Posts by Rio

The Female Health Company (VERU) Ran by Women for Women

August 11th, 2014 Posted by Company Research Report No Comment yet

The Female Health Company (VERU) company research.

Female Health CompanyFemale Health Company VERU

About Female Health Company (VERU)

The Female Health Company owns rights to the FC2 Female Condom. FC2 is a revolutionary, female-initiated option offering women dual protection against sexually transmitted infections (S.T.I.’s), including HIV/AIDS, and unintended pregnancy. Further, FHCO currently has the only female condom (FC2) which is both approved by FDA and cleared for purchase by WHO. Furthermore, more than 50% of adult HIV/AIDS cases are female, 80% of which are contracted via heterosexual sex. HIV/AIDS is the number one cause of death globally for women 15-44 years old.

Another is, Female Health Company’s main market is currently the public health sector, which distributes FC2 to more than 143 countries worldwide for use in prevention and family planning programs. Likewise, the company’s customer base consists primarily of a small number of customers who purchase large quantities. Due to the receipt and timing of large orders, the Company experiences some quarter to quarter fluctuation in unit sales.

How does the Female Health Company make money?

Female Health Company manufactures markets and sells the FC2 female condom. Its product provides dual protection against unintended pregnancy and sexually transmitted infections, including HIV/AIDS.

Who is running the business and what is their background?

fhco karen

Karen L. King

Ms. Karen L. King serves as President, Chief Executive Officer of the Company, effective January 20, 2014.

Previously, Ms. King served as President of the Biologics and Bio-Solutions businesses of Royal DSM, a global provider of biopharmaceutical manufacturing technology and services, from September 2006 to September 2013.

Ms. King served as Executive Vice President of the Company from May 2006 to September 2006 and as Vice President, Global Development from August 2004 to May 2006, where she was responsible for sales, marketing, and business development.

Prior to August 2004, Ms. King worked at Baxter International since 1981, most recently serving as President of Pulse Nutrition Solutions, Inc., a subsidiary of Baxter that developed a line of nutritional products for consumer use.

 

m greco fhco

Michele Greco
Ms. Michele Greco serves as Chief Financial Officer, Vice President of The Female Health Company. Ms. Greco is a CPA with nearly 30 years of experience in public accounting with Ernst & Young LLP.

From January 2011 to February 2012, Ms. Greco provided consulting services to Systems Research Incorporated as a recruiter of finance professionals.

From March 2009 to January 2011, Ms. Greco was involved in a series of personal business ventures.

From 1994 to March 2009, Ms. Greco served as an audit partner with Ernst & Young LLP. Ms. Greco joined Ernst & Young LLP in 1981.

 

Financial Liquidity

FHC liq
A current asset is 4 times bigger than its current liabilities while quick ratio 2.8.  FHCO has no short-term and long-term debt.

fhccf

Female Health Company Cash Flow From Operating Activities

Operating cash flow of FHCO shows positive results in the past five years from 2009 to 2013 with an average of 7. The company has funds available to retire additional debts and invest new line of business. FHCO’s cash outflow from investing was bigger than cash inflow or they are using the capital to invest in the company. Financing cash flow 2009 to 2013 was also negative; their company is repaying its debts.

Female Health Company Free Cash Flow

fhcfcf

Free cash flow balances were all positive which means that the company is still capable of possible expansion thru investing to other companies. 

The Female Health Company Valuation

In our valuation of equity, we adopt the investment styles which we think applicable to the company. One valuation style is that seeks out undervalued companies whose stock prices are temporarily down, but whose fundamentals are sound in the long run. The philosophy was to buy stocks when prices fall and to sell when the price rises a great deal.

fhcsgr

Using the formula “Sustainable growth rate=ROE x (1- dividend payout ratio)”, it shows that the average SGR of FHCO was 20.71 percent. This is the measure of how fast a company can grow.

FHCO MS

Going forward, the margin of safety shows that the margin of safety was averaging 73 percent. Using a margin of safety, one should buy a stock when it is worth more than its market price. Further, the margin of safety protects the investor from both poor decisions and downturns in the market. The Margin of Safety requires knowing when the buying price is low in absolute terms, rather than merely relative to the market as a whole. This formula is used to identify the difference between company value and price, in other words, it is the difference between the real value of the stock and the market price. The result shows that it passed the 40 percent requirement and therefore, it is a good candidate for a Buy.

Female Health Company Relative Valuation Method

With this valuation method, is to compare the market values of the stock with the fundamentals (earnings, book value, growth multiples, cash, flow, and the metrics) of the stock.

fhcrel

FHCO’s current book value per share was $1.09, with an average of $.77 per share, on the other hand, the price to earnings ratio in the trailing twelve months (ttm) was 11.9% per share and 19.02% average per share. Moreover, the earnings per share at ttm was $.33 and averaging $.34 while the return on equity at ttm was $34.43 and has an average of $ 49.47 per share.

The table below shows the summary of calculations of FHCO

fhco yield
The growth was 24 percent, while the dividend yield was 7.41 percent. Likewise, the calculated value of appreciation is $1.22 which is the required 40 percent. Further, the computed value dividend was .28 and the computed total value was $ 3.70. The price that the investor is willing to pay was $3.70. Furthermore, the market price of FHCO to date was $ 3.95 per share. Overall, if we compare this to the total value of $ 3.70 per share, it indicates that the stock is trading at undervalued prices.

Conclusion

Overall, it shows that FHCO is financially healthy based on its current resources. Further, the company has sufficient cash flow used for operating activities and high free cash flow. Furthermore, the margin of safety of 73 percent has passed the 40 percent requirement.

CITATION:

http://www.reuters.com/finance/stocks/companyOfficers?symbol=FHCO.O&WTmodLOC=C4-Officers-5
www.google.com/finance?q=NASDAQ%3AFHCO&ei=bC7oU4jWGseskgXM1YDQBA
http://femalehealth.investorroom.com/index.php?s=117

Researched and Written by Rio

Edited by Cris

ITT Educational Services Inc (ESI) Involves in Higher Education Program

August 7th, 2014 Posted by Company Research Report No Comment yet

ITT Educational Services Inc (ITT) Company Research

ITT Educational Services Inc

ITT Educational Services Inc is a provider of post-secondary degree programs in the United States.  Offered master, bachelor and associate degree programs to approximately 73,000 students, which has144 locations (including 141 campuses and three learning sites) in 39 states.

The company offered one or more of its online programs to students who were located in 48 states, helping them to prepare for careers in various fields involving their areas of study.

 

How does ITT Educational Services make money?

ITT Educational Services Corporation, Incorporated is one of the largest for-profit education companies and offers primarily 2-year and some 4-year degrees in a number of subjects. Their revenue is generated from the number of enrolling as they experienced significant growth in students. Part of company’s income derives from Federal financial aid programs.

Who is running the business and what is their background?

Kevin Modany

Kevin Modany

 

Mr. Kevin M. Modany is Chairman of the Board, Chief Executive Officer of ITT Educational Services Inc. He has served as Chairman since February 2008 and as Chief Executive Officer since April 2007. He also served as President from April 2005 to March 2009. From April 2005 through March 2007 he also served as Chief Operating Officer.

Mr. Modany has been a Director of ours since July 2006. Mr. Modany had previous experience in advising other companies on financial and operational matters, and he had involvement in the financial and operational aspects of the company before becoming Chief Executive Officer.

 

Daniel Fitzpatrick

Daniel Fitzpatrick

Mr. Daniel M. Fitzpatrick is Chief Financial Officer, Executive Vice President of ITT Educational Services Inc. He served as Senior Vice President, Chief Financial Officer from June 2005 through March 2009.

ITT Financial Liquidity

esi liq

The average current ratio was 1.35 which means that its current asset was higher by 35% compared to its current liability while quick ratio was also 1.22 averaged.

Debt to equity ratio was averaging  0.98 which means that ESI has minimal leverage.

And solvency ratio was 1.96 averaged in 5 years period which shows that the company was capable of paying its total obligations.

The liquidity of ESI lies in the normal level. The company’s current resources were just sufficient to continue its operation with excess funds for unexpected opportunities.

ITT Asset Management/Efficiency

esi eff

Inventory turnover ratio was 0. as this industry has no record of inventory. Receivable turnover ratio average was 26.99 times per period. This is equivalent to 15 days for its receivable to turn into cash. For some companies, this is the credit term given to their respective customers. The payable turnover ratio has an average of 20.60 times for the company to pay its obligations or 47 days for its suppliers to pay.

Looking at the above data, the company’s current resources, as well as its total asset, is efficient enough in generating sales.

ESI is not highly indebted as calculated in the debt ratio. However, if compared to the owners’ equity it reflected an average of .98, this is because the company has not many capital investments.

ITT Property, Plant & Equipment

esi ppe

Gross investment in PPE average in five years was 340.20. It showed that the company was yearly expanding thru investment in fixed assets. Accumulated depreciation average was 150. It is a cumulative cost allocated to a tangible asset over its useful life. So, the net value of the PPE after deducting its accumulated depreciation was 190.20.

To calculate it using an estimated life of 5 years, the average used life of the said fixed asset was 2.2 years already. And it was still a remaining 2.8 years to use before it is fully depreciated.

ITT Income

esi rev

Revenue was 1015, 1319, 1597, 1500 and 1287 with trailing twelve months of 1108. Shown here, the gross revenue was yearly increasing from 2008 to 2010 but pulled down from 2011 to 2012. Its yearly growth rate was 30, 21,-.06 and -.14 percent.

Its operating income was 328, 489, 614, 507 and 233 with ttm of 104. This is the amount after deducting the operating expenses.

Income before and after tax have the same trend, continuously increasing until 2010 but dropped a little in 2011 while 50 percent in 2012. Its yearly growth rate was .48, .25, -.18 and -.55 percent respectively.

The net income was consistent going up in 2008 to 2010 but showed a slight decrease in 2011 and dropped by more than 50 percent in 2012. The company needs to be closely monitored.

ITT Expense

esi exp

The cost of revenue was 384, 450, 538, 553 and 539 with ttm of 500 which is equivalent to 37 percent average of gross revenue. It has the same trend with revenue.

Operating expense was 304, 381, 445, 440 and 515, with of ttm of 503, which is equivalent to 31, 30, 29, 28 and 29 percent respectively of revenue. While another expense the trailing twelve months was 43 or 4 percent of revenue. And total expense was  436, 573, 687, 642 and 609, with trailing twelve months of 546. This represents 49 percent of gross revenue.

Total expenses of the company are quite high especially in the year 2012 which unmatched its revenue. So, the company needs to control its expenses.

ITT Margin

esi marg

Gross margin was .62, .66, .66, .63 and 58, trailing twelve months was .55, this is the percentage result of gross profit over revenue.
Operating margin was 32.3, 37.1, 38.4, 33.8 and 18.1 percent, trailing twelve months was 9.4 which shows a continuous increase from 2008 to 2010 but slightly dropped by 5 percent in 2011 and 17 percent in 2012.

Net profit margin was 20, 23, 23, 21 and 11 percent, with ttm of 17. This is the bottom line of ESI’s business transactions expressed in percentage.

ITT CASH FLOW

esi cf

Operating cash flow from 2008 to 2012 was 173, 301, 559, 388 and 105 ttm was 115. It shows positive results throughout the five years period, although up and downtrend.

Net cash used in investing activities from 2008 to 2012 was 129, -64, -99, -46 and 123. Its trailing twelve months was 133. It shows negative results except in 2008 and 2012 because cash inflows were greater than cash outflows which are mostly investments.

Cash Flow from Financing Activities

Financing cash flows refer to cash received from the issue of debt and equity or paid out as dividends, share repurchases or debt repayments.

Net cash used for financing activities of ESI from 2008 to 2012 was -83, -334, -424, -277 and -211, with trailing twelve months of -245. Its cash inflows include common stock issued, the excess tax benefit from stock and other financing activities while cash outflows include repurchased of common stocks.

Financing cash flow showed a negative balance since its cash outflow transaction was more than its cash received.

Free Cash Flow

esi fcf

Free cash flow from 2008 to 2012 was 137, 273, 526, 357 and 87 which show positive balance throughout the five years period. It indicates that the company has enough funds to continue its operation and expansion.

Based on the overall performance of ESI, the company was able to meet its financial and operational commitments.

Relative Valuation Method for ITT

esi reval

The current book value per share was $5.44, with an average of $5.62 per share, while the price to earnings ratio in the trailing twelve months (ttm) was 5.5% per share and 8.28% average per share. Moreover, the earning per share at ttm was $2.61 and averaging $7.31 while the return on equity at ttm was $36.94 and has an average of $155.6 per share.

Overview, it indicates that ESI has a good measure of profitability it also shows that the company was able to generate a favorable and stable return on the invested capital.

The table below shows the summary of calculations of ESI using this method.

The growth was 5 percent while the dividend yield was 0. The calculated value of appreciation is $15.64. Further, the computed value dividend was 0 and the computed total value was $ 23.46. The price that the investor is willing to pay was $23.46. Furthermore, the market price of ITT/ESI to date was $ 7.82 per share. If we compare this to the total value of $ 23.46 per share, it indicates that the stock is trading at undervalued prices, therefore, it is a “Buy”.

Conclusion:

To sum it all, the results show that ITT/ESI is financially healthy as far as its current resources are concerned in spite of the fact that the stock price is unstable due to issues like low net income and weak cash flow.

Income wise, though it is decreasing lately, the company is still continuously generating income, with fairly controlled expenses which resulted in a fair profit margin. When it comes to generating cash flow, the company has sufficient cash flow used for operating activities and moderate free cash flow.

Furthermore, our investment valuation method shows that ESI is still undervalued.

CITATION:

http://www.ittesi.com/index.php?s=45 
http://www.reuters.com/finance/stocks/officerProfile?symbol=ESI&officerId=618323

Researched and Written by Rio

Edited by Cris

SolarWinds Inc

Does SolarWinds Inc (SWI) Merits a Buy?

March 12th, 2014 Posted by Company Research Report No Comment yet

SolarWinds, Inc. (SWI) designs, develops, markets sells and supports enterprise information technology (IT), infrastructure management software to IT professionals in organizations of all sizes. The Company’s product offerings range from individual software tools to more comprehensive software products that solve problems encountered by IT professionals. Further, its products are designed to help the management of their infrastructure, including networks, applications, storage, and physical and virtual servers, as well as products for log and event management. Furthermore, it offers a portfolio of products for IT infrastructure management.

Forbes named SolarWinds the “Best Small Company in America,” citing high-functioning products for low costs and impressive company growth.

Who runs SolarWinds and are they competent?

Mr. Kevin B. Thompson, President, Chief Executive Officer, Director of SolarWinds Inc

SWI CEO

Mr. Kevin B. Thompson is President, Chief Executive Officer, Director of SolarWinds Inc. He has served as the President since January 2009 and the Chief Executive Officer since March 2010. He previously served as the Chief Financial Officer and Treasurer from July 2006 to March 2010 and the Chief Operating Officer from July 2007 to March 2010. Prior to joining the Company, Mr. Thompson was Chief Financial Officer of Surgient, Inc, a software company, from November 2005 until March 2006 and was Senior Vice President and Chief Financial Officer at SAS Institute, a privately-held business intelligence software company, from August 2004 until November 2005. From October 2000 until August 2004.

More experience,

Mr. Thompson served as Executive Vice President and Chief Financial Officer of Red Hat, Inc, a publicly-traded enterprise software company. Mr. Thompson holds a B.B.A. from the University of Oklahoma. He also serves on the board of directors of NetSuite, Inc. (NYSE: N).

Mr. Jason Ream, Chief Financial Officer, Executive Vice President – Finance of SolarWinds Inc

SWI CFO

Mr. Jason Ream has been appointed as Chief Financial Officer, Executive Vice President – Finance of SolarWinds Inc, effective October 1, 2013. Mr. Ream joined the Company in April 2009 as Vice President, Business Development, and Investor Relations, and has been instrumental in expanding the Company’s market opportunities by guiding the Company’s Merger and Acquisition activity. Later, he was promoted to Vice President of Growth Strategy in 2012. Prior to joining the Company, Mr. Ream worked for J.P. Morgan as an Executive Director in investment banking from July 2006 to January 2009. From July 1999 to July 2006, he held various roles in investment banking at UBS, Piper Jaffray, and Credit Suisse First Boston. Mr. Ream holds an A.B. in Mathematics from Amherst College.

