Sunday, December 18, 2005
Q3 2005: earned $205K in the quarter. 1 cent per undiluted share. Only earned $291K for the whole 9 months. Cash flow from ops is negative due to AR and inventories. The stock is selling for about 50 cents.
CEO Jimmy Wang owns 81% of the stock. Showstopper.
WPEC (sec), backhoes, excavators, crawlers, etc. rental. Mostly from Case manufacturer. Washington, Oregon, Northern Calif, Alaska.
Revenues have been somewhat steady over the years. 12% gross margins. Lost money in 2001 and 2002, but made money after that. 10 million shares (on Sept 23, 2005), 4.9 million options, 8.5 million warrants, 15 million convertable debentures. 38.4 million fully diluted shares. Earned 6.5 cents per fully diluted share (huge dilution). Increased substantially from 2003 which increased substantially from 2002.
Assets are mostly inventories, AR, and PP&E. Balance sheet is ok. Cash flow from ops is terrible (very negative). It has been deteriorating since 2003. As net income has gone up, cash flow has gone down even more. Proceeds from the sale of rental equipment has exceeded cost of purchasing rental equipment every year. $30 million in debt shifted from one source to another.
Quality of income seems to be deteriorating while stated net income has increased. It's unlikely for this to be a good investment unless everything openly fell apart and the market overreacted. I have no idea what it's worth because free cash flow is negative. Their stated diluted earnings are 10 cents, but I consider that overstated. I figure 5 cents of earnings (at best), so the stock might be worth 75 cents based on that. It's selling for $1.67.
worth following in case the trouble shows up in earnings
WSRT (sec), data security and compliance (DoD) services. Environmental compliance (recycling, safe disposal). Refurbished IBM mainframes and midrange frames. Data center maintenance. Nearly all in the US.
2004 had 25% gross margins. 0.5% operating margins. Tax benefit results in 0.6% net margins. However, this is an early stage business. Revenue ramped up from $7.5 million in 2003 to $22 million in 2004. 28 million shares. At least 4 million options (probably not much more). Directors and executives own 46.4% of the business.
Q3 2005: Assets are mostly AR, inventories, goodwill, and intangibles. Otherwise, balance sheet is ok. Lost money in Q3 and 9 months of 2005.
WSZZ (sec), steak house restaurants. Revenues have been declining over the years, but seem to have stabilized in 2004 (slightly higher than 2003). 5.4% operating margins. 2.6% net margins (1% in 2003, -3.7% in 2002). Closed restaurant expenses shrank to zero in 2004. Comps are up due to 7% increase in menu prices, but there was a 2% decrease in customer count. 12 million shares, about 12.2 million shares fully diluted. Earned $566K in 2004, $212K in 2003, lost $1.6 million in 2002. High depreciation charges (over $500K). Free cash flow from ops is very high due to depreciation, amortization of franchise royalty contracts and other assets, provision for deferred taxes. Free cash flow from ops was good in 2003 and 2002, also. All this cash from operations has gone into paying off debt.
Q3 2005: Balance sheet keeps improving. Debt is almost gone. Revenues dropped this year. They only earned 3 cents for 9 months vs 5 cents (a closed store expense in Q1 did much of the damage). Free cash flow pretty much matches earnings, but that involved a fire casualty gain and proceeds.
The stock might be worth around 70 cents. It's selling for $1.30
WTEC, third party administrator for auto warranties, vehicle service contracts (also for personal watercraft, RVs, light trucks). Revenues have been somewhat steady. They almost always lose money, including 2005.
WTEK, manufacture and sale of waste balers (compress and compact various waste materials into bales). Executives and directors own 47.7% of the business. Assets are mostly inventories and AR. Balance sheet is ok. 21% gross margins. No taxes paid last two years. 2.8% net margins. Cash flow is ok. Barely making money in 2005 (cash flow from ops is terrible). Lost a lot of money in 2003. Also lost money in 2002... and 2001. Made money in 2000 on much higher revenues.
ACRG (sec), distribution of HVAC and refrigeration equipment and supplies. But they acquired these businesses. Revenues have grown each year going back to 2001. Gross margins have held up. Operating income has scaled up reasonably well. Assets are nearly all inventories and AR and these have increased quite a bit. Cash flow from ops is severely negative and has deteriorated over the last 3 years as earnings have increased (to $4.2 million in 2004).
Q2 2005: Inventories and AR are even bigger. Revenues are flat from 2004. But of course SG&A has gone up. Net income for 6 months is $2 million. Cash flow from ops is still horribly negative. They've tapped the revolver to make up for it.
ACOM is now ACLI (sec), prospectus filed July 19, 2005. Large diversified marine transportation and service. Barges, manufacturing of barges (2nd largest in the US), towboats, and other vessels. Mississippi and Tombigbee waterways. 2nd largest provider of dry cargo barge transport (15.7% of the market) and liquid cargo (13.6% of the market) on the Inland Waterways. Foreign competition is restricted due to the Jones Act. Companies must be US owned, using US built, US operating, and US flagged vessels, with predominantly US crews. What a load of crap!
They lost money last year, and they present a pro forma (which really does mean "as if") statement which, even that shows them with very low margins. And this is a protected industry. Sheesh. Kill the Jones Act and get some competition in here.
ADEO now ADEP (sec, yahoo), vision-guided robots for assembly, handling, packaging, testing, and bending. They've been restructuring in the last 3 years. Revenues peaked in 2001 and then fell to half that level in 2002 where they've held steady since then. In 2005, they finally made a profit (they had even lost money in 2001). They made a profit in every quarter with results steadily improving during the year. Cash flow is weak due to inventories. Balance sheet is ok. 6.1 million shares. 762K options outstanding. 390K available for issue (better count them, these guys dilute). Assume 7.5 million shares totally diluted. Earnings in 2005 were $1.3 million, however the last 6 months alone were about $1 million. I figure the stock might be worth around 27 cents. The stock is selling for $14.35.