Last week marked the successful conclusion of my first liquidation investment – Terra Nova Financial (TNFG).

I originally picked up the stock back in October 2010, when the stock was trading below the lower bound of the director’s estimated liquidation range.

On August 15, the company distributed a press release announcing a final liquidation distribution of $0.103 per share payable on August 19, 2011.

This was a pleasant surprise, as TNFG’s March press release had estimated a final stub payment in the range of $0.04 – $0.07 per share.

Here are the final results of the workout:

Not stunning, but a nice result for my first attempt at this type of investment.

Joe Ponzio at F Wall Street summed up a good maxim for investing in workouts:

“The question is: Upon thorough analysis, do they offer safety of principal and a satisfactory return. To answer the first part, you must know the deal; to answer the last part, you must know the timeline.”

If you have followed the series of posts on TNFG, the one constant is my utter inability to predict the timing of the various payments – but I at least had a timeline and worst-case scenario in mind.

The lesson here is to always be extremely conservative when estimating the timing and return possibilities for these type of investments.

While the returns are certainly welcome, the best part about these types of opportunities is that they are largely uncorrelated with the rest of the market.

In these volatile times, I’d be very happy putting a much larger percentage of my portfolio into these types of scenarios, and will be actively searching for similar situations.

This is another update on recent news and results for some of my current stock holdings, following the theme from my post on first quarter results.

To be efficient, I’m once again going to combine several short blurbs into a single post.

Access Plans Inc (APNC)

APNC continues its amazing growth trajectory, recently reporting a 155% increase in fiscal second quarter earnings (which follows a 69% increase in Q1 earnings).

Quarterly revenue increased 5%, as solid gains in the Wholesale Plans (+12%) and Retail Plans (+4%) segments were partially offset by a decrease in the Insurance Marketing (-6%) segment.

The company benefited from a large decrease in direct costs, fueling the large jump in earnings.

Consider: In the first six months of the fiscal year, APNC has already earned more net profits than in all of 2010.

APNC is throwing off a ton of excess cash, with the net cash balance growing to $8.89m this quarter. Despite this rapid growth, the stock continues to trade at less than 5x TTM EV/EBIT and less than 8x EV/FCF.

As a continued vote of confidence, one of APNC’s largest shareholders, Russell Cleveland of Renn Capital Management, increased his stake by over 350k shares to 10.1%.

While there has been no news, the assumption is that the company is still exploring strategic options for unlocking shareholder value, including a going private transaction – I see this has a strong potential catalyst.

Iteris (ITI)

On a pure numbers basis, ITI is out of place when compared to the majority of my portfolio (which is focused on companies trading at a discount to assets, such as Fuji Oozx or IBAL).

ITI recently reported fiscal fourth quarter fiscals for 2011, with revenues up 4% as compared to the same quarter last year, primarily driven by the recent acquisition of Meridian Environmental Technology (MET).

The company continues to see strong growth in its product businesses, but revenues were held back by weakness in the Transportation Systems segment.

Operating income for the quarter was $0.67m, down from $1.19m last year, primarily due to increased sales and marketing expenses and costs associated with the MET acquisition.

For the fiscal year, the numbers are not great, with the company reporting an operating loss of $4.7m due a large impairment charge taken in the third quarter – backing out the impairment charge shows operating income roughly flat when compared YoY.

This impairment charge also has no effect on cash flow, as the company reported almost $5m in FCF. ITI’s cash balance now sits at $11.8m, offset by roughly $3m in debt.

Despite a history of losses, Iteris reported its fifth consecutive year of profitability, and has paid down over $11m in debt since 2007.

Iteris is probably considered more of a growth stock rather than a true value play, but it’s a name where I believe in the industry trends that back  the company’s technology.

Consider these points from the latest conference call and recent investor presentation:

• Expect Global Intelligent Transportation System (ITS) Device Market to reach $65b by 2015, up from $24B in 2010, growing 22% CAGR
• Road and other infrastructure spending projects usually project $1.50 back as return for each $1.00 invested – comparatively, spending on management infrastructure (in ITI’s sweet spot) usually sees a 7x or more return for each $1 invested
• Next Federal Highway Bill will provide a ‘shot in the arm’ for growth – expected to pass this year
• EU mandate for LDW in commercial trucks will start boosting sales in 2013 ; by 2015, expect 10-20x increase in demand

ITI management sounded very bullish on the latest conference call, with the CEO saying that he expects Iteris to do $100m in sales within the next 18 months!

The stock has struggled, but it’s hard to come up with a valuation less than $2/shr based on current metrics – if the growth materializes, the stock could appreciate significantly from current levels.

New Frontier Media (NOOF)

As opposed to ITI, NOOF violates my rule to avoid investing in business facing industry headwinds. NOOF is not in a great industry, and is therefore ignored by many in the investing world.

But at some point, even unloved stocks in bad industries are just too cheap to ignore.

NOOF reported $48.7m in revenue for fiscal 2011, down 3.4% from 2010, continuing the string of slow but steady declines going back to 2007.

After taking a string of impairment charges over the past few years, operating and net income have both been ugly, but appear to be trending in the right direction – net losses have improved from $5.2m in 2009 to $1.7m in 2010 to only $0.8m in 2011.

The company will likely see continued pressure in the domestic Transactional TV business (the main source of profits). Growth is manifesting nicely however in international markets, where sales have increased 64% YoY to $5.9m.

Despite the GAAP losses, the company has enjoyed positive operating and free cash flow going all the way back to 2004.

The cash pile just keeps growing, and NOOF now sits on $18.8m in cash offset by no debt.