Moreover,

For the financial aspects of the company, these are uncovered in the company’s financial statements. Shown here are the data from 2009 to 2013:

SolarWinds Financial Liquidity

swi liq

The average current ratio of SolarWinds, Inc was 2.1 which shows that its current asset was 210 percent over its current liabilities. Likewise, the quick ratio average was 2 which means that the monetary asset of the company was 200 percent when compared current liabilities. While, debt to equity ratio was only 0.06 and solvency ratio was 73 percent.

Income

Income or revenue is the amount of money that is brought into a company by its business activities.

swi inc

The company’s revenue from 2009 to 2013 was going up year over year with a growth rate of 31, 30, 36, 25 and 30 respectively. On the other hand, operating income was also increasing every year by 41, 35, 36, 7 and 30 percent. Further, net income, it is also increasing yearly by 50, 38, 31, 11 and 32 percent.

Margin

The margin is a percentage result of revenue after taking the corresponding expenses. We applied the gross margin, operating margin, and net margin. The gross margin was the result of gross profit over revenue and the operating margin was the result of operating income over the revenue of the period, on the other hand, the net margin was the result of net income over revenue of the period.

From 2009 to 2013, gross margin, operating margin and net margin of SWI are:

swi marg

SWI’s gross margin yearly was quite high at 97, 95, 94, 93 and 92 with an average of 94 percent which is very impressive. While the operating margin was 39 percent average, also high enough and the net margin was 26, 30, 31, 30 and 27 percent. Its average is 28 percent.

Overall results showed that SWI is financially stable and more progressive.

SolarWinds CASH FLOW

Cash Flow from Investing Activities

Investing transactions generate cash outflows, such as capital expenditures for property, plant and equipment, business acquisitions and the purchase of investment securities. Likewise, inflows come from the sale of assets, businesses and investment securities. As a result of the companies investing cash flow from 2009 to 2013 were negative which means the company’s expansion was more on capital expenditures.

Cash Flow from Financing Activities

Debt and equity transactions dominate this category. Companies continuously borrow and repay debt, issuance of stock and payment of cash dividends. Moreover, the financing cash flow of SWI was positive except in 2009 which has a negative result of -21. It shows that the company repaid debts and repurchase stock during this particular period.

Free Cash Flow

Free cash flow is the result after deducting capital expenditure from operating cash flow. SWI’s free cash flow shows positive results from 2009 to 2013 with an average of $109M. It indicates funds available to retire additional debts, increase dividends or invest new lines of business. However, if negative, it indicates the financing is needed to support current operations and programs.

In addition, the cash flow margin of the company was 49 percent average while free cash flow ratio was 95 percent.

Cash Flow Ratios

Others view cash flow ratios are more reliable indicators of liquidity than balance sheet or income statement ratios such as the quick ratio or the current ratio. Lenders, rating agencies, and wall street analysts have long used cash flow ratios to evaluate risk. Other cash flow ratios measure a company’s ability to meet ongoing financial and operational commitments.

Cash Flow

swi fcf

With the result of the formula “Sustainable growth rate=ROE x (1- dividend payout ratio)”, it shows that the average SGR of SWI from 2009 to 2013 is 45.73 percent. This indicates how fast a company can grow.

swi sgr

Explanation

It protects the investor from both poor decisions and downturns in the market. The Margin of Safety requires knowing when the buying price is low in absolute terms, rather than merely relative to the market as a whole. This formula is used to identify the difference between company value and price, in short, it is the difference between the real value of the stock and the market price.

 

Relative Valuation Methods

This valuation method compares the market values of the stock with the fundamentals (earnings, book value, growth multiples, cash, flow, and the metrics) of the stock.

swi relative

For SolarWinds Inc, the current book value per share was $6.45, with an average of $4.24. Its price to earnings ratio in the trailing twelve months (ttm) was 39.4% and 38.25% average per share. Moreover, the earning per share at ttm was $1.17 and $0.90 average while the return on equity (ttm) was $20.72 an average of $45.73 per share due to high ROE in 2009 at $145.68 per share.

swi growth

The growth rate 30 percent, with 0 dividend yield. The value of appreciation or MOS was $71.60, the required 40 percent. In addition, the computed value dividend was $0 because of 0 yields which resulted in the total value was $107.40. The price that the investor is willing to pay in 5 years was $414.05. Likewise, the market price of SWI to date was $46.49 per share. If we compare this to the total value of $107.40 per share, it indicates that the stock is trading at an undervalued price.

Conclusion

To sum it all, the results show that SolarWinds, Inc (SWI) was financially healthy as far as its current resources are concerned.

Moreover, income-wise, the company is continuously generating income and growing year over year. On the other hand, expenses were properly controlled which resulted in a commendable profit margin. On the other hand, when it comes to generating cash flow, the company has sufficient cash flow used for operating activities and high free cash flow.

CITATION:

https://www.google.com/finance?q=NYSE%3ASWI&ei=7oMeU8jJM86kkgXLRQ

Written by Rio

Re-edited by Cris

Facebook Inc

Facebook Inc (FB) High Current Resources and Positive Cash Flow

September 20th, 2012 Posted by Company Updates No Comment yet

Facebook Inc Value Investing Guide

Facebook Balance Sheet

Financial Liquidity

Liquidity ratio expresses a company’s ability to repay short term creditors out of its total cash. It shows the number of times short term liabilities are covered by cash. In order for the investors to determine the liquidity of the company, it is important to evaluate the current assets and current liabilities, if these could meet its current obligations. If current assets do not exceed current liabilities by a comfortable margin, the company may be unable to pay its current bills. For Facebook Inc., results from 2010 to June 2012 are as follows:

facebook inc

  • The company’s current ratio was 5.77, 5.12 and 11.6 which means that current asset was 11 times greater than current liabilities as of June 2012;
  • Its quick ratio was the same with current ratio since the company had no inventory account; and
  • Working capital in dollars was 1,857, 3,705 and 10,933.  The company’s working capital was extremely high and continuously increasing by 99.5 percent and  195 percent respectively.

After getting the results, the question would be “Does the company has sufficient resources to stay in business in the short term?” According to Rio, Facebook Inc. has enough and sufficient resources to stay in business in the short term as proven by its liquidity ratios. They showed extremely high current resources against current liabilities particularly cash account which contributed 85 percent of its total current asset.  The company is very liquid and capable to settle all its obligations and can even invest additional product lines.

The company differs from other companies which involve inventory, high receivable and high payablesFacebook Inc. derived its income online through advertisements and other forms which are classified as cash in nature. However, the company has recorded a minimal balance of accounts receivable and accounts payable. To this, we have computed its efficiency ratios as follows:

facebook inc

The receivable turnover ratio was 5 and 7 for the two years period, while its payable turnover ratio was 68 and 59 and fixed asset turnover ratio was 3 and 3. The company showed very impressive returns on its investments.  Thus, it has the capability to continue its business operation.

Leverage

Company leverage relates to how much debt it has on its balance sheet and at the same time, measure of financial health. In every business, it is important to know the ratio of its total obligations versus total resources of the company. Debt to equity ratio will show us a better idea of the company’s financial condition along with its operational efficiency. A company with a high proportion of long term debt is said to be high leverage. Somehow, long term liabilities are risky because if bondholders/banks are not paid promptly, they can take legal action to obtain payment, such action in extreme cases, force the company into bankruptcy.

For Facebook Inc.’s leverage, its debt, debt to equity and solvency ratios for 2010, 2011 and June 2012 are:

facebook inc

  • The company’s debt ratio was 0.28, 0.23 and 0.11 which shows that its debt obligation continues to lower  down and,  as of June 2012 Facebook Inc.’s total debt was 11 percent of total asset;
  • Debt to equity ratio was 0.38,  0.29 and 0.12 meaning total liabilities were reduced by 12 percent as of June 2012 against total equity; and
  • And solvency ratio was 0.90, 0.92 and 0.63. This tells us that the company was able to settle all obligations upon due date.

facebook inc

The above table presented that as of June 2012, current liabilities to total assets was .80  which means that the creditors have 80 percent claims on the total assets of the Facebook, while the ratio of stockholders equity to total assets was .89 which also tells us that 89 percent of the company’s assets belong to the owners of the company. Therefore, the owners or stockholders have the majority control of FB.

FB’s investment in property, plant, and equipment for 2010, 2011 and as of June 2012 shows that:

facebook inc

facebook inc

  • The company continues to expand through the investment of fixed assets. Gross PPE  as of June 2012 was $2,734. Deducted by its accumulated depreciation of $629  or  23 percent of the total cost,
  • Net book value of PPE was $2,105 which is equivalent to 77 percent of the total cost.

Using an estimated useful life of the property of 5 years, deducting its used life of 1.2 years as of June 2012, the remaining life of the PPE was 3.8 years. Therefore, Facebook Inc.’s investment in PPE will last for more than 3 ½ years before it is fully depreciated.

Facebook Income Statement

Profitability

The overall objective of a business is to earn a satisfactory return on the funds invested in it and consistent with maintaining a sound financial position, hence profitability ratios are used. With Facebook Inc., its profitability ratios for two years period – 2010 and 2011-and the trailing twelve months (TTM) are as follows:

facebook inc

facebook inc

  • Net margin of the company was .31 and .27 with TTM of .13 which shows that it declined in 2011 by 4 percent.
  • Asset turnover was .66 and .59. TTM of .29. It is computed as revenue over the total asset, where asset turnover tells an investor the total sales for each $1 of assets.
  • Return on asset was .34 and .27 which tells us how much profit a company generated for each $1 in assets.
  • Return on equity was .47 and .35. , tells us how much profit FB earned in comparison to the total amount of shareholder equity on the balance sheet.
  • Financial leverage or equity multiplier was 1.38 and 1.29, computed as assets over total stockholders’ equity.
  • Return on invested capital was .43 and .36. This is the financial measure that quantifies how well a company generates cash flow relative to the capital it has invested in its business. 

Profitability ratios of FB show a high level in 2010 but slightly decline in 2011 because of the increase in operating expenses which doubled the previous year.Although its revenue also increased, it could not cope up with the high expenses. It is compared to a domino effect; once one is affected, it affects all.

Income

Available financial data of Facebook Inc. per records only started the year 2010, so its income for 2010 and 2011 are:

facebook inc

  • Revenue in million dollars was 1,974 and 3,711. TTM of 4,327. It shows a growth rate of 88 percent in 2011, while TTM is 16 percent.
  • Gross profit was 1,481 and 2,851. TTM of 3,237  which was  75, 77 and 75 percent of revenue. This was company’s income after deducting its cost of revenue.
  • Operating income was 1,032 or52 percent to revenue and 1,756, which is 47 percent to revenue. TTM was 3,188 or equivalent to 74 percent of revenue. This was the company’s income after deducting all operating expenses.
  • Income before taxes was 1,008 and 1,695. TTM of 515. In percent, it was 51 and 46 of revenue and this was the income after interest and other income and expenses.
  • Net income was 606 and 1,000 with TTM of 577. It was the company’s income after deducting income taxes, with a growth of 65 percent in 2011. It is equivalent to 31 and 27 percent of the company’s revenue.

Facebook Inc.’s total revenue showed a growth rate of 88 percent in 2011 compared to its earnings in 2010, with a gross profit rate ranging  from 75 to 77 percent. Its operating income  was 52 percent in 2010 and 47 percent in 2011 while the company’s net income was  31 and 27 percent of total revenue.  Considering these results, the company is doing well in its operation.

Expenses

Looking into their expenses, we would be able to know how much the company spent in their operations for two years from 2010  to 2011.

facebook inc

  • The cost of revenue in dollars was 493 and 860, TTM of $1,090. This represented 25 and 23 percent of total revenue. The cost of 2010 was almost doubled in 2011, its increase was 43 percent since its sales also increased.
  • Sales, the general and administrative expense was 449 and 1,095, which was equivalent to 23 and 30 percent of revenue. It abruptly rose to 144 percent in 2011.
  • Another operating expense was $2 and 19. TTM of P2,673. This accounts .1, .5 and 62 percent of revenue
  • Interest expense was 22 and 29, equivalent to 1 percent of the total revenue and
  • Provision for income tax was 402 and 695 with TTM of -62.  This ranges from 19 to 20 percent of revenue while TTM was -1 percent.

The modified graph shows the relationship of revenue, total expense, and net income comparatively from 2010 to 2011:

facebook inc

The company’s revenue showed a high growth of 88 percent in 2011; a good sign of a starting business, while the cost of revenue was 25 and 23 percent. After deducting the cost of revenue, its gross profit ranges from 75 to 77 percent. The company’s operating expenses were 23 and 30 percent of revenue, its operating income showed a decrease from 2010 to 2011 by 5 percent due to an increase in operating expenses. And net income was 31 and 27 percent of revenue. The profit margin had declined by 4 percent in 2011 affected by the increase in operating expenses.

Facebook Cash Flow

The statement of cash flows reveals how a company spends its money (cash outflows) and where the money comes from (cash inflows). Cash flow statement of Facebook  Inc. was shown below: 

facebook inc

Cash Flow from Operating Activities

Operatingcashflow is the key source of a company’s cash generation. It is the cash that the company produces internally. Cash flow from operating activities of Facebook Inc. from 2010 to 2011 are as follows:

facebook inc

  • The company’s net income was $606 and 1000. TTM of 577. It shows that the net income in 2011 rose by 65 percent against 2010.
  • Its depreciation and depletion were $139 and 323. TTM of 449 which showed that it increased in 2011 by 132 percent because of additional investment in property, plant, and equipment.
  • Other Working Capital was $145 and 166.  with TTM of -542.  It expanded in 2011 by 14 percent.
  • Accrued liabilities was $20 and 38. TTM of 285.
  • Cash flow from operating activities was $698 and 1549.  TTM of 1758.  It shows us that it doubled in 2011 with a growth rate of 122 percent.  

Cash flow from operating activities shows a high balance in 2010 as well as 2011, the amount was more than doubled in 2011. It shows that the company was doing well in their two years of operation.

Cash Flow from Investing Activities

Cash flow from investing activities is the key source of a company’s cash generation. It is the cash that the company produces internally as opposed to funds coming from outside investing and financing activities. For the year 2010 to 2011, cash flow from investing activities of Facebook Inc. are:

facebook inc

Total cash outflow was -3,937 which composed of:

  • Investment in property, plant and equipment was -293 and -606. TTM is -1187. Facebook expanded in 2011 in PPE by 107 percent.
  • Its acquisition, net was -22 and -24, with TTM of -595. The company increased its acquisition in 2011 by 9 percent only.
  • And purchases of investment was -3,028 in 2011, while

Total cash inflow was $626. It included the following:

  • Sales/maturity of investment was 629. TTM was 1,863.
  • Other investing activities were -9 and 6. TTM of 6.
  • Net cash used for investing was -324 and -3,023. TTM of -8,008. The bulk of investment in Facebook Inc. was in 2011 wherein property, plant and equipment were 107 percent against 2010 and purchase of investment of $3,023.

The above table shows that Facebook incurred a negative balance on investing cash flow because of its expansion through investments in which its cash outflow exceeds cash inflow. 

Cash Flow from Financing Activities

Debt and equity transactions dominate this category. Companies continuously borrow and repay debt. The issuance of stock is much less frequent for investors, particularly income investors and the most important item is cash dividends paid. Similar transactions to investing cash flow also involved cash outflow and inflow. Cash flow from financing activities of FB from 2010 to 2011 are: 

facebook inc

  • Debt repayment was -90 and -181. TTM of 8, which shows that it doubled in 2011.
  • Common stock issued was 500 and 998. TTM of 6761. It shows that in 2011 stock issued was increased by 99 percent.
  • Other financing activities were 371 and 381. TTM of 440.
  • So, its net cash provided by financing was 781 and 1198, which showed a positive balance. It means that cash came in was greater than cash out. It further increased in 2011 by 53 percent.

