Posts in Company Updates

Another New Challenge for ITT Educational Services Inc (ESI)

July 22nd, 2016 Posted by Company Updates No Comment yet

itt-tech-esi

ITT Educational Services Inc (ESI) received a letter from the US Department of Education (ED)

ED required ITT Tech to increase its existing guarantee of $79.7 million to $123.6 million. ESI have to comply within 45 days from the date of the ED letter to provide the Additional Amount of $43,938,303. This is either cash or letter of credit.

ESI had submitted a letter of credit for $79.7 million which is termed “ED Letter of Credit” in the beginning. The agreement was termed “ED Agreement” on December 16, 2015. Furthermore, with ED to maintain an escrow account, the “ED Escrowed Funds” until November 4, 2019.

The Problem

“Will the company be able to provide the required additional amount?” I think they can because Cerberus Business Finance LLC could finance their financial needs. Although ESI had originally borrowed $100,000 million, ESI was able to pay and the half of it with a balance $50,505 million as of March 31, 2016. In addition, ESI expects a $0 balance on December 31, 2016. The future cash earnings of ESI are already set for payment of their current obligations. Therefore it becomes a challenge for them to pay the additional escrow.  

ITT Tech SEC 8K Filing Report

Quoted from SEC 8k:

“The Financing Agreement entered into among the Company, Cerberus Business Finance LLC, as collateral agent and administrative agent, and the lenders’ party thereto (as amended, the “Financing Agreement”) permits the Company to incur certain types of indebtedness. Permitted indebtedness under the Financing Agreement includes indebtedness in respect of cash collateral under the ED Agreement in an aggregate amount not exceeding $120,000,000 at any time outstanding, as well as other indebtedness in an aggregate amount not exceeding $17,500,000 at any time outstanding, which amount is not currently represented by any existing type of indebtedness. Based on these permitted types and amounts of indebtedness, the Company does not believe that the Additional Amount, when provided, will constitute a default under the Financing Agreement.”

In conclusion,

The possible effect of the regulation imposed by ED could materially affect its liquidity. The company’s current situation, there is no certainty that they could fund the Additional Amount. However, through Cerberus Business Finance LLC they might be able to meet its obligation with the DOE.

To view the research report of ITT Tech please click here.

Research and Written by Cris

 

 

Interested to learn more about the company? Here’s investment valuation for a quick view, company research to know more of its background and history; and value investing guide for the financial status.

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

tuesday-morning-corporation-tues-2/

Tuesday Morning (TUES) Closeout Buyer and Surplus Re-seller

July 26th, 2012 Posted by Company Updates No Comment yet

Tuesday Morning Corporation (TUES) who started?

Tuesday Morning Corporation (TUES) developed its name when the business opened their doors on Tuesday morning, generally the first Tuesday of the month.

The company founder, chairman, and chief executive officer Lloyd Ross conceptualized the title. In line with this, an idea was brought up in the early 1970’s when Lloyd Ross was working in Rathcon, Inc. and noticed that manufacturers had no reliable way to dispose of their surpluses of high-end inventory. Moreover, he started in buying and selling merchandise from top-name manufacturers to department and specialty stores.  In spite of its name, the store is open throughout the week where the products are known to be first-quality, famous-maker giftware.

On our Economics class in high school we tackled Surplus and since then I have completely forgotten what it meant exactly. Surplus, as defined by our research team, is a situation in which assets exceed liabilities, income exceeds expenditures, exports exceed imports, or profits exceed losses. It is the opposite of a deficit. When a country exports more than it imports, it is said to have a trade surplus.

TUES background of the company? Its history and development?

Every single thing on this planet has its own history and background and how it developed. So for Tuesday Morning Corporation, Meriam and Janice have listed some valuable information regarding that.

TUES nature of its business?

The corporation is a closeout retailer of assorted famous maker gift that markets assorted first quality merchandise.

It buys brand name and first quality products at closeout prices and resells it at prices lower than those generally charged by department stores and catalog retailers. Also, they offer home accessories, housewares and famous-maker gifts in the United States. The stores do not sell seconds, irregulars, refurbished or factory-reject products. On March 31, 2011, the company compelled with 840 discount retail stores in the 41 states. The company relies on direct marketing which includes mail, eTreasures, e-mail list an advertisement in newspapers and television.

Brand new items that are no longer being sold for wholesale cost are considered closeouts. Thus, it may be a result of discontinuation and overstocking of the product or a sale in which all remaining stock is disposed of, usually at greatly reduced prices.

Who is running TUES and their background?

As anyone of us knows, a company would only run if there are people working on it. What’s a company called without them anyway? Janice will help ease the questioning with a thorough background description of the company along with the people running it.

Key management personnel of Tuesday Morning Corporation has been serving the company for a couple of years. Mr. Michael J. Marchetti is the interim CEO who has been part of the corporation for more than ten years. Same with the CFO Ms. Stephanie Bowman, that has been employed for almost six years.

Mr. Michael J. Marchetti serves as the president, interim chief executive officer, and chief operating officer of Tuesday Morning Corporation. He joined the company in February 2001 as senior vice president of strategic planning. For a few months, he held the following position as an acting chief financial officer, secretary, and treasurer of the company. Before climbing to his current position, he served several executive positions such chief operating officer, executive vice president and executive vice president of operations. Mr. Marchetti was previously employed as a principal by MarCon Services, Inc. He was also a former chief financial officer of CWT Specialty Stores, Inc.

Ms. Stephanie Bowman is the executive vice president, chief financial officer, secretary and treasurer of the company. She started her employment as the controller in August 2006. She was previously seated as vice president of finance before becoming the CFO. Prior joining on Tuesday Morning Corporation, she was the senior vice president of finance of Summit Global Partners. Ms. Bowman is a certified public accountant and holds a degree in BBA, Accounting from the University of Texas at Arlington.

That was a bit off on my part. Janice then made it clear to me. Interim CEO is a person appointed by a company’s board of directors to assume the role of the chief executive officer during a time of transition or as the result of the sudden departure of the company’s previous CEO. These CEOs are tagged with the “interim” tag due to the fact that they have not officially been given the title of full-time CEO. Like many industry leaders, interim CEOs are often called upon to “steady the ship” in periods of great turmoil.

