The Deep Value Week – 2024/52
Buybacks, Incentive Schemes, Governance Changes and one Laggard Report
Companies mentioned:
· Alpha Pro Tech (APT) - Expands Share Repurchase Program by $2 Million
· Alico (ALCO) - Extends CEO Contract and Revises Incentive Structure
· Chicago Rivet (CVR) - Resolves Customer Dispute with $1.1 Million Settlement
· Key Tronic (KTCC) - 401(k) Plan Reports $49.7 Million in Assets with Investment Growth
· NACCO (NC) - Amends Consulting Agreement with Chairman Alfred M. Rankin, Jr.
· Seneca Foods (SENEA) - CFO Michael S. Wolcott Reports Stock Gift Transaction
· Sigmatron International (SGMA) – 2Q24/25
“Graham’s Geiger counter”
Benjamin Graham suggested that one way to measure the valuation of the overall market was to assess the number of net-nets available. When many such opportunities exist, it indicates a cheap market overall, while their absence suggests that the market is expensive. Today’s net-nets, however, are not the same as Graham’s net-nets. Many are un-investable being Chinese RTO’s, loss-making biopharma’s etc. But we do think it is interesting to follow this number over time, and what percentage of total listed stocks qualify as a “naked” net-net without any type of quality adjustments to make them investable. Below is a net-net screen from Stockopedia.
Alpha Pro Tech (APT) - Expands Share Repurchase Program by $2 Million
Buyback Programme │ P/TB 0.93 │ Apparel & Building Products │ URL
Alpha Pro Tech, Ltd., a manufacturer of protective apparel and building products, announced a $2 million expansion of its share repurchase program, bringing the total available funds to approximately $2.8 million. This includes $0.8 million remaining from the previous expansion announced in October 2024. The repurchased shares will be retired, reducing outstanding common stock. The company plans to execute the repurchases through open market transactions or privately negotiated deals.
Alico (ALCO) - Extends CEO Contract and Revises Incentive Structure & CEO John Kiernan Reports Acquisition of 38,000 Performance-Based Restricted Stock Units
Management Events │ P/TB 0.78 │ Agriculture │ URL / URL
Alico, Inc., a Florida-based agricultural company, announced on December 23, 2024, an updated employment agreement with its CEO, John Kiernan. The revised agreement extends his tenure through September 30, 2027, with an annual base salary of $525,000 and eligibility for performance-based bonuses, including a discretionary $100,000 annual bonus and a transaction bonus tied to a potential Change in Control event.
In connection with this, Kiernan's bonus agreement was also amended, enabling him to earn long-term capital bonuses for retention and a real estate commission bonus for fiscal 2025 based on specific performance metrics. Additionally, Kiernan is eligible for up to 38,000 performance-based restricted stock units (PSUs) contingent on achieving stock price milestones of $35, $40, and $45 per share by September 30, 2027. Vesting of these PSUs depends on his continued employment or specific termination events such as a resignation for "good reason" following a Change in Control. John E. Kiernan, President and CEO of Alico, Inc., filed a Form 4 on December 23, 2024, disclosing the acquisition of 38,000 performance-based restricted stock units (PRSUs).
Chicago Rivet (CVR) - Resolves Customer Dispute with $1.1 Million Settlement
Legal Disputes │ P/TB 0.64 │ Fasteners │ URL
Chicago Rivet & Machine Co. announced on December 20, 2024, that it has reached an agreement with a customer to resolve a dispute involving non-conforming fasteners produced by its subsidiary, H&L Tool Company. These fasteners were used in the braking systems of certain vehicles and had been flagged earlier in the year. To settle the matter, the company will pay a total of $1.1 million in equal installments over five years. This settlement includes a $243,000 contingent liability already recorded in Q1 2024, with an additional $857,000 to be recognized in Q4 2024. The agreement provides a full release of further liability, enabling Chicago Rivet to avoid potential litigation and associated costs.
Key Tronic (KTCC) - 401(k) Plan Reports $49.7 Million in Assets with Strong Investment Growth
Retirement Savings Plan │ P/TB 0.35 │ Contract Manufacturing │ URL
Key Tronic Corporation filed its annual Form 11-K on December 19, 2024, reporting on the Key Tronic 401(k) Retirement Savings Plan for the fiscal year ending June 30, 2024. The plan's net assets increased to $49.7 million, up from $36.1 million the previous year, driven by $5.8 million in investment gains and $4.7 million in contributions. Employer contributions grew significantly to $1.38 million, reflecting an improved match structure, while participant contributions reached $3 million.