Based on the above table, Facebook Inc. had money left for its financing activities. The company generated cash through the issuance of common stocks which was $500 in 2010 and increased to $998 in 2011 and  Also,  also through other financing activities. While cash out was in repayment of debt with minimal amount involved.

Free cash flow is the funds left after deducting capital expenditures from operating cash flow. Results for Facebook as follows:

facebook inc

Free cash flow of Facebook was 405 and 943. TTM of 571. It shows that it doubled its amount in 2011 compared to 2010. This means that the company has money left over after paying its expenses and dividends.

Cash Flow Ratios

For Facebook Inc., cash flow ratios for 2010 and 2011 are as follows:

facebook inc

  • Operating cash flow to sales was .35 and .42. It is the proportion of the cash flow provided for the operation to its revenue. There was an increase of 7 percent in 2011.
  • Operating cash flow ratio and current coverage ratio was .31 and .34. It measures how liquid a firm is in the short run since it relates to current debt and cash flows from operations.
  • Free cash flow ratio .58 and .61. A measure of financial performance calculated as operating cash flow minus capital expenditures. It shows that it is above 50 percent and progressing by 3 percent.
  • Capital expenditure ratio was 2.38 and 2.56, which provides information on how much of the cash generated from operations will be left after payment of capital expenditure to service the company’s debt. If the ratio is 2, it indicates that the company generates two times what it will need to reinvest in the business to keep operations going;  the excess could be allocated to service the debt.
  • Total debt ratio was .84 and 1.08, which shows the percentage of operating cash flow against its total liabilities. This ratio provides an indication of a company’s ability to cover total debt with its yearly cash flow from operations. The higher the percentage ratio, the better the company’s ability to carry its total debt.

Cash flow ratios of Facebook against revenue, capital expenditure, free cash flow, current and total liabilities showed an impressive result. These are progressing in the succeeding months by having an increase which tells us that Facebook is doing very well in its business. It is worth investing in this kind of company as far as its financials are concerned.

Written by Rio

Edited by Cris

Sasol Limited SSL

Sasol Limited (SSL) Able to Roll the Dice on the Business Run?

August 17th, 2012 Posted by Company Research Report No Comment yet

Sasol Limited (SSL), knowing the financial status is like going for a general check-up to find out if you are healthy and fit to work. This indicates whether; for a company; is able to roll the dice on the business run.

Sasol Balance Sheet

Sasol Liquidity

Liquidity ratio measures how the company is able to meet and to pay off its near obligations. To compute for liquidity of Sasol is to analyze the following ratios as shown in the table below:

Particulars 2006 2007 2008 2009 2010 Ave
Current ratio 1.69 1.61 1.99 2.02 2.35 1.93
Quick ratio 1.31 1.0 1.26 1.46 1.63 1.33
Working capital (in dollars) 14,676 14,509 27,316 26,769 30,854 22,824.80
Free cash flow (in dollars) 417 4,261 6,327 15,166 -579 5,118.4
  • Working capital in dollars had an average of 22,824.80. It tells us that the company has sufficient resources to meet current obligations.
  • The current ratio was 1.93 on average. It means that the company had 193 percent current assets for every $1 of current liabilities.
  • Quick ratio was 1.33 average. It tells us that the company has 133 percent of quick assets for every $1 of current liabilities.
  • Free cash flow in dollars was an average of 5,118.4. It indicates that the company has money left over after expenses and dividends have been paid. The creditors have no worries of the company’s default in payments.

Sasol Efficiency

Of course, when talking about company financials, inventory is on the line. This is portioned of the business assets that are ready for sales. How to compute for this is to use the asset management ratios. For Sasol Limited, the following are the results:

  • Inventory turnover is 6.07, 4.17, 3.72, 6.07 and 4.81 for 2006 to 2010, respectively with an average of 4.96. This tells us that the average dollar volume of inventory is used up almost five times average in five years.
  • Inventory turn day was 59, 86, 97, 59 and 75. Average of 75 days. This tells us that the company keeps an average of 75 days or two and a half months of inventory on hand.
  • Accounts receivable turnover was 7.92, 7.89, 6.61, 11.03 and 7.99. An average of 8.29. This tells us that the company’s accounts receivable have an average of 8 times turn each period.
  • Average collection period was 45, 46, 55, 33 and 45.  Average 44.66 or 45. It means that the company must wait for an average of 45 days for its receivables to be converted into cash.
  • The fixed assets turnover ratio in percent was 1.31, 1.3, 1.67, 1.62 and 1.31.  Average of 1.44. It tells us that the company is generating an average of 1.44 of revenue for every $1 of fixed assets. This is considered a good ratio meaning the company is using its plant, property, and equipment effectively and efficiently.
  • The working capital turnover ratio was 1.57, 1.72, 1.88, 1.72 and 1.37. Average of 1.65. This means that the working capital of the company has 2 times turns each period. The ratio is low meaning the company is not efficient in utilizing its working capital.

Sasol Leverage

We are basically done with the inventory. Now it’s time to know the financial leverage. When we speak of leverage, we are pertaining to the amount of debt used to finance a firm’s assets. In line with this, below are the results for Sasol Limited.

Particulars

2006 2007 2008 2009 2010

Ave

Debt Ratio 0.49 0.48 0.45 0.43 0.39 0.45
Debt-to-Equity ratio 0.96 0.93 0.83 0.74 0.65 0.82
Current Liabilities to Total Assets 0.21 0.20 0.20 0.18 0.15 0.19
Long Term Liabilities to Total Assets 0.15 0.11 0.11 0.09 0.09 0.11
Net Worth to Total Assets 0.51 0.52 0.55 0.57 0.61 0.55
Interest Coverage 30.1 22.3 29.5 9.7 11.3 20.58
Cash Flow to Debt 0.27 0.28 0.27 0.50 0.25 0.31
Equity Multiplier 1.96 1.93 1.83 1.74 1.65 1.82
  • Debt ratio was 0.45 on average.  This means that the company’s debt capital was 45 percent.
  • Debt to equity ratio was 0.82 in average or total liabilities had 82 percent out of total equity. This means that the company’s creditors have fewer claims than the shareholders.
  • Current liability to total asset had an average of 0.19. This tells us that the creditors/note holders had 19 percent claims against total assets.
  • Long-term liability to total asset was 0.11 on average. This tells us that the banks/bondholders had 11 percent claims against total assets.
  • Net worth to total assets was 0.55 on average. Stockholders/owners had 55 percent claims against total assets.
  • Interest coverage was 21 percent in average meaning the company had 21 percent income before interest and tax against total interest. It further tells us that the company will not default on its payment of interest.
  • Cash flow to debt was 0.31. Tells us that the company has funds for its debt at an average of 31 percent.
  • Equity multiplier was 1.82 in average. The results show that it has a lower equity multiplier meaning that the company’s asset doesn’t finance by debt.  This also shows a number of assets owned by the firm for each equivalent monetary unit owner claims, held by stockholders. This ratio is best compared to other industry.

Facts:

  • The cash and cash equivalent growth in percent were 181, 144, 597 and 447 for 2007 to 2010 respectively. It tells us that in 2008 it decreased by almost 40 percent, but increased by 453 percent in 2009 and down again by 150 percent. In the vertical analysis, it represents 7 percent average of the total assets.
  • Total receivable in percent was 141, 210, 139 and 168 for 2007 to 2010, respectively.  It represents 13 percent of total assets. It shows that the ratio was up and down trend and the highest was in 2008.
  • A total current asset in percent was 106, 152, 147 and 149 for 2007 to 2010 respectively. It represents 35 of total assets. It shows that it was high in 2008 and the ratio increased from 2009 to 2010.
  • Property, plant, and equipment were 119, 124, 135 and 148 for 2007 to 2010 respectively. It represents 60 percent of the total assets.
  • Long-term investment in percent was 114, 162, 215 and 325 for 2007 to 2010 respectively. It shows that it is increasing from 2006 to 2010.  It represents 2 percent of total assets.
  • Notes receivable long term in percent was 155, 132, 141 and 113 for 2007 to 2010. This represents 1 percent of the total assets.
  • A total asset in percent was 115, 136, 141 and 152 for 2007 to 2010 respectively. For total assets, the trend is increased by 5 percent to 21percent from 2006 to 2010.

Cash and cash equivalent were high in 2009, which represents 14 percent of the total assets, from 2006 the cash was improving from 3 percent to 14 percent and 10 percent in 2010. Total receivable was high in 2009 because sales were also high in 2009. The increase was 69 percent and sales increased by 11 percent during the same year. Its total current assets, PPE and long-term investment rose from 2006 to 2010; which were good. While notes receivable was decreasing from 2006 to 2010, meaning the collection is being handled effectively. Its total assets were improving as well from year to year.

The overall results tell us that Sasol is financially sound.

Sasol Income Statement

Return on assets or ROA for short, tells an investor how much profit a company generated for each $1 in assets. Return on equity (ROE), tells investors how much profit a company earned in comparison to the total amount of shareholder equity on the balance sheet.

  • Return on assets in percent was 10.1, 14.3, 16.0, 9.4 and 10.2. Average of 12.
  • Return on equity in percent was 19.8, 27.6, 29.3, 16.3 and 16.8. The average is 21.96.

Return on assets had an average of 12 percent or the average return of revenue for every $1 of investment in assets, while the return on equity had an average of 21.96 percent. Sasol earns $0.22 of revenue average for every $1 investment in equity. It indicates a fair return on the money the investors have put into the company.

Sasol Income

2006 2007 2008 2009 2010
Total revenue 82,395 98,127 129,943 137,836 122,256
Gross profit 33,848 38,130 55,309 49,328 43,073
Operating income 17,212 25,621 33,816 24,666 23,937
Income before tax 17,116 25,703 33,657 24,195 23,372
Income after tax 10,582 17,550 23,528 13,715 16,387
Net income 10,406 17,030 22,417 13,648 15,941
  • The company’s total revenue was 82,395, 98,127, 129,943, 137836 and 122,256. It showed that year it was increasing except in 2010 which dropped by 11 percent.
  • Its gross profit was 33,848, 33,130, 55,309, 49,328 and 43,073 which was also increasing per year except in 2010 which slightly decreased. It shows a growth of 12.65 percent, 45.05, -10.81 and -12.68 percent from 2007 to 2010, respectively.
  • The company’s operating income was 17,212, 25,621, 33816, 24,666 and 23,937 with a yearly growth of 48.86 percent, 31.99, -27.06 and -2.96 percent.
  • The income before tax 17,116, 25,703, 33,657, 24,195 and 23,372. It showed 50.17 percent, 30.95 percent, -28.11 percent  and -3.40 percent from 2007 to 2010 respectively.
  • Income after tax in dollars was 10,582, 17,550, 23528, 13715 and 16,387.
  • Net income was 10,406, 17,030,22,417, 13648 and 15,941. Its growth in percent showed 63.66, 31.63, -39.12 and 16.80 .

Sasol’s total revenue from 2006 to 2008 moved consistently upward with a gradual increase in 2009 and drop down to -11.3 percent in 2010 but it has a good indication of a 4.7 percent increase in Q2 of 2011. After considering the cost of revenue, the gross profit of the company was still efficient in covering the operating expenses with an average of five years at 20 percent. It also moved upward from 2006 to 2008 and down in 2009 and 2010 but it was corrected with an 8 percent increase in Q2 of 2011.

Sasol Expenses

  • Cost of revenue in thousand dollars was 48,547, 59,997, 74,634, 88,508 and 79,183. The computed average was 70,173.80. The figures showed an increase from 2006 to 2009 but in 2010, there was a decrease of 11 percent against 2009. It also showed 61 percent average against total revenue.
  • Selling/general/and administrative expense in thousand dollars was 9,550, 11,912, 16,404, 24,918 and 16,890. The computed average was 15,934.80. It indicated that from 2006 to 2009 results increased while the gap in 2010 decreased by 32 percent compared to 2009. It represented 14 percent average against total revenue.
  • Income tax was in thousand dollars was 6,534, 8,153, 10,129, 10,480 and 6,985. The computed average was 8,456.20. It showed an increase from 2006 to 2009 but with a decrease in 2010 of 33 percent gap in 2009. It also shows 7 percent average of against total revenue or 7 percent average of the taxable income.

The computed cost of revenue is higher at 61 percent of total revenue which would depend on the nature and operation of the business. Selling/general/and administrative expense was 14 percent plus 7 percent of income tax. Out of these expenses, still, it shows that the company resulted in a net income of 18 percent.

Sasol Profit Margins

  • Gross margin in percent was 41, 39, 43, 36 and 35.  Average of 39. It is increasing between the year 2007 and 2008 but it shows a decrease in between the year 2006 to 2007 and from the middle of the said years up to the year 2010.
  • Operating margin in percent was 21, 26, 26, 18 and 20.  Average of 22 percent. The trend showed an increase in three consecutive years from 2006 to 2008 but down in 2009 of 8 percent and increase again by 2 percent in 2010.
  • EBIT in percent was 20.90, 26.1, 26, 17.90 and 19.60.  Average of 22.
  • Pretax margin in percent was 20.8, 26.2, 25.9, 17.6 and 19. The average is 22 percent.
  •  EBIT and pre-tax resulted with the same margin, the trend showed an increase in three consecutive years from 2006 to 2008 but decrease in 2009 of about 8 percent then increase again by 2010 of about 2 percent.

Sasol Cash Flow

Cash Flow Statement is categorized into three: cash flow from operating activities, cash flow from investing activities and cash flow from financing activities.

Sasol Cash Flow from Operating Activities

Cash flow from operating activities indicates a positive result continuously for five years period. It shows that the company is effective in generating cash flow from its revenue.

  • Cash flow from operating activities in dollars was 13,713, 16,306, 17,182, 30,838 and 15,529 for  2006 to 2010 respectively. Average of 18,713.60.
  • Working capital in dollars was 3,988, -4,929, -5,581, -3,059 and -3,688 for the year 2006 to 2010 respectively. Average of -4,249.
  • Other operating cash flow in dollars was 3,688, -3,059, -5,581, -4,929 and -3,988 for 2006 to 2010 respectively. Average of -4,249.

Sasol Cash Flow from Investing Activities

Cash flow from investing activities has a negative balance from 2006 to 2010. It means that the company has no cash for investing. Contributing factor to having a negative balance is the company’s purchase of a fixed asset on a yearly basis.

  • Cash from investing activities was -$12,283, -10,545, -10,844, -12,518 and -16,704 for the year 2006 to 2010 respectively. Average of -$12,578.80.  It tells us that the company had no cash for investing. Sale of business and sale of fixed assets contributed much on cash inflow.

Total cash outflow was  -$62,894, which are:

Particulars 2006 2007 2008 2009 2010
Purchased of Fixed Assets -$13,269 – $12,023, -$10,838 -$15,546 -$16,057
Purchase/Acquisition of Intangibles -$27 -$22 -$17 -$126 -$51
Other Investing Cash Flow $1,013 $1,500 $11 $3,154 -$596

Total cash inflow was $5,082, which are:

Particulars 2006 2007 2008 2009 2010
Acquisition of Business -$147 -$285 -$431 -$30
Investment, Net -$524 -$1,248
Purchase of Investment -$62 -$79 -$42 -$89 -$47
Sale of Fixed Assets $542 $193 $184 $697 $208
Sale/Maturity of Investment $16 $7 $14
Other Investing Cash Flow $ 77 -$529  -$393 -$393 $477

Sasol Cash Flow from Financing Activities

Cash flow from financing activities had a negative result, therefore, it indicates that the company’s cash outflows exceeded its cash inflows for investing. Total cash inflow was -5,565 while the total cash outflow was -7,990.

  • Cash flow from financing activities was -1,277, -2,893, -8,415, -1,193 and  -2,701 for the year 2006 to 2010 respectively. Average of -3,295.8. It has a negative balance successively for five years.
  •  Total cash inflow was -9,452 which is issuance (retirement) of stocks  $431,  -$3,337,  -$6,825, $75 and $204 for 2006 to 2010 respectively
  • Total cash outflow was -7,027  from 2006 to 2010 which are: issuance (retirement) of debts, Net  -1,633,  852, -1,132, -1,056 and -2,596  respectively and other financing cash flow was -75, -408, -458,  -212 and  -309   respectively.

Free cash flow measures the company’s capability to cover capital expenditures maintenance and determine if the company has still funds for future expansion.