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

So how about their directors? It’s a good thing Janice was there to help me out. She even gave out bits of information as to how their committees were structured.

The committee is comprised solely of independent directors. The committees are the audit, compensation and nominating and corporate governance committee. Mr. Bruce Quinnell sits as the chairman of the board of the company.

Mr. Quinnell is an independent director and he has been with the company since April 2006. He is the chairperson of the audit and compensation committee. He is a former executive officer of the following companies, namely Walden Book Company, Pace Membership Warehouse and Dollar General Corporation. A member of the board of directors of Bombay, Inc, Cyber Medical Services, Zoom Systems, Inc and chairman of the board of Board of Hot Topic, Inc. Mr. Quinnell is a business consultant with extensive background in the retail industry. He provides leadership and management skills as well as financial, audit and operational expertise to the company.

Steven R. Becker, 45, is the chairperson of the nominating and corporate governance committee. He was appointed as chairman on July 1, 2012.  Mr. Becker is a co-founder and partner of Becker Drapkin Management. He was a former director of Plato Learning and current member of the board of directors of Hot Topic, Ruby Tuesday, Pixelworks. At present, he is an active member of the board of trustees of Dallas Museum of Art. He holds a B.A. degree from Middlebury College and J.D. from the University of Florida.

In non-profit organizations, just as to how Janice had described it, the board of trustees often provides means for members or associates of the organization to elect or appoint individuals that will oversee the function of the organization and ensure that the core values and purposes of the organization are reflected in the operation process. Generally, members of a board of trustees serve terms from one to three years, although various charters may allow persons to be re-elected or re-appointed upon the completion of each term.

It may be selling products or offering services; every business or company has their own means and ways so as the public could enjoy buying and purchasing their goods without further stress on their part and their wallets of course.

How do they make money?

Tuesday Morning offers the finest in closeout product, never seconds or damages. The business uses different strategy formats to be competitive and achieve its financial goal.

Revenues were realized during the transport and sales of the product to the customers. Strategies such as close monitoring and markdown controlling of inventory allow product selling at reasonable rates which contribute well to the company’s earnings. Through “event-based” selling strategy such as “grand openings” and “closeout sales,” major profit is realized. To attract customers, the company promotes major sales events and products through online, radio and television advertising and direct mailings and emails. Items purchased through online by the customers are also one of the sources of company’s income. During the month of October through December, merchandise purchases increased a wherein significant portion of the revenue and net earnings were recognized. Also, earnings of the corporation grew due to the sales per store and increase of transactions in the comparable store sales.

Comparable store sales are the amount of revenue a retail location generated in the most recent accounting period, relative to the amount of revenue it generated in a similar period in the past. Comparable store sales are most commonly used to compare the most recent year’s holiday shopping season, to last year’s, or to compare this week, month, quarter or year’s sales to last week, month, quarter or year’s sales.

How do they fit into the industry they operate in?

Tuesday Morning is a company that most of the industry is not seeing as a major player in the marketplace. So how do they manage to fit into the industry they operate in? That’s what we’re about to find out in Meriam and Janice’s research work.

The company has a significant take on their competition with the supply chain. At present, as a closeout retailer of home furnishing, the company competes against a diverse group of retailers, including department and discount stores, specialty, catalog and e-commerce retailers and mass merchants.  The store also competes in the market with big numbers of retailers who specialize in one or more types of home furnishing and housewares products that TUES sells. Due to competition in the home furnishings retail industries, the company develops a strategic initiative to equally maintain its trend. Business competitors are Bed Bath & Beyond Inc. (BBBY), J. C. Penney Company, Inc. (JCP), Target Corp. (TGT) and Industry – Discount, Variety Stores. No second-hand factory with defects, either damaged products, are sold in the stores that make Tuesday Morning Corporation stand ahead with the competitors such as Samsonite, Cuisinart, Krups, Calphalon, and others.

In the business world, like how our research team has defined it, a retailer is a person that sells goods to the consumer, as opposed to a wholesaler or supplier, who normally sell their goods to another business. The retail transaction is at the end of the supply chain. Manufacturers sell large quantities of products to retailers, and retailers sell small quantities of those products to consumers.

Who are their suppliers and customers?

Tuesday Morning has a dedicated customer base that seeks the best merchandise at outrageously cheap prices.  Wow! That’s good to hear, right? Let’s get to find out more about that; thanks for Meriam and Janice’s detailed article.

They sell various products preferably brand new and no factory defect. Products are lamps, rugs, furniture, kitchen accessories, small electronics, gourmet housewares, linens, luggage, bedroom and bathroom accessories, toys, stationery, silk plants, as well as crystal, collectibles, silver serving pieces, men, women and children’s apparel and accessories  and selected items which are offered at retail shops and website. Normally, closeout products are only available from manufacturers or vendors on a non-recurring basis. The company doesn’t offer long-term contracts with vendors for supply, pricing or access but rather individual purchase decisions, which are often in large quantities.  TUES profits rely on the price of the product they purchase from the suppliers.

Consumer also called as customers, is an individual who buys products or services for personal use and not for manufacture or resale. He/she also makes the decision whether or not to purchase an item at the store and someone who can be influenced by marketing and advertisements. Anytime someone goes to a store and purchases a toy, shirt, beverage, or anything else, they are making that decision as a consumer.

What is their workforce like?

Just like computer parts, once a certain part is missing, the whole machine itself would be useless. Without human intervention to, a computer is a dumb box. Why did I say this? That’s because as of now, we will be reading what’s the workforce like on Tuesday Morning Corporation.

The workforce of the company is a combination of the management team, personnel, and technology.

With today’s competitive market, automated technology process significantly supports the company’s business operations. TUES is believed to have the strong bond with its employees who are not associated with labor groups. It has a total of 1,900 employees on the full-time basis and approximately 7,000 on a part-time basis as of June 30, 2011. Their store management is composed of full-time and part-time employees such as the store, zone and field managers.

Store manager handles the recruitment, training, and supervision of store personnel and stores inventory. In addition, management members held periodic meetings with the regional, field, zone managers and visits selected stores during sales and non-event sales. Key employees and stable management are where the future of the company highly depends on one. Aside from the personnel, the company uses “eTreasures”®, a program that keeps the customers updated with the newest product and offerings. Some labor source to consider manufacturers and vendors wherein they produce and supply items to the stores.