A key development during the year was the merger of the Ayrshire 401(k) Plan into the Key Tronic plan, transferring $9.8 million in assets. Investment growth was bolstered by mutual funds and company stock, with Key Tronic's stock contributing $1.1 million to total assets. The plan’s fair value hierarchy highlights diversified investments, including stable return funds, mutual funds, and participant-directed brokerage accounts.
NACCO Industries (NC) Amends Consulting Agreement with Chairman Alfred M. Rankin, Jr.
Governance │ P/TB 0.52 │ Coal Mining Services │ URL
On December 19, 2024, NACCO Industries announced an amendment to its consulting agreement with Alfred M. Rankin, Jr., Chairman of the Board of Directors. Effective January 1, 2025, Mr. Rankin’s annual consulting fee will be reduced from $200,000 to $100,000. He will continue supporting NACCO’s President, CEO, and senior leadership team while leveraging his extensive mining industry expertise and strategic leadership experience. The agreement modification aligns with NACCO’s operational and financial strategy, ensuring ongoing access to Mr. Rankin’s guidance while reducing costs. The amended consulting fees will be disbursed monthly in arrears at $8,333.33 per month.
Seneca Foods (SENEA) - CFO Michael S. Wolcott Reports Stock Gift Transaction
Insider Transaction │ P/TB 0.90 │ Food Production │ URL
Michael S. Wolcott, Senior Vice President, CFO, and Treasurer of Seneca Foods Corporation, filed a Form 4 on December 19, 2024, disclosing changes in his beneficial ownership of company stock. On December 17, 2024, Wolcott reported a gift of 215 shares of Seneca Foods Class B Common Stock at a price of $73.70 per share. Following the transaction, his direct holdings include 15,515 shares of Class B Common Stock and 9,538 shares of Class A Common Stock. Additionally, he holds indirect ownership through the company’s 401(k) plan, including 493 units of Class A and 119 units of Class B shares.
Sigmatron International (SGMA) – 2Q24/25
New Report │ P/TB 0.19 │ Contract Manufacturing │ URL
SigmaTron International faced significant challenges during the latest quarter, reporting a net loss of $9.47 million for the three months ended October 31, 2024, compared to a net income of $28,000 in the same period last year. Revenue declined sharply by 24% to $74.7 million, primarily due to weakened demand in industrial electronics, which remains the company’s largest segment. Gross profit fell to $6.9 million, with a gross margin of 9.2%, reflecting increased cost pressures and lower sales volumes.
The company's financial position remains strained, with short-term liabilities totaling $138.6 million, accounting for a significant portion of the balance sheet. Although cash reserves improved to $4.0 million from $2.4 million at year-end, ongoing breaches of debt covenants have forced SigmaTron to classify long-term debt as current liabilities. The company has initiated measures to address liquidity challenges, including asset sales and operational restructuring.
SigmaTron’s lenders have imposed strict conditions, including a requirement to complete a Replacement Transaction by September 2025 to fully repay outstanding obligations. Failure to meet these revised debt terms could lead to further financial repercussions. Management has expressed concerns about the company’s ability to remain a going concern over the next year, given persistent demand softness, high interest expenses, and liquidity constraints.
In response, SigmaTron has pursued several cost-cutting and debt-reduction strategies, such as consolidating operations, reducing headcount, and optimizing inventory levels. A recent sale-leaseback transaction of the Elk Grove Village headquarters further improved liquidity and reduced debt. These efforts are part of broader strategic initiatives aimed at stabilizing the business and meeting financial covenants.
Looking ahead, the company anticipates continued challenges in aligning its financial structure with operational needs. SigmaTron plans to explore additional capital-raising opportunities and efficiency measures to navigate the difficult economic landscape. Management remains focused on reducing debt and meeting lender expectations but acknowledges substantial uncertainty surrounding its ability to achieve these objectives.
The writer may own shares of the companies mentioned. This communication is for informational purposes only.