  • Free cash flow was 417, 4,261, 6,327, 15,166 and -579 for 2006 to 2010 respectively. Average of 5,118.8. It showed that the company had sufficient funds to pay its obligations from 2006 to 2009 respectively. It means that there was money left over after paying operating expenses from 2006 to 2009 but no funds in 2010 since it showed a negative balance.

Sasol Cash Flow Ratios

Sasol Limited cash flow analysis uses ratios that focus on cash flow and how solvent, liquid, and viable the company is.

  • Cash flow from operation to net income ratio was 1.32, .96, .77, 2.26 and .97.. Average of 1.18.  It was higher by 126 percent average versus net income. It indicates the company’s ability to generate cash from income.
  • Cash flow return on asset was .1329, .1369, .1226, .2114 and .0992.. Average of 14.07 percent. It indicates that the company was able to generate cash on invested assets.
  • Cash flow margin was .17, .17, .13, .22 and .13.. Average of 16 percent which was a good indication of the company’s ability to generate cash relative to revenue.
  • Cash flow solvency in percent was 27.13, 28.38, 26.99, 49.71 and 25.14.  Average of 31.67. It indicates that the company had 31.67 percent of cash flow for every $1 of total liabilities, more than enough to settle its obligations.
  • Cash flow return on equity in percent was .10, .12, .13, .23 and .12.. Average of .14. This means that the company was able to generate a cash return of $0.14 for every $1 of equity.

Cash flow from operating activities effectively generated cash from revenue for its operation from 2006 to 2010 while cash from investing activities had a negative balance from 2006 to 2010 which clearly indicates that there was no cash from investing activities. Cash from financing activities also showed a negative result for its five years in operation due to its yearly acquisition of fixed assets, therefore indicating there were no funds for financing activities. Free cash flow tells us that the company had excess cash after paying operating expenses from 2006 to 2009 but no funds for 2010. Cash flow solvency indicated that the company had sufficient cash flow to settle its obligations. Sasol was able to generate a return of more than enough money invested in assets.

Written by Cris, Dyne, Wilmay, Nelly and Rio
Edited by Cris
kaman-corporation-kamn2

Kaman Corporation (KAMN) Company Research

August 2nd, 2012 Posted by Company Research Report No Comment yet

Kaman Balance Sheet

Financial Liquidity

Kaman Corporation is a diversified company operating in two business segments which is Aerospace and Industrial Distribution.

Liquidity is the ability of the firm to convert assets into cash. It is also called marketability or short-term solvency. The liquidity of a business firm is usually of particular interest to its short-term creditors since the liquidity of the firm measures its ability to pay those creditors.

In our guide to value investing for Kaman Corporation, its financial liquidity was computed through ratios from 2007 to 2011 as shown in the table below.

kaman balance sheet a

  • Current ratio average for five years of operation was 2.8, which shows that the company’s current assets was greater than current liabilities by 280 percent.
  • Quick ratio was 1.30. It tells us that Kaman’s monetary assets which is current assets less inventory, was 130 percent and was also greater than its current liabilities.
  • Working capital was $338 average in five years of operation. This is the funds left after deducting current liabilities from current assets. Kaman’s working capital showed a positive balance, increasing from year to year except in 2008 which slightly down by $1.

Kaman’s liquidity on its five years of operation was very impressive. It shows that its business was financially stable, wherein the company was capable to pay its short-term as well as long-term obligations and can even invest to other line of business.

Efficiency ratios are used to measure the quality of the company’s receivables and how efficiently it uses its other assets. For five years period from 2007 to 2011, Kaman’s efficiency are:

kaman balance sheet b

  • Inventory turnover ratio was 3 times average each period. This shows that its products are not so in demand in the market. Sales to inventory ratio shows the number of “turns” in inventory. If the ratio is very high, it may indicate that the business is losing sales to competitors because they are under stocked or customers are buying elsewhere.  If ratio is too low, this may show that the inventories are stagnant.
  • Receivable turnover ratio was 8 times average per year. Receivables turnover is a ratio that works hand in hand with average collection period to give the business owner a complete picture of the state of the accounts receivable. Receivables turnover looks at how fast we collect on our sales or, on average, how many times each year we clean up or totally collect our accounts receivable.
  • Payable turnover ratio was 14 times average. A low percentage would indicate a healthy ratio with all bills be paid in a timely manner.
  • And fixed asset turnover ratio was 16 times average.

To gauge how efficient the company in handling its resources, also consider its industry, since it varies from industry to industry. We cannot compare food lines inventory off take to non-food lines since normally, food lines are sellable than non-foods. Kaman’s performance was quite good considering its industry.

The day’s sales in inventory or inventory conversion period tells the business owner how many days, on average, it takes to sell inventory. The usual rule is that the lower, the better, since it is better to have inventory sell quickly than to have it sit on the shelves. Receivable conversion period measures the number of days it takes a company to collect its credit accounts from its customers. A lower number of days is better because this means that the company gets its money more quickly. While payable conversion period measures how the company pays its suppliers in relation to the sales volume being transacted. A low percentage would indicate a healthy ratio. For Kaman, conversion period from 2007 to 2011 are:

kaman balance sheet e

  • Inventory conversion period was 112 days average which means it takes almost 4 months to sell its inventory.
  • Receivable conversion period was 48 days which tells us that its credit accounts have more than 1.5 month to collect.
  • Payable conversion period was 35 days average which means that the company pays its suppliers within 35 days.
  • Cash conversion cycle was 125 average days. This metric looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties.

Considering Kaman’s line of business, wherein products are not so in demand in the market, with line-up of competitors, cash realization is within normal level, provided, that there is a continuous transaction, proper handling and control and close monitoring.

Leverage

Leverage is a business term that refers to borrowing. If a business is leveraged it means that the business has borrowed money to finance the purchase of assets. The other way to purchase assets is through use of owner funds, or equity.

One way to determine leverage is to calculate the debt-to-equity ratio, showing how much of the assets of the business are financed by debt and how much by equity.

 

  • The company’s debt ratio was 0.57 average which means that Kaman total obligations was 57 percent of the total assets.
  • While debt to equity ratio was 1.40. It tells us that Kaman’s total obligations were more than its owners’ equity at 140 percent.
  • And solvency ratio was 0.12 average which means that the company is 12 percent solvent.
  • Current liabilities to total assets was 0.24 which tells us that 24 percent of the company’s total assets are controlled by the creditors mostly suppliers.
  • Stockholders’ equity to total assets was 0.43 average which also means that the owners have 43 percent claims on the company’s total assets.

Based on the above findings, Kaman Corporation was indebted by 57 percent against total assets. With its debt of 140 percent against total equity, the company must have to closely monitor regular settlement of its debt to bring it to manageable level.

Property, Plant & Equipment

Property, Plant & Equipment consists of assets that are tangible and relatively long-lived. The firm has acquired these assets in order to use them to produce goods and services that will generate future cash inflows. These are recorded at cost upon acquisition of these assets.  From 2007 to 2011, the company’s acquisition of plant, property and equipment are as follows:

kaman balance sheet d

  • Average property, plant and equipment was $206.
  • Accumulated Depreciation average of $122 which is equivalent to 59 percent of the total cost of PPE.
  • Net book value of PPE was $84 or 41 percent of the total cost.

Referring to the above data, property, plant and equipment of Kaman is not yet fully depreciated with remaining life of 41 percent. By using the percentage method of depreciation, the company could still use the fixed asset for two more years.

I think we are basically done with the balance sheet. It’s high time to move on the income statement. Take a look at the table below. They are the results of profitability ratios of Kaman from 2007 to 2011. But what are those? Good thing Nelly explained everything.

Kaman Income Statement

Profitability

kaman IS a

  • Net profit margin; simply the after tax profit a company generated for each dollar of sales; had a yearly average of 3.43. This depicts that it decline in 2008 of 45 percent compared to 2007 net margin of 5.51. But, in 2009 to 2011 it increases yearly of 0.40, 2.1, and 17 percent.
  • Their asset turnover; which measures the effectiveness of the company to convert its assets into revenues; showed an average of 1.63 percent.
  • Return on assets has an average of 5.64 percent and this tells us how much profit the company generated for each dollar on total assets. Which show that in 2007 returns has the highest 8.84 with decreases in 2008 and 2009 and slightly increases in 2010 and 2011 of 8 percent and 17.8.
  • Their financial leverage was 2.4 in average. This measures the financial structure ratio of the company base on total assets against total stockholders’ equity. Resulting as the equity multiplier, it allows the investors to see what portion of the return on equity is the result of debt.
  • Return on equity had an average of 12.64; the company could return such profit percent for every dollar of equity. This was computed through DuPont method wherein the formula is net profit margin multiply with asset turnover multiplied with equity multiplier.
  • Return on invested capital with an average of 9.91. This is the financial measure that quantifies how well a company generates cash flow relative to the capital it has invested in its business.

The data tells us that net profit margins vary across different companies, making it important for comparison a potential investment against its competitors. A higher net profit margin is preferable as a general rule of thumb. Kaman’s asset turnover ratio tends to be inversely related to the net profit margin. The higher the net profit margin for the last five years, the lower the asset turnover and this is more attractive to investors By comparing the results on returns earned on debts or their financial leverage to returns on profit margin and sales, they earned more on internally generated sales  which was impressive and favorable to investors.

Income

How is the revenue going on with Kaman Corporation for its five years of operation? Nelly computed for it and put the data into table as shown below:

kaman IS b

  • Revenue was the company’s total earnings per year wherein Kaman Corporation show an average of 1,260.6 million dollars for the last five years. Its trend increase slightly in 2008, decrease in 2009, then increases in 2010 and 2011.
  • Their gross profit was the company’s total earnings after deducting its cost of revenue.  Its trend was same as their revenue with a yearly average of 343 million dollars.
  • Operating income was the company’s total earnings after deducting all operations expenses. Wherein their trend showed a fixed-down-up movement with an average 67.2 million dollars.
  • Their income before tax was the income after interest and other income and expenses, wherein it shows an average of 60.2 million dollars. It’s showed an increase in 2008, decrease in 2009 and then increase in 2010 and 2011.
  • While their net income was the company’s income after deducting income taxes with a yearly average of 42.8 million dollars. It showed a decreasing trend in 2008 and 2009 and then increases in 2010 and 2011.

Looking into their income, Kaman’s revenue depicts a yearly growth ratio of 9.54, 15.43, -8.56, 15.03 and 13.62 from 2007 to 2011. This means their revenue was trending upward except in 2009 wherein revenues declined so as net income decreased. Their operating income has a growth ratio of 35.35, 0.83, -17.35, 8.34 and 52.00. This show drastic changes yearly meaning operating expenses fluctuates. Its net income growth ratio has depicts a 75.92 percent, -36.34, -8.29, 9.07 and 43.61 yearly. The decrease in net income in 2008 was cause by the increase in cost of revenue and operating expenses while in 2009 it was due to decrease in their revenues.

Expenses

How about with their expenses from its five years of operations? Listed below are the expenses incurred during 2007 to 2011:

kaman IS c

  • Their cost of revenue was the amount the company paid for the goods that was sold during the year. This had an average of 917.4 million dollars and it represents 73 percent of revenue.
  • While their operating expense was the expenses incurred in conducting their regular operations of the business. And it has an average of 275.8 which is 22 percent of revenue.
  • Their provision for income tax was the amount allocated for their payment of income taxes. And this had an average of 21.4 which represents 2 of revenue.

Overall expenses or total expenses result an average of 97 percent of revenues leaving a merger amount of 3 percent for their net income from revenues. This means KAMN’s expenses on their operations gets a huge chunk on their revenue which is unfavorable, therefore, to improve their net margin they should tighten on their budgeting and costing.

Margins

I’ve learned that profitability can be measured in two ways. One is from returns (which we tackle on the early part of the income statement; and the other one is from margins. For Kaman Corporation, Nelly laid the margins percentage of revenue from 2007 to 2011.

kaman IS d

  • Gross profit margin has a yearly average of 27 percent.
  • Operating margin has an average of 5.3.
  • EBT margin has an average of 4.8.
  • Net margin has an average of 3.

To double check Kaman Corporation as a manufacturing company, it has only a gross margin averaging to 27 percent.  This means cost of revenue holds 73 percent which was almost three fourth of their total earnings. Therefore, after deducting their operating expenses, operating margin was only 5.3 and EBT margin 4.8 minus the non-operating expenses. Thus, net margin left an average of 3 percent of revenue.

We are down now to the last part of Numbers team report and that is the cash flow.

Kaman Cash Flow

Cash flow statement is one of the useful tools that laying all the facts. This encompasses the result from the operating side up to financing activities.

Cash Flow from Operating Activities

Indirect method or reconciliation method starts with net income and converts it to net cash flow from operating activities. In other words, the indirect method adjusts net income for items that affected the reported net income but didn’t affected cash. A sample you can see from table 1 below.

Direct method also called the income statement method; reports cash receipts and cash disbursements from operating activities. The difference between these two amounts is the net cash flow from operating activities.

To compute net cash flows from operating activities, non-cash changes in the income statement are added back to net income, and net cash credits are deducted. Like as what you can see from table 1. Net income was net earnings from the revenue for the period after all deducting its direct cost and operating expenses. Depreciation and amortization was an allocation of asset, it was added back since it was not cash generating. Inventory was an item that was ready or available goods for sale. Other non-working capital was a change from accounts receivable or accounts payable. Other non-cash item refers to allowance for doubtful accounts or unrealized gains and losses in investment.

The net cash provided from operating activities for their five years of operation only blew up by 63 percent in 2009 against 2007 and went down in 2011 by 56 percent. This was due for the net income had only results in 2007 and 2011.The movement of depreciation was consistently increasing, while the inventory had only increase in 2009 by 246 percent.

 kaman CF a

On other hand, operating cash flow results using direct method, are:

kaman CF b

In direct method, cash collection was the based then deduct all the cash payments made by the company for that period. Cash payment for purchases was the purchases made within the period; cash payments for operating was cash paid in terms of operating expenses like salaries; while cash payments for income taxes was a taxes paid due for that year.

The net cash from operating indicated that Kaman Corporation had insufficient cash, the cash payments made exceeds over their cash collection. It had an average of -113 percent deficits.

Cash Flow from Investing Activities

Cash flow from investing was an activity of cash that focuses on where the company invested or utilized their cash. Based from the total, they venture in acquisition more than in PPE with equivalent percentage of 106 and 36 percent. This is because Kaman Corporation is a diversified company that conducts business in the aerospace and industrial distribution markets.

 kaman CF c

The net cash for investing activities indicates; in 2007 it had only a positive result to 40 percent based in total, due to the contribution of other investing activities which represents at 106 percent positive. In 2008 to 2009 was decline by 82 percent and from 2010 to 2011 was up to 38 percent. The movement was due for the acquisition in sideways.

Cash Flow from Financing Activities

Net cash provided or used in financing activities was mainly contributed from debt issued, debt repayment, dividend paid and other financing activities. Debt issued is a company cash provided for the business. Debt repayment is a restructuring of existing debt that the company used for the operation. Dividend paid is a cash dividend paid by the company during the period. Other financing activities are normally from the increase/decrease in debt issue costs, increase/decrease in financing costs and increase/decrease in minority interest.

kaman CF d

Table 4 showed that the net cash from financing activities of Kaman Corporation was quietly impressive; since for their five years only in 2007 and 2009 they had a negative result. This was due to the dividend and other financing cash flow paid for that respective years. The rest was positive due to the debt issued by the company.

Cash Flow Ratios

Operating cash flow to sales ratio compares the operating cash flow of the company to its sales revenue. It will help us determine, the ability of a company to generate cash from its sales. In other words, it shows the ability of a company to turn its sales into cash. It is expressed as a percentage. Though there is no any standard guideline but a consistent and/or increasing trend in this ratio is a positive; indication of good debtor’s management.

kaman CF e

By referring to table 5, operating cash flow ratio to sales ratio of Kaman Corporation was on grade C. It indicated that in every $1 of sales they can only generate at $.02,-.01, .06, .03 and .03 from 2007 to 2011, respectively.

