GLAS, Glass House Brands Inc.

Will it survive?

• Can it pay its interest? -1.7×
  Does not cover its interest
  Operating income ($17M) ÷ interest expense $10M
  What this means

  A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.

• How heavy is the debt, net of cash? $69M
  Net debt against an operating loss
  Cash $0 − debt $69M
  What this means

  Netting $0 of cash and short-term investments against $69M of debt leaves $69M owed, with no operating profit this year to measure it against — understand that combination before anything else about the company. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? 52d
  Tight
  DSO 9 + DIO 91 − DPO 48 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

• Return on invested capital -12%
  Below average through the cycle
  6-yr median, range -25%–2%; -9% latest = NOPAT ($13M) ÷ invested capital $143M
  Industry peers: median -23%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 6 years (it ran -9% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin -11%
  Consumes cash through the cycle
  6-yr median margin, range -61%–9%; latest ($4M) = operating cash $11M − maintenance capex $15M
  Industry peers: median -84%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's -2% of revenue this year, a -11% median across 6 years. It chose to put $12M more into growth, so free cash flow this year was ($16M) — the gap is investment, not weakness.

• Are earnings backed by cash? $11M
  Loss, but cash-generative
  Net income ($29M) · cash from operations $11M
  What this means

  The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.

How is the cash used?

• Where do the earnings go? —
  Not enough data
  What this means

  The filing data didn't include the inputs for this check.

• Investing or harvesting? 1.81×
  Expanding
  Capex $27M ÷ depreciation $15M
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 0 of 4 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Miss
  Revenue ≥ $2B · $182M
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Near
  Current ratio ≥ 2× · 1.78×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Miss
  Debt ≤ working capital · $69M vs $30M WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Miss
  A profit every year (6-yr record) · 5 loss years
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record —
  Uninterrupted dividends · no dividend line tagged in the data
  What this means

  An unbroken dividend was Graham's mark of durability. This record carries no dividends-paid line in any year — common for partnerships, whose distributions file under tags the chain doesn't read — so the criterion is withheld rather than judged on silence.

• Earnings growth —
  Earnings +33% over the record · —
  What this means

  Earnings were negative early in the record, a growth rate isn't meaningful.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-0.51/share (latest year $-0.35), the averaged base the calculator's gate runs on, and book value is $0.90/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2020–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 1 of 6
  What this means

  Lost money in 5 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 0 of 6 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin −45% → −12% (3-yr avg ends)

  In the filing’s words The record and the words agree: the margin widened and the filing attributes the gain to its own pricing, not volume alone.

  What this means

  Through the cycle the operating margin widened — about −45% early to −12% lately, median −31% — pricing power intact or improving.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Worst year 2022 · −66.4% op. margin
  What this means

  Operations went underwater in 2022, understand why before trusting the good years.