Targeted emails allow information, about your opportunities, event or organization to be sent to a specified target group. It also gives you the ability to segment your email list and target your email messages to their specific audience. Sending targeted emails will minimize unsubscribes and reduce list churn.

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

So we’ve basically covered from how the company emerged, its development and history. I guess it’s high time to get to know how they treat their employees and what is their pay and working conditions like.

Tuesday Morning Corporation performance is dependent on recruiting, developing, training and retaining quality sales, distribution center and other associates in large numbers, as well as, experienced buying and management personnel.

Executive Officers and Employees

Executive officers and employees follow a code of conducts which established ethical standards in the company. Training is provided to store management personnel upon hiring or during the promotion. The compensation package for the executive officers is the following: base salary, equity-based compensation, annual cash payments perquisites and other personal benefits. Annual cash payments are applicable to executive officers with a certain employment agreement. Stock-based compensation is enjoyed by directors, officers, and key employee however in 2008; it was terminated by the board of directors. For potential liabilities with workers, the company provides a mix of insurance and self-insurance plans. Full-time and eligible employees avail the 401(k) profit sharing plan wherein the certain percentage is deducted from their salary. The company also offers death benefit plan to full-time employees and executive officers.

Death benefit or “survivor benefit” is the amount of a life insurance policy or pension that is payable to the beneficiary when the annuitant passes away. Also, it may be a percentage of the annuitant’s pension. Alternatively, the benefit may be a large lump-sum payment from a life insurance policy. The size and structure of the payment are determined by the type of policy the annuitant held at the time of death.

Summary Compensation Table

The table presents the compensation of executive officers and directors for fiscal years 2009, 2010 and 2011.

tues 1

tues 2

Gossips

Now that we’ve pretty much covered every aspect of the company, let’s get it on with the summary that’s been laid for us by our research team.

According to Reuters news in January 2012 at 08:00 am, Tuesday Morning Corp. revised its guidance for fiscal 2012 and expects net sales to be in the range of $815-$820 million.

Another news from Yahoo finance dated Tuesday, July 10, 2012, there was an increase of 0.8 percent. Comparable store sales for the quarter ended on June 30, 2012, with an increased rate of 0.2 percent. For the fiscal year ended June 30, 2012, and net sales were $812.8 million compared to $821.1 million for fiscal 2011.

On Wednesday, June 6, 2012, Reuters announced Management Changes and Director Resignation of Tuesday Morning Corp. This relieved Kathleen Mason of her duties as President and CEO and commenced a search for a new chief executive.

June 7, 2012, Dallas Business Journal has written, Kathleen Mason Firing surprise. She said,   “The Company has been profitable for 12 consecutive years,”. “We have grown to 850 stores with 10,000 employees and 11 million loyal customers.”

Revision of guidance of Tuesday Morning Corporation increased Net sales this 2012; CEO Michael Marchetti had positive views to achieve an increase in total sales for the quarter. Management changes made Kathleen Mason relieved from her duties, which came as a surprise to her and felt disappointed.

CITATIONS

Who started the company and why?

http://en.wikipedia.org/wiki/Tuesday_Morning

/http://www.fundinguniverse.com/company-histories/tuesday-morning-corporation-history/

http://www.fundinguniverse.com/company-histories/tuesday-morning-corporation-history/

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

http://www.fundinguniverse.com/company-histories/tuesday-morning-corporation-history/

http://en.wikipedia.org/wiki/Tuesday_Morning

http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=TUES.O

http://www.sec.gov/Archives/edgar/data/878726/000110465911024289/a11-9588_110q.htm

What is the nature of the business?

http://www.fundinguniverse.com/company-histories/tuesday-morning-corporation-history/ http://www.sec.gov/Archives/edgar/data/878726/000110465911024289/a11-9588_110q.htm

http://en.wikipedia.org/wiki/Tuesday_Morning

http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=TUES.O

Who is running the company and their Background?

http://insiders.morningstar.com/trading/executive-profile.action?t=TUES&PersonId=PS000015PH&flag=Executive&insider=Michael_Marchetti&region=USA&culture=en-us&ProductCode=com

http://investing.businessweek.com/research/stocks/people/person.asp?personId=752929&ticker=TUES:US

http://www.sec.gov/Archives/edgar/data/878726/000104746911008263/a2205707zdef14a.htm p19

http://www.sec.gov/Archives/edgar/data/878726/000104746911008263/a2205707zdef14a.htm p1

http://www.reuters.com/finance/stocks/officerProfile?symbol=TUES.O&officerId=1147173

http://www.linkedin.com/pub/stephanie-bowman/13/604/806

http://www.macroaxis.com/invest/manager/TUES–Stephanie_Bowman.

Who is directing the company  How are the committees structured? 

http://ir.tuesdaymorning.com/committees.cfm

http://www.sec.gov/Archives/edgar/data/878726/000104746911008263/a2205707zdef14a.htm p6

http://ir.tuesdaymorning.com/committees.cfm

http://insiders.morningstar.com/trading/executive-profile.action?t=TUES&PersonId=PS00001IV7&flag=Director&insider=Steven_Becker&region=USA&culture=en-us&ProductCode=com

How do they make money?

http://www.sec.gov/Archives/edgar/data/878726/000104746911007754/a2205433z10-k.htm p

http://ir.tuesdaymorning.com/secfiling.cfm?filingID=1104659-12-30571 p11

http://ir.tuesdaymorning.com/secfiling.cfm?filingID=1047469-11-7754 p4

http://ir.tuesdaymorning.com/secfiling.cfm?filingID=1047469-11-7754 p11

http://ir.tuesdaymorning.com/secfiling.cfm?filingID=1047469-11-7754 p10

http://ir.tuesdaymorning.com/secfiling.cfm?filingID=1047469-11-7754 p24

http://ir.tuesdaymorning.com/secfiling.cfm?filingID=1047469-11-7754 p30

How do they fit into the industry they operate in?