Operating cash flow ratio help us measures the company’s ability how they operating efficiently. From operating activities result over the total current liabilities or obligation of the company. For Kaman Corporation, the result was  negative in 2008. In total result to 17 percent; it means in every $1 the company cash will be used was $.17. Table 6 furthers explains this.

The free cash flow is to provide a measure of what is available to the owners of firm after providing for capital expenditure to maintain the existing assets and to create new assets for the future growth. The higher free cash flows to operating cash flows ratio is a very good indicator of financial health of a company. For Kaman Corporation, it showed results as indicated in the table 7 below.

 

The free cash flow result of Kaman Corporation from 2008 to 2011 was declining from 214 down to 36 percent. In average; it represent at 84 percent. It means, in every $1, the company had $.84.

Written by Rio, Nelly and Dyne

Edited by Criselda

systemax-inc-syx

Systemax Inc (SYX) to Treat with Extra Careful?

July 23rd, 2012 Posted by Company Research Report No Comment yet

Systemax Balance Sheet

Financial Liquidity

In planning for an investment to a certain company, the number one factor to consider is the financial liquidity of the company you want to invest in.  To obtain them, we need to use related ratios such as current ratio, quick ratio and working capital.  For Systemax Inc., the results are as follows:

  • Current ratio was 1.83, 1.69, 1.56, 1.65 and 1.86. Average of 1.72. The company’s average current ratio for the past five years in operation was 172 percent. This means that its current assets are 72 percent greater to its currents liabilities.
  • Quick ratio in was 1.07, .91, .74, .85 and .96. Average of .91 or 91 percent. It was computed as current asset minus inventory divided by current liabilities; to focus on the monetary asset of the company.
  • Working capital in dollars was 274, 250, 250, 301 and 354. Average of 286 per period. It showed positive results throughout its five years in operation illustrating a healthy management of the firm’s current resources.

Efficiency

Usually a company acquires inventory on credit, which results in accounts payable. A company can also sell products on credit, which results in accounts receivable. Cash, therefore, is not involved until the company pays the accounts payable and collects accounts receivable. So the cash conversion cycle measures the time between outlay of cash and cash recovery.

  • This cycle is extremely important for retailers and similar businesses. This measure illustrates how quickly a company can convert its products into cash through sales. The shorter the cycle, the less time capital is tied up in the business process, and thus the better for the company’s bottom line.  Below is the CCC of Systemax Inc. from 2007 to 2011: Inventory turnover ratio was 9.42, 9.11, 7.39, 8.36 and 8.47. Average of 8.55. The company has an average turnover ratio of 9 times each period.
  • Inventory conversion period was 39, 40, 49, 44 and 43. Average of 43. The average days of inventory to be out for delivery are 43 days.
  • Accounts receivable turnover ratio was 14.11, 15.88, 13.08, 13.01 and 13.69. Average of 13.95. The company receivable turns 14 times average per period.
  • Average collection period was 26, 23, 28, 28 and 27. Average of 26 days or about one month the company can collect its receivables. Most companies extend credit terms to its valued customers from 15 days, 30 days and 45 days.
  • The payable turnover ratio was 11.35, 10.68, 9.15, 9.52 and 10.93. Average of 10.33. Systemax Inc. payable turnover ratio is 10 times each period.
  • Payable conversion period was 38, 40, 47, 44 and 39. Average of 42, which tells us that the company’s accounts payable, is almost 1 1/2 months average to pay. It is an advantage to the company since the money they have collected can be utilized in short term investment to earn a profit.
  • Cash conversion cycle was 27, 23, 31, 27 and 31. Average of 28. CCC from company’s inventory to receivables and settlement of its obligations take an average of 28 days.

Further interpretation of cash conversion cycle:

Particulars

2007

2008

2009

2010

2011

Average

Inventory Conversion Period 39 40 49 44 43 43
Average Collection Period 26 23 28 28 27 26
Payable Conversion Period 38 40 47 44 39 42
Cash Conversion Cycle 27 23 31 27 31 28

The company’s resources are well managed and handled since it shows that its CCC for the past five years in operation is within one month period only, therefore, funds are not tied up in the business process.

Leverage

Financial leverage is the degree to which an investor or business utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Financial leverage is not always bad, however; it can increase the shareholders’ return on investment and often there are tax advantages associated with borrowing. In value investing for Systemax Inc., debt ratio, debt to equity ratio and solvency ratio from 2007 to 2011 are shown below:.

  • Debt ratio was .50, .52, .55, .54 and .49. Average of .52, which means that the company’s total debt is 52 percent of its total assets.
  • Debt to equity was 1.01, 1.10, 1.24, 1.19 and .96. Average of 1.10. Total obligation is 110 percent against its owners’ equity.
  • Solvency ratio was .23, .17, .13, .12 and .16. Average of .16, which tells us that the company is 16 percent average solvent.  Solvent means able to pay all debt obligations as they become due.
  • Current liabilities to total assets was .49, .51, .54, .52 and .46. Average of .51. The company’s current debt is 51 percent average of its total assets. This also means that creditors have 51 percent in control of the total assets of Systemax Inc.
  • Stockholders’ equity to total assets was .50, .48, .45, .46 and .51. Average of .48. The owners’ equity is 48 percent average of the company’s total assets. This means that owners have 48 percent claim of its total assets.

Based on the analysis of the company’s total obligations, it shows that its ability to pay all debt obligations when they become due is only 16 percent. Extra care should be observed in the final decision to invest in this company. Please take note further, that total debt obligations are more than 50 percent of its total assets.

Fixed asset turnover ratio measures the company’s effectiveness in generating sales from its investments in plant, property, and equipment. It is especially important for a manufacturing firm that uses a lot of plant and equipment in its operations to calculate this ratio. The contribution of the company’s fixed asset in generating sales is still effective and efficient at an average ratio of 54 percent.

Systemax Income Statement

Systemax Inc gets its income from sales of desktops computers, notebook computers, computer related products and industrial products in North America and Europe to individuals and businesses through catalogs and internet websites. Their income statement is one of the financial statements they used to provide information in the context of its income and expenses of the company and its profitability.

Profitability

The profitability ratios of Systemax Inc. from 2007-2011 as shown in data below:

  • Net margin in percent was 2.50, 1.74, 1.46, 1.19, and 1.48. This simply is the after tax profit a company generated for each dollar of revenue.
  • Asset turnover was 4.42, 4.40, 4.17, 4.20, and 4.13. This measures the efficiency of the company to convert its assets into revenues.
  • Return on assets was 11.05, 7.67, 6.08, 4.97, and 6.10. This tells us how much profit the company generated for each dollar on total assets.
  • Financial leverage was 3.01, 2.11, 2.24, 2.18, and 1.96. This measures the financial structure ratio of the company base on total assets against total stockholders’ equity.
  • Return on equity was 22.22. 15.78, 13.22, 11.00, and 12.60. This tells us how much the company could return for every dollar of equity.
  • Return on invested capital was 21.61, 15.62, 12.88, 10.63, and 12.32. This is a financial measure that quantifies how well a company generates cash flow relative to the capital it has invested in its business.

In terms of profitability, Systemax net margin was at its highest in 2007 by 2.5 percent from the past ten years of operations. It decreased in the following years showing a declining net income. Furthermore, the company had lower net profit margin with a higher volume of asset per asset turnover. Return on assets tells us that the company really utilized their assets to generate profit.

With regards to financial leverage; measured by equity multiplier; showed that portion of equity was in a downward trend as a result of debt. This means that debt declined in relation to total assets and total stockholders’ equity. Their return on equity depicted a declining trend from 2008 to 2010 and increase by 12.6 in 2011 but still, the company managed to earn from the money invested by their stockholders. The Same trend goes for the return on invested capital that went down from 2008 to 2010 but marks a potential increase of 12.32 in 2011. 

Income

Let us have a look now with the money they earned. Below is the income of Systemax Inc. from 2007 – 2011:

  • Revenue in million dollars was 2,780, 3,033, 3,166, 3,590, and 3,682. Its 1st quarter of 2012 revenue was 914. This was company’s total earnings.
  • Gross profit was 426, 464, 460, 496, and 531. This was the earnings after deducting the cost of revenues.
  • Operating income was 96, 83, 73, 69, and 81. This was the company’s income after deducting all operating expenses.
  • Income before income tax 100, 84, 73, 69, and 81. This was the income after interest and other income and expenses.
  • Net income was 69, 53, 46, 43, and 54. This was the company’s income after deducting income taxes.

Systemax Inc.‘s revenue gradually increases every year with a growth ratio of 18.54 percent, 9.10, 4.39, 13.39 and 2.56 from 2007 to 2011 respectively. This means that revenue was at its highest in year 2007 and 2010. Then growth in 2011 was only 2.56 percent and latest quarter of 2012 depicts only a -1.75. “This is not a good sign, they need to add more marketable sites to improve thus increase their sales favorably,” Nelly said.

Gross profit increased from 2007 to 2008 by 426 million dollars to 464 with a slight drop of 460 in 2009, then increases for the last two years of 496 and 531 respectively. This showed that cost of revenue was also increasing yearly.

Their operating income from 2007 of 96 million dollars it starts to decrease down to 83, 73, and 69 in 2008 to 2010, then in 2011 it increases to 81, as shown in its growth ratio of 54.28, -12.71, -11.68, -6.63 and 17.14. This means operating expenses were increasing, too. Their income before income tax was almost the same with operating income for interest and other income and expenses have minimal amounts which had increase 2007 and 2008 only. Net income growth ratio was 53.90 percent, -23.95, -12.6, -7.87 and 27.87. This means that net earnings was favorable in 2007 and 2011, for in 2008 to 2010 it depicts a decreasing trend. But at least in 2011 it had gain back almost one half of the earnings in 2007. 

Expenses

Of course, when you have revenue, expenses cannot be out of the blue. For Systemax Inc, the following are the expenses from 2007 – 2011:

  • Cost of revenue in million dollars was 2,354, 2,569, 2,706, 3,094, and 3,151 with average of 2,774.80.
  • Sales, general and administrative expense was 331, 381, 387, 423, and 456 with average of 395.60.
  • Other operating expense was 0, 0, 0,  4 , and -6  with average of -0.40.
  • Interest expense was 1, 0, 1, 2, and 2 with average of 1.20.
  • Other income and expense was 6, 1, 1, -1, and 0 with average of 1.40.
  • Provision for income tax was 31, 31, 27, 23, and 24 with average of 27.20.

Their expenses, especially cost of revenue, accounts for an average of 85 percent of revenue. This means that around 15 percent only was left for their operating expenses, interest and other income and expense, provision for income taxes as well as their net income. And cost of revenue is trending upwards every year. Their sales, general and administrative expenses accounts for 12 percent of revenue and also in an increasing trend. Other operating expenses accounts for -0.01 percent, interest expense for 0.03 while other income and expense for 0.04 of revenue. Their provision for income tax accounts for 0.83 percent. Thus, net income accounts an average 2.11 percent of revenue.

All in all, Systemax Inc. is very conservative in choosing only markets that deals in catalogs and internet websites. In order to improve their revenue they need to expand their wings in selling openly for a wider market. And they also need to clean up their cost of revenue which is very high, so limiting it down would increase their earnings. They have an impressive returns but unlike in 2007 wherein they gained the highest. In 2011 it starts to move up again and if this goes on, so as management to create a new market they can regain to attain an increasing trend.

Systemax Cash Flow Statement

The net cash flow from the operation in 2007 to 2009 declined by seventeen times lowered from 2007; but affected by the inventory, it increased to 81 percent. It was recovered in 2010 by 92 percent due also for the decrease in inventory, ten times lowered from 2009 data. It was down again in 2011 by 261 percent and expected for a possible increase in 2012 based on net cash flow result for the Q1.

Cash Flow from Operating Activities

Cash flow from operating activities was net cash provided or used from the operations. It can be computed using the indirect method which all non-cash items will be added and also accounts affect the working capital. The starting line was the net income as our basis. For Systemax, data below are as follows:

  • Net income $million was 69, 53, 46, 43 and 54.In 2012Q1 was 7 compared in 2011Q1 was 14.
  • Depreciation and amortization was 9, 10, 12, 14 and 17.
  • Inventory was -13, -41, -70, -6 and -4.
  • Other working capital was 17, 49, 29, 43 and -47.
  • Net cash provided by operating activities was 93, 82, 5, 65 and 18. In 2012Q1 was 15 compared in 2011Q1 was 10.

The cash flow from operating will be presented using the direct method which the basis will be the cash collection and deduct all the cash payments made for one accounting cycle. Below are the results for Systemax Inc:

  • Cash  collection was 2,780, 3,033, 3,145, 3,545 and 3,682
  • Cash payments for   purchases  was 2,341, 2,528, 2,636, 3,088 and 3,147
  • Cash payments for operating  expenses  was 340, 381, 382, 433 and 445
  • Cash interest was 1, 0, 1, 2 and 2
  • Cash payment for income taxes was 31, 31, 27, 23 and 28
  • Cash flow from operating activities was 67, 93, 99, -1 and 60

Based on the cash collection, in 2007 to 2011; the movement continued to go upward. But the result of net cash from operating increased only from 2007 to 2009.In 2010, it was lowered by 10 times from 2009, due to the cash payments made that were more than compared to their collection.

Cash Flow from Investing Activities

The cash flow from investing of Systemax Inc increased from 2007 to 2008; they had increased by 53 percent in PPE and a total of acquisition represents 65 percent over the net cash of investing. Period from 2009 to 2011 was down, since their investment in PPE was in sideways.

Cash flow from investing are the activities of cash where the company put their funds which came from either cash generated from the operations or cash raised through by financing. The following are the results of investing activities:

  • Investment in property, plant, and equipment was -8, -17, -19, -25 and -12.
  • Property, plant, and equipment reduction for five years was zero.
  • Acquisition, net was 0, -31, -14, 0, 0, 0.
  • Net cash used for investing activities was -8, -48, -32, -25, -12. Total for five years was -125.

Cash Flow from Financing Activities

Cash from financing is an activity where the company raised a fund which they will use. In value investing for Systemax Inc., the results are the following:

  • Short-term borrowing was 0, 0, 0,-13 and 0.
  • Long-term debt issued was 0, 0, 0, 8 and 2.
  • Long-term debt repayment was 0, 0, -4, -2 and -3.
  • Common stock issued was 1, 1, 1, 1 and 0.
  • Cash dividends paid was -37, -37, -28, 0 and 0. Total for five years was -102
  • Net cash provided by (used for) financing activities was -42, -43, -31, -5 and -1. Total for five years was -122.

Their cash flow from financing for five years had a total of 122. It indicates that 2007 and 2008 had more outflow compared against 2009 to 2011. In percent it was represented at 34, 35, 25, 4 and 1, respectively. This was used for cash dividend paid which is equal to 84 percent.

The net change in cash was the remaining cash from the operation less the cash used from investing and cash from financing. For this company, below are the results:

  • Net change in cash was 41, -12, -58, 34 and 5.
  • Cash at beginning of period was 87, 128, 116, 58 and 92.
  • Cash at end of period was 128, 116, 58, 92 and 97. Total for five years was 491.

If observed with the data above, the net change in cash from 2007 to 2011 was in sideways. It had a negative cash change in 2008 and 2009 which the cash from investing and the financing was over than the cash from operations.

To measure the financial performance of the company we need to compute the free cash flow. It represents the cash, which a company is able to generate after laying out the money required to maintain or expand its asset base. Like in Systemax Inc., it shows the following:

  • Operating cash flow was 93, 82, 5, 65 and 18.
  • Capital expenditure was -8, -17, -19, -25 and -12.
  • Free cash flow was 85, 65, -14, 40 and 6.

Data above shows that free cash flow of Systemax Inc. was in sideways which both affected by the movement of the result in operating and capital expenditure that was also in sideways. It indicated also that 2009 was in negative which the capital expenditure was higher than the operating cash flow by 74 percent.

