Sunday, January 29, 2006
revisiting companies 8
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IDIB (sec) Stock is up to 25.5 cents. Q3 Results: Cash is down, AR is up, loaned out money to related parties (partially offset by loans from RPs). Must have done an acquisition because goodwill is doubled. Current ratio fell below 1. More than half equity. Revenues are way down. But SG&A is down even more and they made an operating profit of $329K (loss in prior year). Net profit $196K ($534K for 9 months). 19.5 million shares on Nov 8, 2005. 6 million options on Dec 31, 2004. 4 million warrants (see below). Since no options were granted in 2003 or 2004, assume a totally diluted share count of 30 million shares. Net earnings for Q3 are $0.0065 per totally diluted share, which annualizes to 2.6 cents for a year and the stock might be worth 39 cents.
Cash flow from ops is very solid. Free cash flow is about $700K for 9 months. They invested $1.8 million of cash for Mentoring of America and HG Marketing (plus 2.5 million warrants and assumption of liabilities) and did a small amount of financing via notes payable. The drop in cash is due to the acquisition. The huge drop in SG&A is due to pushing all of this onto HG Marketing. Seems suspicious: seems like the costs haven't disappeared due to efficiency or any positive change, just who is charged for it. This kind of stuff often comes back to bite you in some way (or it's just plain fraud).
There are some complicated terms on the Mentoring of America deal involving escrowed shares and a monthly net income of $150K/month for 24 months.
Lots of other warrants issued for all sorts of stuff. About 1.5 million warrants. This is starting to look bogus. They keep issuing stock and buying stuff but revenues fall.
Also another acquisition of Hire Solutions acquired for 294K shares which could be "put" back to the company, which it was, for cash, but the cash is not due until Hire produces at least $100K of net income (which it hasn't yet).
I don't like what I see here. Too many shenanigans. Not enough business focus. Continue following for a while, but consider dropping it.
MHJ (sec) original post, Stock is down to $5.05 (from $5.50). I had figured it being worth $5.70.
Q2 Results: Revenues and gross profits are unchanged from the prior year. Operating income is more than doubled due to a huge drop in SG&A. They don't have the gain on a real estate sale which was in the prior year and added a one-time jump in profit. Net income is $551K. 5.8 million shares on Nov 14, 2005. 550K dilutive options. Unknown number of anti-dilutive options. Earned 8.7 cents diluted in Q3 (annualizes to 34.7 cents which would make the stock worth $5.21). Free cash flow matches earnings fairly well. Not much else going on besides operations and less than replacement capex.
Independent audit committee board member resigned with a replacement already selected (seems like it wasn't a surprise).
CEO bought 9.6% of the shares of a subsidiary.
MLR (sec) original post. Stock is up to $33.92 (from $18). Q3 Results: (comparing to Q2) Cash is up, AR is down, inventories down, current ratio is still very strong. Equity increased by over $5 million. Revenues are down slightly. Gross margins are higher resulting in higher gross profit. Net income is up somewhat. Earned 47 cents diluted (vs 45 cents). Cash flow from ops is strong (was very weak). Same for free cash flow.
New revolver with good terms. Australian military order is winding down (could have negative impact on the future?). Still, they have a "strong backlog". Negatively impacted by steel price increases.
HOOB (sec) Stock price is $48. The 10-K was released. 270K shares of stock on Dec 20, 2005. Gross profits are flat (pretty much every year). Net income jumped to $547K from $185K due to a drop in general expense and a drop in interest expense.
Medical business was dropped.
Cash flow is mainly generated by their Paramus, NJ real estate which is 100% leased out. Runs until 2012 when The Sports Authority lease expires (that building was acquired in 1971, 62K sq ft, acquired for $718K, $3.6 million capex, $3,6 million mortgage remaining). CompUSA lease expires in 2009 (that building was acquired in 1994, 31K sq vt, acquired for $2.6 million, no capex, no mortgage remaining).
Land is carried at $453K cost. I have no idea what it's worth.
Net rental income has been steady since at least 2001. Earnings per share starting in 2001: 58 cents, 58 cents, 74 cents, 68 cents, $2.03 diluted in 2005. $2.5 million equity.
Cash flow from ops has decreased each year, due largely to purchases of "trading assets" which seems like an investment activity.
Pension liability. Obligation is estimated at $3.2 million and has grown rapidly. The plan is mostly funded and the company has made regular steady contributions keeping it that way. Estimated return on assets is 7% (which is perhaps slightly high, but ok).
They've been buying and retiring treasury stock each year. They've been making approx $450K principal payments on mortgage.
$500K is probably a reasonable estimate of sutainable earnings. So the stock is probably worth $28 plus one-two-hundred-seventy-thousandth of the excess long term estimated value of the land (i.e. the non-bubble value).
HYDI (sec) Stock is up to $1.30 (from $1.15). Q3 Results: 4.6 million shares on Sept 30, 2005. AR is down. Fairly capital intensive. About half equity. Revenues down slightly across the board. Increased net loss. Negative cash flow from ops. Here's an 8-K full of excuses. They're working on new products. I'll wait and see what happens.
HWWI (sec) Stock is up to $1.00. They had lost 40% of their market when their implant business in the US was lost due to FDA changes. They're trying to get it back. I had figured it was worth 75 cents. Q3 Results: Revenues are up but gross profit is down. Expenses are down slightly. Net income is down to $118K (from $170K). 17.4 million shares on Halloween. When accounting for stock options granted, net income drops in half. Cash flow from ops is strong due to a drop in inventories. Will this business ever be predictable?
BUF previously MNRD (sec) Stock is at $1.85 (mostly unchanged). Q3 Results: 29 million shares on Nov 11, 2005. Cash is way up, but so is AR and inventories (huge expansion here), but not as much in PP&E. Current liabilities are way down. Balance sheet has gone from extremely weak to strong. Half equity (was large deficit). Revenue up somewhat. Larger operating loss. Huge net loss. Even greater burning of cash from ops. Huge influx of capital via preferred shares.
They merged with Technology Acquisition Corp.
DYSL (sec) Stock is at 87 cents. 10-K for period ending Sept 30, 2005. 3.8 million shares on Dec 12, 2005. 3.2 million options and warrants. High purity synthetic fused silica for optics. They stopped making glass and now just re-sell what others make. They acquired a business which doubled revenues. So I'd look out for low margins. Balance sheet is ok, but AR and inventories went way up (possibly from acquisition). Half equity. 30.6% gross margins, which seems good. 4% operating margins, which seems bad. 3.5% net margins, which is also low. Net income $173K, 2.5 cents per fully diluted share. Cash flow from ops is only $102K (AR and inventories). Free cash flow is close to zero. $768K cash paid for acquisition. Issued a bunch of preferred stock. Added some debt. The stock might be worth 37 cents.
DWVS (sec) Stock is up to 32 cents. Not much new except a resale of 7.5 million shares underlying a $600K convertable note. I had looked at the 10-Q issued on Oct 9, 2005 and decided the company was priced about right.