http://www.sec.gov/Archives/edgar/data/878726/000110465911024289/a11-9588_110q.htm p11

http://www.sec.gov/Archives/edgar/data/878726/000110465911024289/a11-9588_110q.htm

http://finance.yahoo.com/q/co?s=TUES+Competitors

http://www.wikinvest.com/stock/Tuesday_Morning_(TUES)

Who are their suppliers and customers?

http://www.google.com/finance?q=NASDAQ:TUES

http://www.sec.gov/Archives/edgar/data/878726/000110465911024289/a11-9588_110q.htm

http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=TUES.O

http://www.wikinvest.com/stock/Tuesday_Morning_(TUES)

What is their workforce like?

http://www.sec.gov/Archives/edgar/data/878726/000104746911007754/a2205433z10-k.htm p11

http://www.sec.gov/Archives/edgar/data/878726/000104746911007754/a2205433z10-k.htm p6

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

http://www.sec.gov/Archives/edgar/data/878726/000104746911007754/a2205433z10-k.htm p39

http://www.sec.gov/Archives/edgar/data/878726/000104746911007754/a2205433z10-k.htm p6

http://www.sec.gov/Archives/edgar/data/878726/000104746911008263/a2205707zdef14a.htm P22

http://ir.tuesdaymorning.com/secfiling.cfm?filingID=1104659-12-30571

http://www.sec.gov/Archives/edgar/data/878726/000104746911007754/a2205433z10-k.htm pF-8

http://www.sec.gov/Archives/edgar/data/878726/000104746911007754/a2205433z10-k.htm pF-20

http://www.sec.gov/Archives/edgar/data/878726/000104746911008263/a2205707zdef14a.htm P25

Gossips

http://www.reuters.com/finance/stocks/TUES.OQ/key-developments/article/2461788

http://finance.yahoo.com/news/tuesday-morning-corporation-announces-fourth-120000047.html   

http://www.reuters.com/finance/stocks/TUES.OQ/key-developments/article/2461788

http://www.bizjournals.com/dallas/news/2012/06/07/firing-surprised-tuesday-mornings.html?ana=yfcpc

Researched and Written by Meriam and Janice
Edited by Cris

stamps.com-inc-stmp

Stamps.com (STMP) Capitalized Total Assets

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

Stamps Balance Sheet

Stamps.com Inc (STMP) value investing has sufficient resources to continuously run its business has proven to its liquidity related ratios.

Liquidity

Financial liquidity of the company plays a vital role in value investing. It is used to determine how capable the company of continuously running its business smoothly. It can be measured by the related ratios on current assets such as current ratio, quick ratio, and working capital. For Stamps.com Inc, below is the data from 2007 to 2011:

Facts

  • The current ratio was 5.62, 5.2, 3.93, 2.23 and 5.07. Average of 4.41. STMP has an average current ratio for its five years in the operation of 4.41, which means that its current assets are 441 percent compared to its current liabilities.
  • Quick ratio was 5.62, 5.2, 3.93, 2.23 and 5.07. Average of 4.41. The company has no recorded inventory, so its quick ratio has an average of 4.41, which tells us that its monetary assets were 441 percent against its current liabilities.
  • Working capital was $60, 63, 41, 16 and 57. Average of $47. Working capital of the company shows a positive balance. However, its trend increased in 2008 by 5 percent but dropped by 35 percent and 61 percent in 2009 to 2010 respectively and recovered again with an increase of 256 percent in 2011. In spite of this trend, the company is capable to pay off its current obligations.

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 own 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 were financed by debt and how much by equity (ownership). Below is the financial leverage ratio of Stamps from 2007 to 2011:

Facts

  • Debt ratio in percent was .12, .16, .16, .23 and .13. Average of .16, which tells us that 16 percent of the company’s assets were loaned.
  • Debt to equity in percent was .14, .19, .18, .30 and .15. Average of .19. It also tells us that the company’s equity is 19 percent of its total assets.
  • Solvency ratio was 1.08, .80, .50, .54 and 1.93. Average of .97, which means that Stamps is 97 percent solvent. It is computed by dividing its net income by tax plus depreciation by its total liabilities.
  • Current liabilities to total assets was .12, .16, .16, .23 and .13. Average of .16.  The company’s current liabilities, when compared to its total assets, were 16 percent average, which means that the creditors have only 16 percent claims on Stamps total assets.
  • Stockholders’ equity to total assets was .55, .84, .85, .77 and .87. Average of .84. Tells us that the owners have 84 percent claims on the company’s total assets.

Based on the results of the leverage ratio analysis, the firm did not borrow the big amount of money from outside creditors. Instead, they did utilize more on the owners’ funds as shown that 84 percent of its total assets were owners’ equity.

Plant, Property & Equipment

This category 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 were recorded at cost upon acquisition of these assets.

The fixed asset turnover ratio measures the company’s effectiveness in generating sales from its investments in plant, property, and equipment. In Stamps, the ratio has an average of 37 meaning the company’s fixed asset has 37 times average turn per period.

Stamps Income Statement

Earnings quality is an important aspect of evaluating an entity’s financial health, yet investors, creditors, and other financial statement users often overlook it. Earnings quality refers to the ability of reported earnings to reflect the company’s true earnings, as well as the usefulness of reported earnings to predict future earnings. The evaluation of earnings is often difficult because companies highlight a variety of earnings figures which are the revenues, operating earnings, net income, and pro forma earnings. In addition, companies often calculate these figures differently. The income statement alone is not useful in predicting future earnings.

Profitability

The company’s net profit margin showed a decrease of 11.97 percent, 7.52 and 6.47 in 2008 to 2010 compared to 2007. But it leaped high in 2011 to 25.86 percent, a 4 times fold compared to 2010. This means that Stamps increased their revenue in 2011 to 102 million dollars and earned a net income of around 26 million dollars compared to 2010 which is 6 million dollars only. Asset turnover is gradually increasing every year, therefore this depicts that they were efficient in converting their assets into revenues.

Return on Assets

Stamps return on assets showed an up and downtrend for the last four years but in 2011 it reached a height of 31.76 percent. This means that they had increased their earnings for every dollar of total assets as compared to previous years. For their financial leverage measured by equity multiplier, showing the portion of the return on equity that was the result of debt, wherein it was trending upward with a slight decrease in 2009. Then increased in 2010 by 1.30 percent but decreased again in 2011 to 1.15. This means that they can control their total liabilities within their current operations. In fact, it went to 22.99 million dollars in 2010 but managed to decrease it the following year to 12.94.