Cash Flow Ratios

Operating cash flow/sales ratio can be used to help us determine the company’s ability to turn sales into cash. For Systemax Inc., it shows the following:

  • Operating cash flow was 93, 82, 5, 65 and 18.
  • Revenue was 2780, 3033, 3166, 3590 and 3682
  • Operating cash flow/Sales ratio in percent was 3, 3, 0, 2 and 0

The operating cash flow/sales ratio result was not impressive for the fact, that in every $1 of sales, the indicative amount was equivalent only at .03, .03, 0, .02 and 0 from 2007 to 2011, respectively. It tells us, that their five years of operation had too much spending of their cash; even their revenue was keep on moving upward; the company’s ability to turn into cash was up to 3 percent. It would be worrisome to see that the growth of revenue is not parallel in the operating cash flow result. Operating cash flow ratio of Systemax Inc, expressed for every $1 of debt, had only an average of $.14 cents available. It means, the cash from operation is not enough to pay its current obligations.

Through the operating cash flow ratio we can conclude the company’s ability to generate resources to meet current liabilities which can be computed using the result of operating cash flow over total current liabilities. Below are the results of SYX:

  • Operating cash flow was 93, 82, 5, 65 and 18.
  • A total current liability was 332, 362, 443, 464 and 412.
  • Operating cash flow ratio in percentage was 28, 23, 1, 14 and 4.  Average of 14.

Free cash flow/operating cash flow ratio measures the relationship between free cash flow and operating cash flow. The higher the percentage of free cash flow embedded in a company’s operating cash flow, the greater the financial strength of the company. Free cash flow/operating cash flow ratio of Systemax had only a lesser result in 2009 by -280 percent from 2008 which both affected from the result of the free cash flow and cash from the operations was also down. Below are the results for to further elaborate:

  • Free cash flow was 85, 65, -14, 40 and 6.
  • Net cash provided by operating activities was 93, 82, 5, 65 and 18.
  • Free cash flow/operating cash flow ratio in percent was 91, 79, -280, 62 and 33.

Capital expenditure ratio measures the capital available for internal reinvestment and for payments on existing debt. When the capital expenditure ratio exceeds 1.0, the company has enough funds available to meet its capital investment, with some to spare to meet debt requirements. The higher the value, the more spare cash the company has to service and repay debt. Like the results of Systemax Inc  in the data below:

  • Net cash provided by operating activities was 93, 82, 5, 65 and 18.
  • An investment in property, plant, and equipment was 8, 17, 19, 25 and 12.
  • Capital expenditure ratio in percentage was 1163, 482, 26, 260 and 150. Average of for five years was 416.

In average of their five years of operations, the capital expenditure ratio result was impressive. It represents at 416 percent, exceeds to their capital investment commitment. It means, they have still cash to pay its debt.

Total debt ratio measures cash availability from the operation which to cover the total obligation of the company. The higher the percentage the less problem arises in the future. It means the company has a lot of cash from the operation to pay its debts. In Systemax Inc., below are the results:

  • Net cash provided by operating activities was 93, 82, 5, 65 and 18.
  • A total liability was 338, 369, 452, 485 and 435.
  • Total debt ratio in percentage was 28, 22, 1, 13 and 4. Average for five years was 14.

The total debt ratio average of their five years of operation was 14 percent. It means the cash from operation is not sufficient to pay its total debt.

Written by Rio, Nelly and Dyne
Edited by Cris

pont blank soulution inc

SS Body Armor Inc Cash Flow is Shaking Might Fall Into Bankruptcy.

July 19th, 2012 Posted by Company Updates No Comment yet

SS Body Armor Inc Balance Sheet

SS Body Armor Inc Financial Liquidity

SS Body Armor Inc financial liquidity of the company is important. Investors are attracted to firms with stable financial. For SS Armor I Inc, the results of its financial liquidity from 2005 to 2008 are as shown below:

Particulars 2005 2006 2007 2008 Ave.
Current Ratio 1.01 1.15 1.31 1.24 1.18
Quick Ratio .79 .90 .92 .78 .85
Working Capital 2 19 35 20 19
  • The current ratio averaged 1.18 as shown in the above table, this means the current asset exceeded current liability by 18 percent.
  • Quick ratio or monetary assets were .85 average against the current liabilities of the company, this means that if inventory is excluded the current asset was 15 percent lesser than its current liabilities.
  • The average working capital was $19, with positive results over the past 4 years. The trend is going up from 2005 to 2007 but down in 2008 by 42 percent.

SS Body Armor’s working capital showed a high increase in 2006 and 2007 by 85 percent and 84 percent respectively, but, went down by 42 percent in 2008. However, records in 2009 showed that its average in three-quarters was $10.5 or it continues to go downtrend.

Looking back at the company’s line of business, the above trend in the generation of cash is normal since its products are not necessarily in nature, provided,  that there is a continuous flow of transactions in the business, meaning there is in and out the transaction on its products each period up to the present. If none, then the business is in critical condition.

Cash Conversion Cycle (CCC)

Usually, a company acquires inventory on credit, which results in accounts payable. A company can also sell products on credit, which results in accounts receivable. Cash, therefore, is not involved until the company pays the accounts payable and collects accounts receivable. So the cash conversion cycle measures the time between outlay of cash and cash recovery.

CCC is important for retailers and similar businesses. This illustrates how quickly a company can convert its products into cash through sales. The shorter the cycle, the less time capital is tied up in the business process, and thus the better for the company’s bottom line. For SS Body Armor I Inc, results are:

  • The inventory conversion period was 68 days or more than 2 months. This is the average days to convert its inventory to sales.
  • Receivable conversion period was 66. The company’s average days to collect its receivable was 66 days or more than 2 months.
  • Payable conversion period was 34. The company’s payable was 34-day average to pay. Usually, this is the company’s credit term given by its supplier.
  • Cash conversion cycle was an average of 100 days or more than 3 months.
Particulars 2005 2006 2007 2008 Ave
Inventory Conversion Period 34 60 62 115 68
Receivable Conversion Period 57 55 52 101 66
Payable Conversion Period 13 33 22 69 34
Cash Conversion Cycle 79 82 92 146 100

Leverage

As to the claimant of the company’s assets in case of bankruptcy, it is also important to know who is in control of the company; creditors, banks or the shareholders? For SS Body Armor I Inc, the creditors have 80 percent claims on the total assets of the company while the owners or shareholders have only 15 percent claims.   To further understand, below is the financial leverage ratios of the company:

  • The debt ratio was an average of .85, which means that the company’s debt capital was 85 percent of total assets.
  • Debt to equity ratio was 15.3 averages.  The company was highly indebted, with 1530 percent against equity.
  • Solvency ratio was -.06, which means that the company is insolvent.  It could hardly pay all debt obligations as they became due.
  • Current liabilities to total assets was .80 which shows the company’s current liabilities was an 80 percent average of total assets, so the creditors have 80 percent claims on the total assets.
  • Stockholders’ equity to total assets was .15.  The owners’ equity was only 15 percent average of total assets, therefore, the shareholders have 15 percent claims on the total assets of the company.
Particulars 2005 2006 2007 2008 Ave
Debt Ratio .98 .86 .81 .76 .85
Debt to Equity 47.66 6.29 4.18 3.19 15.3
Solvency Ratio -.22 -.04 .06 -.05 -.06
Current Liabilities to Total Assets .97 .86 .73 .67 .80
Stockholder’s Equity to Total Assets .02 .14 .19 .24 .15

SS Body Armor Inc is highly leveraged and there’s a rare chance that all its obligations will be settled as to the company’s total resources is concerned. The company’s debt obligation has been just 15 percent behind, nearly equal its total assets, and 1530 percent against owners’ equity and its ability to pay all debts was uncertain, so the company was insolvent.

Property, Plant & Equipment (PPE)

Property, plant, and equipment is still efficient for the next three years since its net book value was equivalent to 60 percent of the original cost, after deducting accumulated depreciation of 40 percent.

Therefore, the company could still continue to run its business without investing additional fixed assets and to wait until these are fully depreciated.  Rio, part of Numbers team, provided the detail data below followed by the interpretation.

Particulars

2005

2006

2007

2008

Ave

Property, Plant & Equipment, Gross 5.9 4.4 9.2 15.4 6.98
Accumulated Depreciation 3.4 2.6 3.2 4.6 2.76
Property, Plant & Equipment, Net 2.5 1.8 6 10.8 4.21

The original cost of the company’s investment in PPE which was capitalized was $6.98 average, deducted by its accumulated depreciation of $2.76 resulted to net book value of $4.21. If the estimated life of the fixed asset is 5 years, then the remaining life would then be 3 years only considering that the accumulated depreciation was 40 percent of the original cost and the net book value was 60 percent (remaining cost of PPE before it is fully depreciated).

Efficiency

Inventory turnover ratio measures how well the company can manage to sell its inventory, or how well the company converts inventory into sales? If a company sells its inventory very well the turnover will be low. When we speak of receivable turnover ratio, it is the firm’s effectiveness in extending credit as well as collecting debts while accounts payable turnover ratio measures the number of times a company pays its suppliers during a specific period. And, asset turnover ratio measures the efficiency with which a company’s assets generate sales.   For SS Body Armor I Inc, results are as follows:

Particulars

2005

2006

2007

2008

Ave

Inventory Turnover Ratio 11 6 6 3 6
Receivable Turnover Ratio 6 7 7 4 6
Payable Turnover Ratio 35 14 21 7 19
Fixed Asset Turnover Ratio 138 139 54 15 52
  • The average inventory turnover ratio was 6, which means that the inventory turns 6 times each period.
  • The receivable turnover ratio was 6, which means the company’s receivable turns 6 times average each period.
  • The payable turnover ratio was 19 times turn per year in five years.
  • The fixed asset turnover ratio was 52 times average each period.  This is the average turnover per period in five years.

SS Body Armor Inc Income Statement

Profitability

The company’s profitability starting with their net margins was not looking good for the past years. It was only in 2007 wherein operations did well and got a 1.9 percent. Their asset turnover tends to be inversely related to the net profit margin resulting to higher volume but low profit. The return on asset was not favorable due to the net losses incurred.

Financial leverage depicts a high portion of the return on equity which is the result of debt. Therefore, return on equity shows unfavorable returns which resulted in bankruptcy as reported by DJ Dow Jones, “PBSI has debuted a chapter 11 plan. But what the creditors and equity holders did instead, they secured a $25 million replacement bankruptcy financing package for Point Blank.” To know, how they end up with this statement, let us give a look at the profitability ratios from 2005 – 2008 as shown in the table below:

Particulars

2005 2006 2007 2008
Net margin  in percent -8.2 -2.1 1.9 -3.3
Asset turnover 2.9 1.86 2.11 1.17
Return on the asset  in percent -24.0 -3.88 4.08 -3.83
Financial leverage in percent 1010 7659 2573 1316
Return on equity  in percent -242 -298 104.8 -50.5
  • Net margin or simply is the after-tax profit a company generated for each dollar of sales. This tells us that net sales went down in 2005, 2006 and 2008; only in 2007 sales went up. Meaning net margins for the past years were not really doing well.
  • Asset turnover measures the efficiency of the company to convert its assets into revenues. This tells us that they were earning from their assets, meaning in 2005 sales from asset turn the highest with 2.9 times compared to 2006 and 2008 but in 2007 it slightly recovered to 2.1.
  • Return on assets tells us how much profit the company generated for each dollar of total assets.  With SS Body Armor I Inc, it earned -24.0, -3.88, 4.08, and -3.83 from their total assets from 2005 to 2008.

Income

Income from sales to the U.S. Military comprises the largest portion of their business, followed by sales to federal, state and local law enforcement agencies, including correctional facilities plus their sports and health products. Their ability to increase their sales is highly dependent on the demand for their products. Nelly, of our Numbers team, laid the income of the company from 2005 to three-quarters of 2009 as shown below:

Particulars

2005

2006

2007

2008

2009 (3Q)

Net sales in thousands

343,561

254,105

320,796

164,922

129,480

Gross profit

58,550

56,980

63,540

41,830

6,750

Operating income (loss)

-25,919

-2,881

11,676

-7,705

-15,530

Income (loss) before income tax

-28,268

-4,954

10,995

-8,549

-13,940

Net income (loss)

-28,140

-5,322

6,206

-5,402

-8,070

  • Net sales in thousands of dollars tell us that their yearly earnings growth ratio of -26, 26.2, and -48.5 has recovered in 2007and declined in 2008. Even their three-quarters total of 2009 amounted only 48 percent of the yearly average of 270,846 thousand dollars. This means the company was in a difficult period in maintaining their sales.
  • Gross profit was the result after deducting the cost of sales, manufacturing and warehouse expenses; tells us that their yearly growth ratio of -2.7, 12, and-34, same as net sales increase in 2007 and decreased in 2008. Three-quarters of 2009 amounted only 12 percent of the yearly average of 55,225 thousand dollars. This means gross profit is slipping down wherein it has been affected by variations of product mix, price changes in response to competitive factors and fluctuations in raw material costs and vendor programs in addition to inventory adjustments caused by excess and obsolete inventory.
  • Operating income (loss) was the result after deducting the following 1.) selling and marketing expenses, including commissions and marketing programs; 2.) general and administrative expenses, including administrative salaries, professional fees, and other office expenses; 3.) research and development expenses; and 4.) other expenses associated with our operations. This tells us that their yearly growth ratio of -88, 305, and -34, operating income has unpredictably increased in 2007 due to fluctuating orders from the US military and other government agencies plus market costs.
  • Income (loss) before income tax was the income generated after deducting interest income and expenses, net of non-operating cost. Still showing a growth only in 2007 against the previous and 2008 and three-quarters of 2009.
  • Therefore their net income (loss), showed that the company’s net earnings were not gainfully profitable only in 2007 when they tighten up on their revenues and cost with strict strategic planning and management but still it declines down in 2008 and 2009.

Net sales showed an increase in 2007 because of the increase in sales by the U.S. Military and domestic market then declined in 2008. This was primarily due to delays in military and contract awards. Therefore, we can say that delays affected net sales and results of operation significantly. And operations were greatly affected by competitive factors of price changes, raw material costs, and inventory. Thus, net income resulted in a deficit despite the implementation of their strategic plans and reshaping their focus to increase their market share and sales.

Expenses

Moving forward to the expenses; the table below will show where areas their allotted money when it comes to their expenses from 2005 to 2008 and three-quarters of 2009.

Particulars

2005

2006

2007

2008

2009 (3Q)

Cost of goods sold in a thousand 285,011 197,125 257,256 123,092 122,740
Selling, general administrative  expense 57,223 42,539 40,921 32,359 19,050
Unusual expense (income) 27,246 17,322 10,950 17,170 1,740
Interest income (expense) -551 -127 110 -411 220
Income tax -250 286 4,636 -2,393 -6,670
Minority interest expense 122 82 153 -754 -590
  • Cost of goods sold in the thousands has an average of 215,621. This tells us that growth decreased by -30.8 percent in 2006 then increased in 2007 to 30.5 due to increase also in sales but decrease down to 52 percent in 2008 and 2009 three quarter accounts 57 percent of average.  This means the cost has been fluctuating depending on the period of the sale of the products.
  • While their selling, general and administrative expense has an average of 43,260.50.  This shows a decreasing trend of -25.6, -3.8, and -21, meaning they were tightening up their expenses.
  • Their unusual expense (income), an average of 18,172, represented the cost of investigations and litigations the company has been facing with their US military and government contracts. And this shows a high cost and burden to the company for the last four years.
  • Interest income (expense), net non-operating has an average of -244.75.  This shows the interest on their obligations with financing institutions.
  • Their income tax had an average of 569.75. This represents the taxes incurred in their income generated.
  • And minority interest expense had an average of -99.25. This was interesting in their minority and non-controlling subsidiaries which declined down in 2008 and 2009.

In their expenses, the yearly average of cost of goods sold accounts 79.6 percent of average net sales, while their selling, general and administrative expenses account 16 percent, unusual expense (income) accounts 6.7, interest income (expense) accounts -0.09, income tax accounts 0.21 and minority interest expense -0.036. Therefore the remaining -3 percent represents their average net loss.

SS Body Armor Inc Cash Flow

Many investors or some analyst was first evaluating the cash flow than the result of the income statement and the balance sheet. Sometimes in one company, it resulted they have a lot of margins but no cash coming in, probably the company allowed on credit but it was not effective in handling their collection. Also from the viewpoint of cash flow, you can determine what kind of the company it does. Could they have enough funds for the operation itself; to sustain their future growth or they need to refinance.

