Concord Camera (LENS) announced yesterday that its Board of Directors has unanimously approved a plan of dissolution and liquidation of their company. The company’s disposable camera business has been in steady decline and the leadership of the company seemed incapable of innovating new products or adapting to the situation.
Investors in Concord Camera have been calling for the liquidation of the company for several years in order to unlock the cash value of its assets. In fact, the Everest Special Situations Fund L.P. took an activist role this year and issued letters back in May and September calling for the sale or liquidation of the company.
Sadly, the well compensated CEO, Ira Lampert, dithered for years on taking action to unlock the value of Concord Camera. As a result, the value of assets have gone down. In the press release announcing the liquidation of Concord Camera, it notes that the company got caught up in auction rate securities. Concord will be marking down the value of those securities by by $5.1 million to $17.1million as of September 27, 2008. In addition, the value of the company’s property in China has likely significantly gone down in value as a result of the current worldwide financial crisis and the general decline in PRC property values. All I can say is that the timing of this liquidation couldn’t have been worse.
I originally was attracted to Concord Camera since its shares use to trade for less than 2/3 of net current asset value. Now I’ll be lucky if the liquidation value comes near my purchase price. My rough take is that the company as of May 29, 2008 had $31.1 million in current assets. Of those current assets, $14.4 million was in inventory, which I now guess is worth a bit less than half that. Therefore, I’m estimating the liquidation value of current assets to be about $24 million. Then adding in the $17 million in auction rate securities, and discounting the $8.6 million in property, plant and equipment to $5 million, I get total assets of $46 million. I left out the other assets and liabilities associated with the Fuji Photo Film licensing agreement. Leaving that out, I’m estimating total liabilities to be $22 million. Therefore, net assets are about $24 million. Dividing that by the 5,913,610 shares as of May 9, 2008, I’m getting roughly $4 per share, and this estimate is likely generous.
At least some value will finally be unlocked from this poorly managed company, and there are plenty of net-nets out there now to choose from if I decide to replace this one with another in the Fat Pitch Financials Portfolio. Thanks goes out to Elchanan Maoz of the Everest Special Situations Fund for helping this liquidation finally happen. I’ve learn a few things from this experience and I will definitely be more careful in examining management a bit closer the next time I consider investing in company trading below net current asset value.
Disclosure: I own shares in Concord Camera and may likely trade those shares in the near future.