Return on Equity

Their return on equity depicted an increase in 2008 from 10.51 percent to 11.90, and then up and down in 2009 to 2010 of 8.02 to 9.23 but 2011 showed an increase of 38.0. This means that Stamps.com Incorporation was earning revenues from money invested by their stockholders, as depicted by the increase in their revenues of 18.75 percent in 2011. To further understand the thought, below is the detailed summary of the profitability ratio from 2007-2011

  • Net margin in percent was 12.43, 11.97, 7.52, 6.47, and 25.86. This simply is the after-tax profit a company generated for each dollar of revenue.
  • Asset turnover was 0.76, 0.86, 0.90, 1.17, and 1.23.  This measures the effectiveness of a company to convert its assets into sales.
  • Return on assets was 9.42, 10.26, 6.77, 7.54, and 31.76. This tells us how much profit the company generated for each dollar on total assets.
  • Financial leverage was 1.14, 1.19, 1.18, 1.30, and 1.15.  This measures the financial structure ratio of the company base on total assets against total stockholders’ equity.
  • Return on equity was 10.51, 11.90, 8.02, 9.23, and 38.00.  The company could return such percent for every dollar of equity.

Income

Revenues from 2007 to the 1st quarter of 2012 are as follows:

  • Revenue in million dollars was 86, 85, 82, 86, 102, and 28. This was the company’s total earnings.
  • Gross profit was 61, 62, 59, 62, 75, and 26.  These were the earnings after deducting the cost of revenues.
  • Operating income was 7, 4, 6, 1, 17, and 26.  This was the company’s income after deducting all operating expenses.
  • Income before income tax is 11, 7, 7, 2, 18, and 5.  This was the income after interest and other income (expenses).
  • Net income was 11, 10, 6, 6, 26, and 16.  This was the company’s income after deducting income taxes.

Explanation

Stamps.com Inc revenues were constant for the last four years with a growth ratio of 1.45 percent, -1.05, -3.28 and 4.16, and then abruptly increase by 18.75 percent in 2011.  Average revenue for five years of 88.2 compared to 28 million dollars in the first quarter of 2012; means that their revenues are definitely increasing. Both gross profits and operating income were on an increasing and decreasing trend for the last four years and then increased again in 2011. Their operating income showed a growth ratio of -42.83, -32.34, 30.38, -74.81 and 1075.97. The income before income tax differed because of the other income and expenses. Net income showed a decrease in 2008 to 2010 of 10 million dollars, 6, and 6, then an increase to 26 and 16 for the 1st quarter of 2012 along with its growth ratio of -35.21, -4.71, -39.23, -10.44 and 374.78.

What causes the increase in revenue? As you can see the company increased their total assets from 57 million dollars in 2010 to 108 in 2011, so as to their stockholders’ equity from 44 million dollars in 2010 to 94 in 2011. This means they capitalize on total assets to augment their revenues.

Expenses

Expenses from 2007 to the 1st quarter of 2012 are as follows:

  • Cost of revenue in million dollars was 25, 23, 23, 24, 26, and 3 for the 1st quarter of 2012.
  • Operating expense was 54, 58, 53, 60, and 58.
  • Other income (expense) was 4, 3, 1, 0, 1, and (21) for the 1st quarter of 2012.
  • Provision for income tax was 0, (3), 1, (4), (8) and (12) for the 1st quarter of 2012

Explanation

The company’s cost of revenue was 29.49 percent, 26.98, 27.9, 27.69 and 25.80 of revenue with an average of 24.2 which meaning, that first quarter 2012 of 3 is lesser than one-fourth of average, so the cost of revenue is decreasing. While operating expense was 62.83 percent, 67.77, 65.02, 70.6, and 54.24 of revenue with an average of 63.69. And other income and expense were 5.20, 3.44, 1.12, 0.14 and 0.55 of revenue with an average of 2.09. Thus, net income was 12.88, 8.69, 8.20, 1.86, and 17.51 of revenue or an average of 9.83.

The company’s cash flow from 2007 up until 2011 will be discussed to us by one of our Numbers team member, Dyne.

Stamps Cash Flow Statement

Cash flow would simply mean the cash in and out of the business. It was classified into three segments– the operating, investing and financing.  In operating, it was cash provided or used for the operations which are basically from the revenue. In both investing and financing, it was cash provided and used for investment and financing.

Cash Flow from Operating Activities

The results of the net cash provided by operating activities can be used to reinvest in the business, repay debt and pay dividends. In Stamps, from 2007 to 2010 it declined. Based on their total of five years of operation, 2007 represents 28 percent then went down to 8 percent in 2010. This was due to the fact that the net income was also declining. It was corrected in 2011. It grew by 17 percent with the increase also of net income by 44 percent. Probably in 2012, it will go up based on the net cash provided by operating activities in Q1 increased by 27 percent from 2011Q1 data.

The net cash provided by operating activities means a net of cash generated from operations. It can be computed using the net income and added back the non-cash items related.

Explanation:

  • Net income in million was $11, 10, 6, 6 and 26. Total for five years was 59. In 2012Q1 was 16 compared in 2011Q1 was 3.
  • Depreciation and amortization were 3, 2, 1, 1 and 1.Total for five years were 8.
  • Another non-cash item was 3, 3, 0, -3, and -8. Total for five years was -5.
  • Net cash provided by operating activities was 17, 12, 10, 5and 15. Total for five years was 59. In 2012Q1 was 11 compared in 2011Q1 was 3.

The basis for computing the cash flow from operating using the direct method of accounting is taking all the cash collection then deduct all the cash payments made by the company.

Facts:

  • Cash collection was 86, 85, 82, 85 and 96. Total for five years was 434.
  • The payment for purchases was 25, 23, 21, 23 and 26
  • Payment for operating   expenses was 54, 58, 53, 60 and 58
  • Cash payment for income taxes was 0, -3, 1, -4 and -8
  • Total cash flow from operating  activities was 7, 7, 7, 6 and 20

With this, cash collection is the main core. If the cash collection was short over the cash payments made, the cash flow would be in negative. In Stamps, the cash collection from 2007 to 2010 there was no big movement except in 2011. It increased to 2 percent. The same thing in total cash flow from operating, no movement except in 2011 which increased to 30 percent, due to the decrease in operating expenses and the provision of income tax.

