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Tuesday, November 22, 2005

more companies

PPLCE, company based around Japanese handwritten letters (not caligraphy) that are faxed (like a point-to-point fax based network) for rural Japanese who use "cabins" to access the service. Huge deferred assets and liabilities (I don't know what to make of that). Low margins and getting lower. Sales are declining. It looks like they earned about $1.3 million in 2005. Terrible free cash flow (ops generated $3 million with $4 million depreciation and $7 million in capex). 18 million shares. Maybe the stock is worth $1, but demographics will eventually kill the business. Stock is selling for $4.25. Prior years had earnings of 43 cents, 34 cents. The rest of 2005 was continued deterioration.
not interested

PRAC, metal stamping equipment maker, emphasis on flexibility of equipment (good). Constantly late in filings. Q3: weak balance sheet. Low equity. Low gross margins. Barely making a living. Basically losing money. Uneven cash flow. Market cap is $600K. $2.8 million in equity. About $20 million in revenues per year. This is like Berkshire Hathaway before Warren Buffett (a terrible tar pit for investors).
not interested

PRGF, enterprise software (bad). 49 employees. Unqualified audit opinion. Weak balance sheet. Increasing revenues. Operational loss. Positive cash flow entirely due to depreciation. Acquisition crazed. Large capitalized software development costs (which hides a lot). Sold debt, sold equity. Looks like the business venture just has bad economics.
not interested

PTNX, (Seems to be some confusion about ticker symbols here PTNX is a NASDAQ stock, PRNI is a pink sheets stock. The CIK number here is for PTNX), supply-chain printing solutions. Labels, transactions, bar codes, forms, reports, diagnostics and management of it all. Open systems architecture so it can drop into different systems. RFID smart labels (excellent). PRNI was first to develop RFID solutions for Wal*Mart/DOD compliance requirements. Market leader in UHF Electronic Product Code printer market in 2004. Working with Impinj Inc. on Gen 2 interoperability. 57% market share in worldwide line matrix market, excluding Japan. Let's see if the numbers back this up.

Revenues are fairly steady between 2001 and 2005. Net income is all over the map. 30 cents 2005, 11 cents 2004, 51 cents 2003, 39 cents 2002. Lost 22 cents in 2001.
RFID is ramping up fast, but still small.

Unqualified audit opinion. Fairly capital intensive. PP&E cost was 2/3 of total assets. Heavily depreciated. Very strong balance sheet. 39% gross margins. 2% operating margins. Heavy, but stable R&D costs which means... lots of stock options. Free cash flow is consistently very high, way above earnings ($7 million 2004, $3 million 2003, $8 million 2003). About 630K stock options outstanding at end of 2004. About 6.4 million shares outstanding on Sept 24, 2004.

Q2 2005: Balance sheet still very strong. Revenues dropped somewhat. 37% gross margins. Operational loss in Q2! Lost 26 cents. Lost 22 cents for the year. Free cash flow burned up $2 million. Share count seems about the same with options. Assume about 7 million shares.
Second quarter sales were down mostly due to lower sales to the automotive
and general manufacturing industries in the United Kingdom, Germany and
France, and a lengthening of the sales cycle that resulted in sales not
closing as expected in the U.S. market. RFID revenue during the quarter was $0.8 million compared with $0.9 million in the same quarter last year as industry RFID deployment of Gen2 technology created some uncertainty in the market. The loss in the second quarter was incurred due to the lower level of sales, increasing expenses for Sarbanes-Oxley compliance and increased sales expenses from a changeover of both our line matrix and thermal product lines to entirely new models, which we expect to be completed in our third fiscal quarter.
So if we assume these are unusual times (might not be), then the business might actually make about $5 million in free cash flow per year, making the business worth about $75 million or $10.70 per share. That's a high number so I'd only want to look at it more closely if it was selling for say half of that. They announced a 7 cent dividend to anyone owning the stock on Dec 1, 2005.

I knew something was wrong when I looked at the stock price and it was less than a tenth of a cent (PRNI). PTNX is selling for $15.36. It seems Yahoo has this mixed up. The pink sheets website shows no SEC filings, news, or reports for PRNI.
not interested

PRRO, financial planner, pension, retirement planning (bad). Strong balance sheet. Rapidly rising revenues, totally gouged by commissions and compensation. 3.3% operating margins. They made money gambling in the stock market which shows up as earnings. They really earned about 9 cents in 2005 for shareholders. Amazingly officers and directors own 91% of the business.

Q3: balance sheet still strong. 4.5% operating margins. Earned about 4 cents in 9 months. Cash flow matches earnings. Apparently no stock options.

The business might be worth 75 cents. It's selling for $5.25. That seems very odd.
Apparently the 10-K is erroneous in some unspecified way.
not interested

PRRR, a short line railroad company plus railroad equipment leasing. GWR Genesee & Wyoming is my gold standard for short line railroad businesses. I should have bought them back when I was looking at them in, what, early 2003?

Anyway, PRRR has 17.9% operating margins on their railroad operations (about the same in 2003, too). Genesee only makes 16.5% and it hasn't changed that much over the years. PRRR earns about 30 cents a year in earnings. They've been doing share buybacks. Free cash flow is very high (depreciation greater than capex). They've been paying off debt. The CEO owns 55.9% of the business. They're going dark, no wait, they're going private! Paying $2.85 per share. Shares sell for $2.70, which is about right for arbitrage. This sucks because $2.85 represents of P/E of about 9.5. Imagine if you bought the stock for $3 (which would still be cheap). This is why I don't like owning stocks where insiders control the business.

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