Management made a number of strong moves during 2011, including consolidating facilities and investing in new storage equipment.

These measures caused capex to jump to over $5m during the year.

In 2012, the capex figure should drop significantly, as the business only requires a normal ongoing capex of $0.3m per year.

While the business may be in decline, it’s hard to see a future where NOOF disappears overnight – the business should continue to throw off cash for the medium-term.

At these prices, the stock is selling at a 45% discount to book value and only 2x FCF, for a FCF yield of almost 50%.

That’s just too cheap in my book, and I expect to see management return some of the excess cash to shareholders once the business stabilizes.

Disclosure

Long APNC, ITI, & NOOF

It’s a busy time of year from an earnings perspective, and the real world has gotten in the way of my normal posting schedule.

However, I’m pretty happy with the earnings results so far, as most of my current positions have performed well – some more so than others.

While one quarter’s (or even a year or longer in many cases) performance doesn’t make or break the merits of a selection, I continue to monitor my investment thesis closely for any signs of deterioration, whether from competition, changing market conditions, or other catalysts.

To be more efficient, I’m going to combine several earnings reports into a series of summary posts.

AMCON Distributing Co. (DIT)

Despite a challenging distributing environment and significantly higher energy costs, AMCON turned in a solid quarter.

Second quarter revenues came in at $206m, down 6% from $230m during the same quarter in 2010. The majority of this decrease was a lower volume of cigarette sales (down $18.7m) that was not offset by a corresponding increase in cigarette prices (up $5.9m).

Net income was $1.5m, down 12%, translating to quarterly EPS of $2.56.

While the income statement showed some pressure, management continues to strengthen the balance sheet.

Due to the nature of the DIT’s business model (i.e. extremely low margins, decent operating leverage), it was good to see the company pay off $5.8m in debt during the quarter.

More importantly, the company renewed its credit agreement with Bank of America – an absolutely vital lifeline for the distributing side of the business – for another 3 years on significantly better terms:

Management continues to take a long-term perspective, not only in expansion but in potential acquisition targets as well:

“We are delighted to have an enhanced credit facility that we believe will give us additional flexibility to take advantage of potential acquisitions and merchant opportunities …We are taking a long range view as we continue to make investments in foodservice, technology and related value added propositions designed to increase our customers’ bottom line… We are carefully evaluating new store locations in both of the regions we operate in. Our recent store opening in Tulsa, Oklahoma has met our expectations. Our niche in the retail market is well defined and we believe there is room to prudently expand…”

Sparton Corp (SPA)

After reporting tough second quarter results back in February, Sparton’s stock sold off sharply over the next few days, dropping almost 20%, despite reasonable explanations for the mixed results and several positive developments.

The confidence was vindicated with the third quarter results this week, as quarterly revenues shot up more than 30% to $50.3m, compared to $38.6m in the third quarter last year.

The new acquisition of Byers Peak is providing immediate gains – with further margin improvements possible due to the planned plant consolidation – and the EMS segment finally showed a big jump in margins as management focuses on profitable contracts.

This margin improvement led to the largest quarterly gross profit in over five years, with quarterly net income more than tripling to $2.5m, or $0.25 per share.

The turnaround is continuing nicely, setting up SPA for its stated (and very bold) goal of reaching $500m in sales by 2015.

Advant-E Corp (ADVC)

The company continues to chug along with steadily improving results. First quarter revenue was up 5% to $2.3m, compared to $2.2m in the same period the previous year.

Edict Systems, the amazingly-consistent SaaS growth machine, turned out another 2% revenue increase, but the big surprise was the Merkur Group with a 22% jump in sales.

Merkur was hit hard during the recession – even posting small losses – but the acquisition is looking better as the economy recovers.

Net income was up to $385k, equal to $0.006 per share, up 45% over the first quarter last year.

More importantly, the company announced another special dividend of $0.02 per share, payable in two installments during the remainder of 2011. The last special dividend was a big part of the original investment thesis.

By the end of 2012, the company will have returned $0.05 per share in dividends in less than two years – almost 20% of the current market cap – once again showing a commitment to rewarding “shareholders, many of whom are long-term investors in the Company.”

Gaming Partners International (GPIC)

I was very late in posting my viewpoint on GPIC’s 2010 financial results, as the company quickly followed up my post by announcing stellar first quarter earnings.

According to the press release,

“For the first quarter of 2011, the Company posted revenues of $17.8 million and net income of $1.7 million, or $0.21 per basic and diluted share. These results compare to revenues of $10.9 million and net income of $37,000, or $0.00 per basic and diluted share, for the first quarter of 2010.”

And backing up my thesis:

“The primary reason for the significant increase in first quarter 2011 net income was comparably higher sales of chips to casinos in Macau.”

As far as the company’s prospects for the rest of 2011, consider this:

GPIC’s first quarter EPS of $0.21 is roughly 40% of the company’s earnings for all of 2010, the 2nd best year in the company’s history, AND the first quarter is usually the slowest of the year.

While the company warned that the rest of the year will unlikely match these results, I think it bodes well for the annual outlook (and hopefully the stock price!).

Concluding Thoughts

I continue to look for ways to raise additional cash in the portfolio, as I remain skeptical on the overall market.

However, there are quite a few stocks, including a few international ones, that I am tracking closely. I’ve had 6-7 bids outstanding for many weeks, as I continue to remain patient about picking up shares in some of these illiquid issues.

I hope to showcase some fresh analysis over the coming months.

Make sure to stay tuned for Part II as more holdings report their results.

Disclosure

Long DIT, SPA, ADVC, & GPIC