Stamps Cash Flow from Investing Activities

The net cash from investing activities for five years resulted in a total of 76. It tells us, the company has more cash provided than cash used. It indicated that only in 2009 and 2010 that they had negative cash, due to the purchase of an investment that was over than the cash from sales/maturities of investment.

After we know the result of cash from operating, it can be used as our basis if the company can utilize the cash either to invest, to purchase additional capital expenditure, purchase of an investment or acquire a business.

Investing activities are:

  • Investments in property, plant, and equipment were -1, -1, 0, -2 and -1. Total for five years was -5.
  • Purchases of investments were -44, -33, -25, -25 and -2. Total for five years was -129.
  • Sales /maturities of investments were 91, 58, 21, 24 and 14. Total for five years was 208.
  • Net cash used for investing activities was 47, 23, -4, -1 and 11. Total for five years was 76.

Stamps Cash Flow from Financing Activities

STMP net cash from financing from 2007 to 2010 were used to repurchases of treasury stock, though it was declining. The total was represented by 102 percent over the total net cash from financing for five years. In 2012, it has cash provided by 22 percent which was from other financing activities. The cash from financing activities is where we can see how the company raised cash. It shows the following:

  • Common stock issued and 1, 1, 0 and 0. Total for five years was 3.
  • Repurchases of treasury stock was -33, -27, -14, -14 and -5. Total for five years was -93.
  • Other financing activities was 0, 0, 0,-25 and 25.
  • Net cash provided by (used for) financing activities was -32, -26, -13, -40 and 20. Total for five years was -91.

Stamps Net Change in Cash

The net change in cash was cash available after paying all their expenses and obligation. It showed how much cash was made for a particular year. Below are the results:

  • Net change in cash was 32, 9, -8, -37 and 46
  • Cash at beginning of the period was 12, 44, 53, 45 and 8
  • Cash at end of the period was 44, 53, 45, 8 and 54

The cash at the end of the period was in sideways. It resulted with all in positive, though the net change in cash in 2009 and 2010 was in negative since the cash at beginning of the period was positive, still, it resulted in positive.

Stamps Free Cash Flow

Free cash flow can be determined using the operating cash flow result in less the capital expenditure and dividend paid. The following were the results:

  • Operating cash flow was 17, 12, 10, 5 and 15
  • Capital expenditure was -1, -1, 0, -2 and -1
  • Free cash flow was 16, 11, 10, 3 and 14

The free cash flow from 2007 to 2010 went down successively and jumped to 79 percent in 2011, due to the operating cash flow that was also declining and the capital expenditure in total represented at 8 percent over the total operating cash flow.

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

first-marblehead-corporation-fmd

First Marblehead Corporation (FMD) A Second Thought

July 18th, 2012 Posted by Company Updates No Comment yet

First Marblehead Corporation (FMD) current financial standing of the company as shown in the year 2011 performance showed its recovery from 2010 result, the company is capable to finance its current obligations, yet, extra care is a must by taking into consideration its other resources if it could sustain to continue its business operation.

Liquidity

Liquidity ratio measures the company’s ability to pay off its total liabilities. To run the company’s operation smoothly, it should be financially stable.  To know the financial liquidity of The First Marblehead Corporation, we compute its current ratio, quick ratio and working capital from 2007 to 2011:

  • Current ratio (current assets over current liabilities) was 1.86, 1.08, 1.67, .94 and 1.10. Average of 1.33. This shows that the company’s average current ratio was 1.33 to 1. This sounds good, indicating that current asset is more than its current liabilities.
  • Quick ratio (current assets less inventories over current liabilities) was 1.53, .16, .81, .94 and 1.10. Average of .91. The quick ratio reduces the current ratio by the inventory value since inventory is not all that liquid.  This measures the company’s immediate solvency. For FMD, the quick ratio was high in 2007 but very low in 2008, then slowly recovered until 2011.
  • Working capital (current assets less current liabilities) in dollars was 96.68, 44.15, 273.60, -22.38, and 25.58. Average of 83.53. The company’s working capital shows a positive balance except in 2010 where the balance is -$22.38, but it recovered in 2011 by having a positive amount of $25.58.

Leverage

The company incurred a long-term debt of $8273.14 in 2011 which is 108 percent of its total assets. This was due to its long-term investment of $ 7012.74 of the same year. Financial leverage of the company can be measured by its debts or obligations which were directly utilized to continue running its business operation. In order to have knowledge of this, related ratios are used.

Facts

  • Debt ratio was .31, .47, .51, .63 and 1.11. Average of .60. Total liabilities compared to total assets of FMD showed that total liabilities represent 60 percent of its total assets.
  • Debt to equity ratio was .44, .88, 1.03, 1.68 and -9.70. Average of -1.13.
  • Solvency ratio was 1.0, -.38, -.90, -.43 and -.03. Average of -.15, meaning the company is not solvent. Acceptable solvency ratios will vary from industry to industry, but as a general rule, a solvency ratio of greater than 20 percent is considered financially healthy. Generally speaking, the lower the company’s solvency ratio, the greater the probability that the company will default on its debt obligations.
  • Current liabilities to total assets had an average of .60, which means that FMD’s creditors have 60 percent claims on the total asset of the company. The company has a long-term loan in 2011 which was 108 percent of total asset. This should be closely monitored. While the stockholders or owners of the company have 40 percent average claim of the total asset.

Explanations

Based on its past performance which resulted in a negative average balance, one should conclude that the company is not doing well on their investments.

Return on assets (ROA) is a useful measure if one wants to evaluate how well an enterprise has used its funds. High ROA ratio implies a well-managed asset while return on owners’ equity (ROE) reflects how much the firm has earned on the funds invested by the shareholders, either directly or through retained earnings. For FMD, below are the results:

  • Return on asset  was 30.6, -19.6, -47.5, -29.4 and -2.9. Average of -13.76.
  • Return on equity was 44.1, -36.9, -96.2, 78.7 and 25.2. Average of -28.5.