Now, the question is do the SS Body Armor I Inc would be one of the best company to invest in? Is PBSOQ belongs to what grade if you rated into as A, B or C?

Based on their cash flow, SS Body Armor I Inc was graded C and was not a good company to invest in; just to emphasize, their free cash flow results from 2006 to 2008, indicates a financial distress in the future. Data below detailed the outcome of the cash flow from operating activities up to the total debt ratio in percentage.

Cash Flow from Operating

Table 1

Particulars

2005

2006

2007

2008

   2009(Q1-Q3)
Net Income -28.14 -5.32 6.21 -5.4 -13.39
Depreciation/depletion 0.62 0.64 0.64 1.48 3.36
Deferred taxes -20.26 1.06 26.64 -2.95 -17.68
Non-cash Items 21.07 1.64 3.89 5.03 1.12
Changes in working capital 60.25 -19.64 -37.36 -16.9 105.45
Cash from operating activities 33.53 -21.62 0.01 -18.74 78.85

The ideal result of cash flow from operating activities must be positive; it should exceed net income. As we can see in table 1, the net income was negative except in 2007; with positive result of 186 percent. In 2009, based on the total of the three-quarters there was a net loss of 60 percent. Depreciation in 2008 and 2009 stood up by 57 and 56 percent, respectively. Deferred taxes and non-cash items were in sideways. The changes in working capital were surprisingly happening in 2009, by 116 percent compared from the last three years falls in negative results. The changes in 2009 had a great impact on the cash from operating, reached at 124 percent. It signified the company’s operational inefficiency.

Cash from operating activities was an act of where the company can determine how much cash they can utilize from its operation. The starting line will be the net income earned by adding back all the non-cash items, depreciation and the changes in working capital.

To dig it further; net income was an income left after the company paid its direct cost, operating expenses, and taxes or in totality, it was called “the bottom line result” in business. Depreciation/ depletion was an allocation of the cost of the asset, it will be added back since we are computing the cash flow and depreciation does not involve cash.

Deferred tax is also known as future income tax.  Non-cash items include amortization, unrealized gains or losses from investments, allowances for doubtful accounts or returns and write-downs of inventory. With changes in working capital, it was a change coming from the current assets (like cash, accounts receivable and inventory) also from current liabilities (like accounts payable or current portion of the debt which payable in 12 months not exceeds in one year).

Cash from Investing Activities

Cash from investing activities denotes companies’ interest which they might also interested in. SS Body Armor I Inc invested in capital expenditures and other investments. A capital expenditure is an outlay of cash to acquire or upgrade a business asset. Common examples include the property plant and equipment or the cost of significant upgrades to an existing facility.

The cash flow from investing activities of SS Body Armor I Inc was contributed by the capital expenditures (please refer table 2 below), which the trend from 2005 to 2007 increased by 85 percent and in 2008 decreased by 28 percent. It had an inflow from other investing cash flow items, represented at 7 percent for a total of five years.

Table 2

Particulars

2005

2006

2007

2008

Capital expenditures

-0.73

-0.46

-4.82

-3.76

Other investing cash flow items, total

0

.57

.04

0

Cash from investing activities

-0.73

0.11

-4.78

-3.75

Cash Flow from Financing Activities

Cash flow from financing activities was a cash flow that a company acquires from a financing round instead of from operations. That is, cash flow from financing activities is the net amount that a company receives from issuing stock, bonds, and net after paying dividends. Dyne defined each term to help us understand the data:

Financing cash flow items include financing costs incurred like the cost to acquire debt. Also, when employees of a company exercise their stock options, the company can claim a tax benefit.  Total cash dividends paid, if the company pays dividends, that cash outflow is recorded here.

Issuance (Retirement) of stock, net;  if the company issues new stock or if the company buys back (retiree) its shares while issuance (retirement) of debt, net; if the company issues new bonds or if the company buys back (retiree) bonds or enters into a long-term debt.

The cash from financing activities of SS Body Armor I Inc results (see table 3 below) in 2005, -257 percent, meaning the company enters in a long-term debt but in 2006 to 2008 it was in both positive, an average of 55 percent; it means the company issues new stock. But in 2009 the company resulted to negative in Q3, compared to a 78 percent increase from the Q1. It tells us that the company had again a long-term debt from Q1 to Q3 and the trend is continuing.

Table 3

Particulars

2005

2006

2007

2008

2009 ( Q1-Q3)

Financing cash flow items 0.58
Total cash dividends paid -0.34
Issuance (retirement) of stock, net -10.53 21.44 0 .09
Issuance (retirement) of debt, net -21.14 -1.04 4.8 23.32
Cash from financing activities -32.02 20.4 4.8 23.99 -71.77

Cash Flow Efficiency

The free cash flow of SS Body Armor I Inc showed in table 4, only in 2005, the company had sufficient of funds while from 2006 to 2008 they were insufficient, total in three years at 166 percent. It means the company would run into debt or will issue an additional stock to support the capital expenditures maintenance.

Free cash flow measures the company’s capability to cover capital expenditures maintenance and determine if the company has still funds for future expansion. Through the results from operating activities less the capital expenditures, we can determine the free cash flow available.

Table 4

Particulars 2005 2006 2007 2008
Cash from operating activities 33.53 -21.62 0.01 -18.74
Capital expenditures -0.73 -0.46 -4.82 -3.76
Free cash flow 32.8 -22.08 -4.81 -22.5

The total debt ratio measures a company’s ability to pay its debt or company’s total obligation. Using the result from the operating activities over the total liabilities per year, we can determine how much available cash would the company able to pay. The total debt ratio of SS Body Armor I Inc, shown in table 5, indicated insufficiency of funds based on the total result in five years; represents at -9 percent or in every $1 of debt they would only able to pay at -.009. It tells us the results would lead to bankruptcy. No money lenders would lend you money if one company does not even maintain to pay its operating maintenance.

Table 5

Particulars 2005 2006 2007 2008
Cash from operating activities 33.53 -21.62 0.01 -18.74
Total liabilities 122.95 127.88 126.19 95.48
Total debt ratio in percentage 27 -17 0 -20

Written by Rio, Nelly, and Dyne

Edited by Cris

Research In Motion Ltd (RIMM)

Research in Motion (RIMM) Interesting Beginning

June 1st, 2012 Posted by Company Updates No Comment yet

Research in Motion featured picture of a man with the umbrella struggling against the New York City snow storm back in February of 2010.  This could almost describe what has been happening with recent events at Research In Motion Limited ( RIMM)  they were caught ill-prepared for a storm of their own back on October 10, 2011.

RIMM Company Research

In the mid-90’s when I was still working in Manhattan I remembered having to work with RIMM.  Everyone in the company had a Blackberry.  The problem was we couldn’t open MS Word with the Blackberry. I was asked to help coordinate.  I don’t remember the outcome but I remember the team with Blackberry was nice, polite and professional.  They sat with our IT department, on our problem.  No wonder they dominated the business market for years.

Who started the company and why?

Research In Motion (RIMM), is a global leader in wireless innovation founded by Mike Lazaridis and Jim Balsillie in 1984. RIMM worked with RAM Mobile Data and Ericsson to turn the Ericsson-developed Mobitex wireless data network into a two-way paging and wireless e-mail network. Mobitex is an Open System Interconnection (OSI) based, national public access wireless packet switched data network. Developed by Swedish Televerket Radio in the beginning of 1980s.

RIMM started in a one-room office; the founders were a twenty-three-year-old college dropout.  RIMM was a company with a difference. Mike and Doug were practical and visionary at the same time, and the pair turned out to be superb engineers. The company was financed by family and a $15,000 government loan.

RIMM’s first big job was a $600,000 contract making networked LCD screens for the General Motors Canada assembly line. Based in Waterloo, Ontario, RIMM operates in North America, Europe, Asia-Pacific and Latin America.

What is the background of the company? its history and development?

Now, let’s focus on the storytelling. The company’s background, history and development followed by the nature of business.

·    The company incorporated under the Business Corporations Act (Ontario) (“OBCA”) on March 7, 1984.
·    Early development financed by Canadian Institutional and Venture Capital Investors in 1995.
·    Was funded C$30,000,000 before initial public offering on the Toronto Stock Exchange in January 1998 under the symbol RIM.
·    In August 1998, RIMM began shipping [email protected] pager 950.
·    Introduced BlackBerry® solution in 1999.
·    Company’s last amalgamation with its wholly owned subsidiaries happened on February 24, 2003.
·    On 2006, Research In Motion and Information Appliance Associates have a licensing agreement in which RIMM would offer a version of PocketMac for BlackBerry to Macintosh users for free.
·    On October 2008, RIMM became one of “Canada’s Top 100 Employers” by Mediacorp Canada Inc., and was featured in Maclean’s magazine.

More historical events

·    RIMM announced in February 2009 that they were expanding their global operations by opening an office and training facility in North Sydney, New South Wales, Australia.
·    On June 2009, RIMM announced the purchase of Dash Navigation.
·    On August 2009, RIMM bought Torch Mobile.
·    On August 18, 2009, Fortune Magazine named RIMM the fastest growing company in the world.
·    As of May 2010, RIMM OS held 10.4 percent of the smartphone operating system market.
·    On March 26, 2010, the company announced the acquisition of BlackBerry applications developer Viigo, a Toronto-based company.
·    RIMM agreed with Harman International on April 12, 2010, to buy QNX Software Systems.
·    On September 27, 2010, RIMM announced BlackBerry PlayBook tablet computer.

From 2011

·    On March 25, 2011, RIMM bought 100 percent of a company whose technology is being incorporated into the company’s developer tools.
·    The BlackBerry PlayBook was released to the US and Canadian consumers on April 19, 2011.
·    On April 26, 2011, the company bought assets and incorporated into the Company’s products.
·    On June 2011, the company acquired Scoreloop.
·    On June 2011, RIMM bought Nortel patent portfolio.
·    On June 30, 2011, an investor push for the company to split its dual-CEO structure was unexpectedly withdrawn after an agreement was made with RIMM.
·    On July 21, 2011, the BlackBerry PlayBook tablet received Federal Information Processing Standard 140-2 certification.
·    On September 2011, RIMM decided to build assembly factory (hardware) in Malaysia, instead of in Indonesia.
·    On October 10, 2011, RIMM experienced one of the worst service outages in the company’s history.
·    Service was restored when the outrage ended on October 13, 2011.

From 2012

·    During fiscal 2012, the company launched the wireless fidelity Wi-Fi-enabled BlackBerry PlayBook tablet in 44 markets around the world.
·    On January 22, 2012, RIMM new CEO Thorsten Heins.
·    On February 21, 2012, it released the BlackBerry PlayBook OS 2.0 software.
·    On March 2012 it was announced that RIMM awarded a patent for placing fuel cell behind mobile phone keyboards.
·    On March 8, 2012, the company acquired Paratek Microwave Inc.
·    During the fiscal year ended March 3, 2012 (fiscal 2012), the company bought 100 percent interests of a company whose technology will provide a multiplatform BlackBerry Enterprise Solution for managing and securing mobile devices for enterprises and government organizations.
·    On March 29, 2012, RIMM announced a strategic review of its future business strategy; a plan to refocus on the enterprise business and leverage on its leading position in the enterprise space.

What is the nature of Research in Motion Limited (USA) business?

Research in Motion Ltd is a manufacturer, distributor, marketer, product, and service oriented company. RIMM is a global leader in wireless innovation and developed mobile industry with the introduction of BlackBerry. The company is a designer, manufacturer, and marketer of wireless solutions.

According to Karla, “Blackberry is a line of mobile email and smartphone devices designed to function as personal digital assistants, portable media players, Internet browsers, gaming devices and much more.” She said, “BlackBerry is known for their ability to send and receive (push) email and instant messages while maintaining a high level of security through on-device message encryption.” BlackBerry support a large variety of instant messaging features, including BlackBerry Messenger.

RIMM offers platforms and solutions for seamless access to information, including e-mail, voice, instant messaging, short message service (SMS), the Internet and Intranet-based applications and browsing. BlackBerry Balance, as one of its products and technology, provide enterprise users access to both work and personal information in a convenient and centralized way while keeping the content separate and secure.

Who is running the company and their background?

Who is running the company and their background? Let us learn about the key people. On January 2012, Thorsten Heins was named President and CEO.  He was Chief Operating Officer, Product Engineering, in charge of overseeing BlackBerry smartphone portfolio worldwide. He joined RIMM in 2007 and has a global reputation for delivering on their commitments with his 27 years of broad experience in wireless networks and consumer electronics devices. He has a master’s degree in Science and Physics from the University of Hannover in Germany. He is married to Petra, a mathematician, and physicist. They have a  21-year-old son and a 23-year-old daughter.

“Physics is also called the fundamental science because it’s the basis for all branches of natural science.  Used in engineering and medicine. Applied physicist uses physics to develop new technologies or solve a problem.” Said Nelly, part of our Stories team.

Since December 17, 2009, Brian Bidulka is the Chief Financial Officer of RIMM.  He is working with Jim Rowan in overseeing the Cost Optimization Program.  He joined the company in 2005. He received an Honors Bachelor of Commerce degree from McMaster University and he received his Chartered Accountant’s designation in 1989.

Who is directing the company? How are the committees structured?

Who is directing the company then? How are the committees formed? Research in Motion Ltd has five committees: Audit and Risk Management Committee, Compensation Committee, Nominating and Corporate Governance Committee, Innovation Committee, and Strategic Planning Committee. Committees have a respective chairman and members composed of directors and independent directors.

Barbara Stymiest is a director since March 2007 and Chairman of the Board. She is Chairman of Audit and Risk Management Committee. John D. Wetmore is an independent director since March 2007. He held various finance positions and a graduate of Bachelor of Mathematics. He is the current Chairman of Compensation, Nomination and Governance Committee. Michael Lazarid is at 50, an independent director and co-founder of RIMM. He’s been with the company since 1984. He is known in the global wireless community and current Chairman of Innovation Committee.

How do they make money?

The primary source of revenue is from BlackBerry smartphone and tablet, service and software. BlackBerry wireless solution has various support levels to cater to customers. The company sells hardware to carriers and distributors.  RIMM has been developing integrated services offering that leverages on BBM, security and manageability, to increase revenues. The software is the programs and data storage; cannot be touched.

How do they fit into the industry they operate in?

Despite competitive pressures, RIMM remains a leader in enterprise mobility. BlackBerry smartphones, with the BlackBerry Enterprise Server, set the standard in the mobile enterprise for secure, reliable and manageable mobile access to enterprise resources and applications.

The company outsourced the most of its manufacturing to specialized global Electronic Manufacturing Services (“EMS”). They working with many businesses, some are direct competitors with one another and others are current or potential competitors of RIMM include Apple Inc. (IOS), Google Inc. (Android), Microsoft Inc. (Windows Phone), and Nokia Corporation (Symbian).  I still don’t understand this type of competitive relationship.

The company pioneered the sophisticated multimode centralized architecture responsible for the routing messages; their competitive edge. This propelled RIMM to rapid growth in Thailand, Indonesia, Spain, Latin America, and other consumer segments. RIMM intends to maintain leadership in the global wireless community with the Blackberry.

Who are their suppliers and customers?

The products are in line with customer’s network and equipment. They use third-party applications to deliver confidential information. Third-party software is the key to customer growth. The company depends on third-party network infrastructure developers, software platform vendors, and service platform vendors. RIMM wants developers to further integrate and enhance the user experience between smartphones and vehicle audio and information systems.

What is their workforce like?

Just got home from work, I wonder what would I be if I am one of the employees of RIMM; what is the working atmosphere looked like? Research in Motion provides an individual the opportunity to grow, contribute and succeed whether it’s a career in software development, product management, corporate or any other department.

RIMM is a refreshing and energy driven environment. People are competitive, hard worker and inspire one another to succeed. RIMM’s success depends on adapting changes in the board of directors and management. The company continues to invest in highly qualified employees and focused on realigning the organizational structure and as of March 3, 2012, the company has 16,500 full-time employees.

How do they treat their employees? What are the pay and working condition like?

