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Saturday, November 19, 2005

another batch of companies

NPTI, cremation services. Unqualified audit opinion. Assets are totally dominated by "Names and reputation" as 62% of assets! Only a small amount of equity. 80% gross margins. 8.4% operating margins. Some monkey business in net income. Very low income tax. Realistic earnings per diluted share are about 22 cents. Cash flow is great due to deferred sales tax, non-cash interest and amortization, deferred charges and other stuff. They use stock for toilet paper. They offer "at-need" services, which means people with a dead relative pay for cremation. They also offer "pre-need" services where you sign up for cremation before death and they take care of everything. In 2005, the financials deteriorated for some reason. They started losing money, cash flow was terrible, the balance sheet gains a huge asset and an equal liability presumably assocated with the pre-need business. It doesn't matter because they're going private.

NRCNA, going private

NROM, 1,300 franchise pizza shops at hospitals, military bases, universities, RV parks, hotels, etc. 29 full time employees, 34 part time. Non-frightening lawsuit. Slowly but steadily increasing revenues. Operating income is a bit less solid. Share count has been very consistent. Earning about 7 cents a share in last 2 years.

Balance sheet has large deferred tax asset (more than 50% of total assets), large AR. High current ratio. 3 years of cash flow is excellent. That plus the reason for lowered earnings in 2004 lead me to believe earnings are closer to 8 or 9 cents. They're paying significant taxes.

They had a monster source of other income in 2005 from settlement of a lawsuit with an investment business. Cash flow is still great in 2005. The business is probably worth about $1.35. Stock is selling for $1.00. Reached a low of 63 cents.
worth following

NWRG, Einstein Bros and Noah's restaurants. Also some older ones that have been closing. Total restaurant count declined to 690. Older non-significant legal stuff. Gross margins hover around 18% over the years. Operational margins had been negative until 2004, when SG&A declined, but so did depreciation. Interest expenses are killing them and they lost money in 2004. They continued losing money into 2005... why is this on the list??
not interested

NXUSF, stolen vehicle recovery and roadside assistance services. Israel, plus Argentina and Mexico. Revenues jumped in 2004 due to huge steady increase in services going back to 2001. There are two very different businesses mixed together. The increasing one has good fundamentals. They're losing money, but less and less every year. In 2003, the pattern was disrupted by a huge gain from discontinued operations, but overall the business has been improving. However, share count exploded in 2004.

Unqualified audit opinion (looks like a change of auditors?). Balance sheet is terrible at end of 2004. Additional paid-in capital.
Nov 15, 2005: being re-listed on NASDAQ. Damn!

Q2 2005: balance sheet is still terrible, current ratio is 1/2. Services revenue continues to climb rapidly. They're just reaching operational break-even. 2.5 million shares. I have no idea what they're worth at this point. Very rough guess might be $10. Selling for $8.75. Am I good, or what? (I didn't peek)
worth following

OHRI, occupational health, prevention and treatment of work-related injuries. Revenues fairly steady. Operating margins 14%, but had been lower for a couple years. Lost money in those two years (14 and 36 cents). In 2004 they made 25 cents. Before the losses, they made 1.08, but 17 cents before that. Directors and executives own 20%. Odd audit opinion without qualifications.

Weak balance sheet with huge amount of AR (which increased from previous year) and goodwill. 3.1 million shares with 1.4 million options outstanding (more are exercisable) and more available to issue. Average free cash flow tends around $2.5 million (aided by depreciation and provision and deferred tax, partly offset by the AR increase). Net income is only $789K.

Q2 2005: balance sheet got a bit better (current debt decreased, that's all). 6 month net income $925K. Annualizes to 41 cents a share for the year. Free cash flow is huge at nearly $3 million, aided by depreciation, minority interest, deferred tax expense. Probably worth about $6 a share. Selling for $10.
worth following

OISI, makes technology equipment for ocular industry: fluorescein angiography (blood is dyed, camera looks at retina, creates a "road map" for laser treatment). Revenues are increasing well. 60% gross margin. SG&A is high and increasing. But 16% net margin. Earned 10 cents a share fully diluted. Free cash flow is a bit lower.

Unqualified audit opinion. More than 24% return on assets. OK balance sheet. 15 million shares. 2.3 million options outstanding. 17.3 million fully diluted shares.

Q3 2005: balance sheet gets stronger. Revenues keep increasing. $1.33 million annualized net earnings based on 9 months. Cash flow still a bit weak due to AR etc. Stock is probably worth about $1.50. Selling for $1.26.
worth following

POLGA, Emerged from Chapter 11 in 2003. Textiles, yuck. But they're pushing the technology and are apparently a large player in their niches. Let's see the margins. 18% gross margins in 2004. Large interest expense. They're at a net breakeven.

Q3 2005: balance sheet is ok. Still losing money.
not interested

PONN, security alarm services for mostly residential, also commercial, wholesale. 62% gross margins. Large SG&A. Operating loss and net loss every single year. Weak balance sheet. Still losing money into 2005. Why was this on the list?
not interested

PPDA, merchant payment processing services and software (15,000 merchant customers). Revenues increased 50% in 2004. 20% gross margins. Just reached operational breakeven during 2004, still underwater due to interest expense. Cash flow is crappy due to AR. Unqualified audit opinion. Balance sheet is ok. 26 million shares. 3 million options outstanding. Assume 30 million fully diluted shares.

Q3 2005: Balance sheet improved. Additional paid-in capital. Revenue still climbing. Gross margins up to 26% now for 9 months. Earned about $257K in 9 months (had more due to tax benefit). Earned about $180K in Q3 alone.

Now there's 28 million shares outstanding. 7 million options outstanding. 35 million fully diluted shares. Worth about 41 cents if growth is real and somewhat sustainable. Selling for 94 cents.
worth following

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