FMD Income Statement

Profitability

Return on equity is one of the most important indicators of a firm’s profitability and potential growth. FMD’s ROE from 2008 to 2010 depicted a declining trend compared to 2007 returns of 44.1 percent. This was mainly due to the decrease in net profit and total stockholder’s equity.  Also in 2012 three quarters total had a decreasing return of -224 percent because stockholders’ equity decreased also in the first quarter of 2012. This means that operations and asset management was inefficient to garner a profitable rate of return for the last four years aside from the financial crisis that happened in the US.

DuPont Model

Using the DuPont Model in the computation of the return on equity, there are three components as follows:

  • The net profit margin of a percent was 42.2, 827.5, 134.3, -1058.2, and -151.5. This simply was the after-tax profit a company generated for each dollar of revenue.
  • Capital turnover (sales/assets) was 72.5, -2.4, -28.7, 2.3, and -3.4. This measured the effectiveness of a company to convert its assets into sales.
  • Financial structure ratio (assets/shareholder’s equity) was 144.1, 163.2, 193.9, 225.3, and -1242.4. This measured the financial leverage of the company.

Multiply every three components you will get:

  • Return on equity was 44.1, -32.4, -74.7, -54.8, and 63.9. The company could return such percent for every dollar of equity.

Computation of the return on assets:

  • Operating margin (EBIT/sales) was 71.3, -1362.1, -189.6, -1336.5 and -157.2. This measured the operations efficiency of the company.
  • Asset turnover ratio was 72.5, -2.4, -28.7, 2.3, and -3.4. Measured the total utilization efficiency of assets.

Multiply the two components, the result was:

  • Return on asset was 51.7, -32.7, -54.4, -30.7 and -5.34. This tells us how much profit the company generated for each dollar on total assets.

Explanation

Therefore, if we were to leave out the equity multiplier to see how much FMD would earn, you will see that the ROE dropped to 31 percent, -19.8, -38.5, -24.3, and -5.15. In other words, the return on equity was due to profit margins and sales while 13.1 percent, -12.6, -36.2, -24.3 and 58.75 was due to returns earned on the debt at work in the business or the portion of the return on equity as the result of long-term debt. As you can see in 2011 return on equity, 58.75 percent was the result of the long-term debt they invest in long-term investment amounting 7, 012.74 million dollars.

FMD depicted a declining ROA from 2007. The company is not profitable in using total assets to generate revenue. This means the company needs to increase operational efficiency as well as increase assets utilization.

Expenses

Expenses from 2007 to 2012 three quarters total as follows:

  • No cost of revenue for this is a financial business that deals with credit services.
  • Selling, general, administrative expenses, the total was 252.96, 328.34, 104.38, 87.68, 122.27 and 282.42.
  • Depreciation and amortization were 0, 19.63, 17.8, 13.36, 8.25 and 1.26.
  • Unusual expense (income) was 3.2 in 2008.
  • Income tax, total was 256.43, -151.88, -160.63, -44.94, 2.11 and 10.89.

By looking at the expenses above (which represents the 204 percent of total revenue), FMD had a huge operating expense which was more than its average revenue earned. Its depreciation and amortization expense accounts for 13 percent; income tax, 22; unusual expense, 0.70; and another net, 12 of average total revenue.

Income

Let’s move on FMD’s income from 2007 to 2011 including 2012 three quarters total. The following are the results:

  • Total revenue in million dollars was 880.7, -28.41, -290.5, 16.15, -139.63 and 140.37 – the company’s total earnings.
  • Gross profit was 871.33, -54.03, -315.6, 6.28, -404.67 and 116.84. This was after deducting the gross revenue from the cost of revenue.
  • Operating income was 627.75, -386.96, -550.84, -215.84, -270.15 and -164.16. Company’s income after deducting all operations expenses.
  • Income before tax was 627.77, -389.96, -550.84, -215.84, -219.45 and 1,105.27. This was the company’s income before deducting income taxes.
  • Net income was 371.33, -235.08, -390.21, -170.90, -221.56 and 1,116.17.  This was the company’s income after deducting income taxes.

Explanation

  • Total revenue growth ratio declined in 2008 and 2009 by -103.2 percent and -132.9. It then recovered a bit in 2010 of 1.83 but decrease again in 2011 of -115.85 and a hopeful increase in revenue as of three quarters total in 2012 of 15.9 against 2007. This illustrates the company’s revenue was inefficient in its marketing of credit services and let revenue to go this down.
  • Gross profit was -106.2 percent, -136.2, 0.72, -146.44, 13.4 against 2007 while operating income and income before tax with -161.6 percent, -187.74, and 134.38 from 2008 to 2010. In 2011 and 2012 operating income amounts -270.15 and -164.16 or -143 percent and -126, and income before taxes of -219.45 and 1, 105.27 or -134.9 percent and 176 respectively. This differences the accounts for the non-operating income and gains on the sale of assets.
  • Therefore, net income or net loss showed growth of -163.3, -205, -146, -159.6, and 300.5 indicating that 2012 net income was quite impressive after four years of net loss in operations.

Margin

  • Gross profit margin (GMP) is often used as a measurement of a company’s efficiency but it cannot gauge the profitability. FMD, the gross profit margin was only good in 2007 and 2010 compared to the rest of the years. They did not earn impressive revenues that could pay for their huge operating expenses as depicted in their EBIT and pretax margin.
  • Net margin after deducting its declining tax rate showed a losing end for straight four years. In 2012 three quarters total, even if their operations were down, it looks prospective with net income because of the gain from the sale of assets in its second quarter.

To further understand, refer to details below:

Facts

  • Gross margin in percent was 98.9, 190.2, 108.6, 38.9, and 289.8.
  • EBIT margin was 71.3, 1362.1, 189.6, -1336.5, and 193.5.
  • Pretax margin was 71.3, 1362.1, 189.6, -1336.5 and 157.2.
  • Net margin was 42.2, 827.5, 134.3, -1058.2, and 158.7.
  • Tax rate was 40.8, 39.2, 29.2, 20.8 and -1.0.