Research in Motion rewarded and recognized the contributions of both team and individual in every step of the way. The company believes in empowering people, investing in their people and their futures. The incentive program is available to all permanent employees and is based on performance. Benefits are available to all full-time employees and it is competitive in the local market.

Employee assistance plan, gym and fitness center membership subsidy and worldwide travel and medical emergency assistance program (Global Travel Program). The company supports employee training and development to promote employee personal and professional development.  Employee enjoys social activities such as holiday parties, summer picnics, and team building sessions and employee giveaways.  A free BlackBerry® smartphone for your use while you’re employed with the company. Also, RIMM offers the [email protected] program and supports to give back to communities through Proud2Be programs.

RIMM Value Investing

Balance Sheet

Liquidity

The main purpose of balance sheet analysis is to determine a company’s financial strength and efficiency. Financial ratios look at liquidity and solvency.  Liquidity refers to the company’s ability to meet its current obligations. Solvency, on the other hand, has to do with the ability to meet the interest costs and repayment schedules associated with its long-term obligations.

Working capital, current ratios and quick ratios of RIMM from 2007 to 2011:

  • Current ratio in percent was 3.51, 2.36, 2.29, 2.39 and 2.06. Average of 2.52, which means that current assets were more than double the current liabilities, on average, $2.52 of current assets for every $1 of current liabilities.   The quick ratio in percent was 3.04, 2.09, 1.97, 2.12 and 1.89. Average of 1.01, which tells us that, excluding inventory, current assets, on average dropped to 1.01 from 2.52 for $1 of current liabilities.
  • Working capital was $1372.69, 2002.92, 2726.24, 3381 and 3858, with an average of $2,668.17. The increasing trend, with the exception of2011; the company can meet current obligations.

Does the company has sufficient resources to stay in business in the short term? Have they the ability to service their long-term debts? RIMM has sufficient resources to stay in the business in the short term shown in the current ratio analysis.  Current assets were greater than the current liabilities at the ratio of 2.52 to 1 average, while quick ratios average 1.01. Working capital showed a yearly increase during its five years of operation, the company could meet its current obligations.

Cash Conversion Period

Cash conversion period is the time for cash to complete the operating cycle. Calculated by adding the inventory conversion period and the receivable conversion period, then, deducts the payable conversion period.  RIMM has an average conversion period of 81 days for the last five years of operation.

Further interpretation for cash conversion cycle:

Particulars    2007    2008    2009    2010    2011    Ave.
Inventory conversion period    68    49    42    29    20    42
Average collection period    69    71    70    63    73    69
Payable conversion period    34    34    27    27    27    30
Cash conversion period    102    87    84    65    65    81

Inventory turnover ratio is used evaluate the size of the inventory. It varies greatly with the nature of the business. It is calculated to show how many times the company’s inventory turns over a period, likewise,  shows if assets are tied up in inventory. Inventory conversion period of RIMM takes on average of 42 days.

The receivable turnover ratio was 5 times average during the five years and its receivables take 69 days average to be collected. Days receivables can be related to the credit terms offered by the company and should not exceed 1 1/3 times the regular payment period. Payable is 30 days.

What kind of assets does the company primary hold? How efficient is the company’s overall process of converting products or services into cash? Current assets include cash, inventory, and receivables. cash conversion cycle shows that RIMM was efficient enough, with an average of 81 days conversion period for the past five years in operation.

Who controls the business; creditors, bondholders or stockholders? Current liabilities to total assets show the creditors claim, long-term liabilities to total assets show bondholders’ claim, while, stockholders equity to total assets show stockholders claim on the business. Creditors have 25 percent, while stockholders have 74 percent claim on total assets.

Leverage

What kind of leverage does the company used in normal business? Large fix assets, working capital provided by suppliers? RIMM used working capital and current assets to finance its normal business operation.  Financial leverage ratios from 2007 to 2011:

  • Debt ratio was .20, .29, .27, .25 and .31, average of .26, which means the total liabilities of RIMM was 26 percent, on average, of total assets.
  • Debt to equity ratio was .24, .40, .38, .34 and .44. Average of .36.
  • Solvency ratio was 1.17, .89, .94, 1.06 and .98. Average of 1.01. Solvency ratio was 117 percent, 89, 94, 106 and 98 or has an average of 101 percent of income against total debt.
  • Current liabilities to total assets ratio was .18, .27, .26, .24 and .28. Average of .25.
  • Stockholders’ equity to total asset was .80, .71, .73, .75 and .69. Average of .74.

How productive is the company use of funds and total resources?  RIMM averaged 23.4 percent for the five years. The return on equity was 32.2 percent. The firm is capable and productive in using funds and total resources.  Profitability ratios of RIMM from 2007 to 2011:

  • Return on asset, for every $1 worth of the asset, RIMM generates 20.4 percent, 23.5, 23.4, 24.1 and 26.5 of revenue or an average of 23.4 in five years period.
  • Return on equity was 25.4 percent, 32.9, 32.2, 32.3 and 38.2, average of 32.2.

RIMM has sufficient resources to stay in the business in the short term and could meet current obligations, as shown by the  current ratio analysis; current assets were greater than the current liabilities, 2.52 is to 1, on average, while quick ratio was 1.01 is to 1, on average.  Working capital showed increases during five years of operation.

The company holds cash, inventory, and receivables. RIMM is efficient in turning resources into cash, with an average of 81 days cash conversion period for the past five years in operation.

Income Statement

The income statement reports earnings over a specific period. The company could generate sufficient revenue for daily operation.  Gross margin ratio deteriorated by 5 percent but was stable at 44 percent during the last two years. Operating profit averaged 25 percent.  Net income was stable at 18.6 percent during five years of operation.

Income

Revenue growth increased at 98 percent, 84, 35 and 33 from 2008. Gross margin was 86 percent, 65, 29 and 34 from 2008. Operating profit was 115 percent, 57, 19 and 44. The pretax margin was also stable at 25.8 percent.  The growth was at 111 percent, 55, 17 and 42 from 2008. Net income increased by 104 percent, 46, 30 and 39 from 2008. Additional data on the income statement for 2007 to 2011:

  • Total revenue was 3037.1, 6009.4, 11065.19, 14953.22 and 19907. Total revenue grew over time by 97.87 percent, 84, 35 and 33 from 2008. The operation of the business is generating income and has been improving consistently.
  • Gross profit margin was 54.59, 51.26, 46.07, 44.03 and 44.33. The ratio deteriorated by 3.33 percent, 5.19, 2.04 and 0.3 from 2008.
  • Operating profit to sales was 26.57 percent, 28.80, 24.60, 21.65 and 23.37. This ratio moved erratically up and down; increased 2.23 percent, decreased by 4.2.
  • Net profit margin (Pretax) was 28.28 percent, 30.13, 25.31, 21.84 and 23.33. RIMM has sufficient income from operation.
  • Net profit margin was 20.80 percent, 21.53, 17.10, 16.43 and 17.13. The ratio deteriorated by less than 1 percent except in 2009 in which it decreased by 4.43 percent. The company makes $0.20, 0.22, 0.17, 0.16 and 0.17 for every $1 in revenue.

Expenses

Three important categories of expenses under the income statement. How does the company handle expenses? Is the company efficient in handling the revenue? The cost of revenue was 52 percent, 14 percent goes to operating expenses; it is the selling, general and administrative expenses. Research and development make up 7 percent. Depreciation was 2 percent. Income tax was 7 percent, on average. The total was 82 percent.  The remaining 18 percent was net income.  The details of the expenses 2007 to 2011:

  • The cost of revenues was 45.42, 48.73, 53.93, 55.97 and 55.67. This is the direct expense incurred in generating sales. More than half the total revenue was the direct cost.
  • Operating expenses were 17.71, 14.67, 13.46, 12.37 and 12.02. These are the selling, general and administrative expenses.
  • Income tax was 7.49, 8.6, 8.2, 5.41 and 6.19. Average 7.18.

Profitability

Most often the gross profit margin (GPM) is calculated and interpreted in the measurement of the company’s efficiency. Most investors thought that high GPM is profitable. However, we cannot just gauge a company’s profitability based on GPM.The company is making money in the operation of its business with an average of 19 percent of revenue. The management performance is up.

Profitability ratio for the year 2007 to 2011:

  • Return on asset was 20.4, 23.5, 23.4, 24.1 and 26.5. The company can turn a profit from an asset.
  • Return on equity was 25.4, 32.9, 32.2, 32.3 and 38.2. This company could return 25 percent, 33, 32, 32 and 38 for every $1 of equity.

RIMM Cash Flow Statement

Cash flow analysis is a method of analyzing the financing, investing and operating activities of the company. It summarizes the cash generated during a period. Cash flow measures the money flowing into, or out of, a company.

Cash Flow from Operating Activities

Cash flow from operation (CFO) signifies the ability of the management to generate a cash flow from the business. RIMM was able and effective in generating cash flow with an increased trend of 100 percent and 30 percent. Cris wrote, “I calculated the ratio of CF from operation over net income [for 2007 to 2011] and the result was 116, 122, 77, 124 and 118.” She continues, “I calculate the ratio between CFO and capital expenditure, the results indicates that the company can invest for the future and is also able to fund capital expenditures out of CFO.”

Cash flow from operating activities from 2007 to 2011:

  • Cash flow from operating activities was 735.67, 1576.76, 1451.85, 3034.87 and 4009.00. It shows an increasing trend from its five years operation.
  • Net income was 631.57, 1293.87, 1892.62, 2457.14 and 3411. These figures were favorably up.
  • Depreciation was 126.36, 177.37, 327.9, 615.62 and 927. These figures were added back to the net income because depreciation is not a cash item.
  • Changes in working capital were -142.58, 130.79, -769.11, -160.71 and 496. These were added or deducted to the balance; it constituted changes in accounts receivable, accounts payable and other current assets accounts.
  • Deferred tax in was 101.58, -67.24, -36.62, 51.36 and 92.
  • Non-cash item was -142.58, 130.79, -769.11, -160.71 and 496.

Cash Flow from Financing Activities

Cash from financing activities reports the issuance and payment of bonds and stocks and payments of dividends. The company has a transaction of the retirement of stocks; the contributing element in the negative balance. This doesn’t mean that the company has no cash fund this category in CFS only involves the activities about financing.  The company has cash ending balance in its cash flow.  Cash from financing activities from 2007 to 2011:

  • Total cash inflow was 128.31, which represents 1 percent of the ending balance.
  • Total cash outflow was 3106.60, which represents 99 percent of the ending balance.
  • Cash from financing activities was -153.66, 80.40, 25.37, -843.38 and -2087. The result shows a negative balance due to its cash outflows greater than the inflows. What contributed to higher outflows is the retirement of stocks?

Cash Flow from Investing Activities

Cash flow from investing activities reports the purchase and sale of long-term investments and purchase of fixed assets.  Under cash from investing activities, what contributed to its negative balance is the purchased of fixed assets; half the total outflow and the capital expenditures; 44 percent.  These were the expenses involved in the operation of the business involving current resources. The company has cash fund balance in its cash flow.   Cash flow from investing activities from 2007 to 2011:

Facts and Explanation

  • Total cash inflow was 6,208.79. This is the sale of the investment.
  • Total cash outflow was -12,322.14.  It represented:
    a.    Capital expenditure of $5588.63, which represented 44 percent.
    b.    Acquisition of business in $808.20, which represents 6 percent.
    c.    Purchase of fixed assets in $6322.14, which represents 50 percent.
  • Cash flow from investing activities was -364.58, -1153.94, -1823.52, -1470.13 and -1698. Ending balance resulted in a negative amount due to its cash outflow was greater than the cash inflow.  This doesn’t mean that the company has no cash funds available for investing activities. This report involves only the activities in investing activities.

    Net Cash

    The net cash ending balance shows an increasing trend except in 2009 where It deteriorates by 29 percent. This company can generate sufficient revenue for operations and could generate a cash flow to be used for future reinvesting, payments of dividends and future business expansions.

    Cash balance from 2007 to 2011 are as follows:

    • Net cash beginning balance was 459.54, 677.14, 1184.40, 835.55 and 1551.0
    • Net cash ending balance was 677.14, 1184.40, 835.55, 1550.86 and 1791.
    • Changes in cash balance were 217.60, 507.26, -348.85, 715.31 and 240.
    • Changes in percentage were 47, 75, -29, 86 and 15.

    The company could generate a positive cash flow from operating activities. Income was sufficient for its working expenses. It has money left over for future expansions, investing and for payments of dividends. In financing activities, the company paid for the retirement of stocks, which was 99 percent of the financing activities.  Cash from investing activities, the outflows is greater than its inflow.  The outflow was for capital expenditure, acquisition of business and purchase of fixed assets. The company is effective in generating cash flows and is profitable.

    Written by: Rio, Cris, Nelly, Janice, Meriam, Karla

    Edited by Cris

    Citations

    Who started the company and why?

    http://en.wikipedia.org/wiki/Research_In_Motion
    http://books.google.ca/books?id=KGrtBbPlR7EC&lpg=PP1&dq=Research+In+Motion&pg=PP1&hl=en#v=onepage&q=Research%20In%20Motion&f=
    ttp://www.sec.gov/Archives/edgar/data/1070235/000107023512000036/pr050812.htm

    What is the background of the company? its History & Development?

    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm#253804ex1_1_2
    http://en.wikipedia.org/wiki/Research_In_Motion
    http://www.sec.gov/Archives/edgar/data/1070235/000107023512000036/pr050812.htm
    http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=RIMM.O

    What is the nature of the business?

    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm#253804ex1_1_2
    http://www.google.com/finance?q=NASDAQ:RIMM
    http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=RIMM.O
    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm#253804ex1_1_1

    Who is running the company and their background?

    CEO
    http://www.rim.com/newsroom/mediaexecutive/index.shtml
    http://www.reuters.com/finance/stocks/officerProfile?symbol=RIMM.O&officerId=1565220
    http://www.guardian.co.uk/technology/2012/jan/23/thorston-heims-new-rim-ceo?newsfeed=true

    CFO
    http://www.reuters.com/finance/stocks/officerProfile?symbol=RIMM.O&officerId=932886
    http://www.rim.com/newsroom/mediaexecutive/index.shtml
    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm
    http://www.bgr.com/2011/07/25/rim-to-lay-off-2000-employees-reorganize-management/

    Who is directing the company? How are the committees structured?

    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm#253804ex1_1_29>
    http://www.rim.com/investors/governance/boardofdirectors.shtml
    http://insiders.morningstar.com/trading/insider-committees.action?t=RIM&region=CAN&culture=en_us

    How do they make money?

    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm
    http://www.sec.gov/Archives/edgar/data/1070235/000119312511346445/d269984d6k.htm

    How do they fit into the industry they operate in?

    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm#253804ex1_1_18
    http://en.wikipedia.org/wiki/Research_In_Motion#Patent_litigation

    Who are their suppliers and customers?

    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm#253804ex1_1_28
    http://en.wikipedia.org/wiki/Research_In_Motion

    What is their workforce like?

    http://www.rim.com/careers/why_rim/life_rim/
    http://www.rim.com/careers/why_rim/
    http://www.sec.gov/Archives/edgar/data/1070235/000119312512155342/d253804dex11.htm

    How do they treat their employees; what is the pay and working condition like?

    http://www.rim.com/careers/why_rim/rewards/
    http://www.rim.com/company/corporate-responsibilities/corporate_philanthropy.shtml

    Gossips

    http://www.reuters.com/article/2012/05/09/researchinmotion-idUSL4E8G98ZB20120509?type=companyNews
    http://ca.news.yahoo.com/research-motion-appoints-chief-operating-officer-chief-marketing-125856275–finance.html
    http://www.reuters.com/finance/stocks/RIMM.O/key-developments/article/2345402
    http://www.reuters.com/finance/stocks/RIMM.O/key-developments/article/2348586
    http://www.thestreet.com/story/11534235/1/7-stocks-fall-to-52-week-lows.html?cm_ven=RSSFeed
    http://beta.fool.com/bobbyfisher/2012/05/08/applications-are-vital-research-motion-comeback/4304/?source=TheMotleyFool

    Interested to learn more about the company? Here’s company research to know more of it’s background and history; value investing guide for the financial status; and investment valuation for the pricing.

 

Note:

Research Reports can be found under the company tab.