FMD Cash Flow Statement

Cash Flow from Operating Activities

The cash from operating activities showed sideways; it had a negative cash flow in percentage which represented at 143 and 717 for 2008 and 2009. This was due to the net loss incurred from 2008 to 2011. The good thing is, it had a positive cash flow in the percentage of 121 and 19, for 2010 and 2011, respectively.

To find out, if there are still funds for the operation, we can get through by taking the net income and adding all the non-cash items. Below are the results:

Facts

  • Net income/starting line in $ million was 371.33, -235.08, -390.21, -170.9 and -221.56
  • Non-cash items was -13.33, 19.62, 181.36, 266.43 and 499.89
  • Another noncash item was -13.44, 14.39, 181.36, 266.43 and 516.66
  • Other assets was -259.41, -77.1, 329, 5.41 and -105.87
  • Cash from operating activities was 195.52, -456.08, -55.83, 268.61 and 226.52

Explanation

The total cash collection was in erratic movement; it had a positive collection in 2007 but in 2008 to 2009 was negative and recovered in 2010 with also a positive collection but in 2011 was in negative. This was affected by the total revenue which was negative in 2008 to 2009 as well as in 2011.

Historical Cash-in

To know the total collection per each year; we can get the revenue and add any decrease in receivable or deduct any increase of receivable. Below was the result:

  • Total revenue was 880.7, -28.41, -290.5, 16.15 and -139.63
  • Receivables, net was 0, 0, -166.41, 156.29 and -55.98
  • Cash collection was  880.7, -28.41, -456.91, 172.44 and -195.61

Historical Cash out

To determine how much cash the company paid for their purchases, we get the total cost of revenue and add the increase or deduct the decrease of inventory then add the decrease or deduct the increase of accounts payable. Below are the details of purchases:

  • Cost of revenue, the total for five years was zero.
  • Total inventory for five years was zero.
  • Accounts payable for five years was zero.
  • Thus, total cash payment for purchases for five years was zero.

Explanation

Since the company had no prepaid and added expense, the operating expense was represented as the total cash payments for operating expenses. Wherein, in 2008 it increased to 27 percent while in 2011 it decreased to 65 percent. By adding the total operating expense per year and add the increase or deduct the decrease of prepaid expense and add the decrease or deduct the increase of accrued expense we can determine how much the cash payments for operating expenses. Below are the results:

  • Total operating expense was 243.58, 332.93, 235.24, 222.12 and 134.52
  • The prepaid expense was zero for five years.
  • The accrued expense was zero for five years.
  • Cash payment for operating expenses was 243.58, 332.93, 235.24, 222.12 and 134.52.

Explanation

It indicates the cash payments for income tax was decreasing. It means the net income of the company that was taxable was also decreasing.

To determine, how much cash payments for income taxes; we need to add the income tax total and add the decrease or deduct the increase in income tax payable. Below are the results:

Computation

  • Income tax – total was 256.43, -151.88, -160.63, -44.94 and 2.11
  • Deferred income tax increase or decrease was -0.05, 0.24, -0.27 and 0.24 for 2008 to 2011
  • Cash payment for income taxes was 256.43, -151.93, -160.39, -45.21 and 2.35

Then how much cash from operating activities was available? Using the direct method of accounting we need to get the total cash collection less the cash payments for purchases, operating expenses and income taxes. Results are as follows:

Facts

  • The total cash collection was  880.7, -28.41, -456.91, 172.44 and -195.61
  • Total cash payment for purchases for five years was zero.
  • The cash payment for operating expenses was 243.58, 332.93, 235.24, 222.12 and 134.52.
  • Cash payment for income taxes was 256.43, -151.93, -160.39, -45.21 and 2.35.
  • Cash from operating activities was 380.69, -209.41, -531.76, -4.47 and -332.48.

The cash from operating activities shows only in 2007 had positive cash available and in 2008 to 2011 was in opposite results. This explains that the company was more on cash outflow than inflow…not enough cash collection against their expenses.

Cash Flow from Investing Activities

The cash from investing activities was in sideways; in 2008 and 2011 had a cash inflow of 396 and 863 percent, respectively, due to the company had a sale of maturity investments and other investing cash flow.

In order to know how much cash the company invested in capital expenditures and other investing items, we need to get the total capital expenditures, which is the composition of purchase of fixed assets and purchase of intangibles. The other investing cash flow items were in the composition of acquisition of a business, the sale of business, sale or maturity of investments, purchase of investments and other investing cash flow. The following are the results:

Facts

  • Capital expenditure was -20.49, -9.12, -2.14, -0.9 and -3.43, total for five years -36.
  • Other investing cash flow item was -55.98, -11.47, 63.1, -43.59 and 342.69.
  • Cash from investing activity was -76.46, -20.58, 60.96, -44.49 and 339.27.

Cash Flow from Financing Activities

How much total cash the company raised through additional funds? This can be seen in financing activities which compose of financing cash flow items, cash dividend paid, issuance (retirement) of debt and issuance (retirement) of stocks. Below are the results that give an impact on the financing activities:

Facts

  • Financing cash flow items were 23.7, 190.97, -91.83, -46.9 and -48.24
  • Total cash dividends paid was -58.47, -36.94, 0, 0 and  0
  • Issuance   (retirement) of stock, net was -59.27, 59.57, 125.61, -1.97 and -0.33
  • Issuance   (retirement) of debt, net was -4.78, 237.41, -16.34, -15.46 and -630.89
  • Cash from financing activities  was -98.83, 451.01, 17.44, -64.32 and -679.47

Explanations

The above data indicate the cash from financing activities of FMD was still in unpredictable. In 2008 and 2009, it had a cash inflow due to stocks sold but the good thing in 2010 and 2011 they raised funds through the issuance of debt.

FMD in 2008 and 2009 shows a negative cash flow because of the negative result of cash operating. But the good thing is that it recovered in 2010 by 120 percent.

Free Cash Flow

To determine if the company has a free cash flow, we need to take the cash from operating activities and deduct the capital expenditure also the dividend. Below are the results:

  • Cash from operating activities was 195.52, -456.08, -55.83, 268.61 and 226.52
  • Capital expenditures was -20.49, -9.12-2.14, -0.9 and -3.43
  • Total cash dividends paid was -58.47, -36.94, 0, 0 and 0
  • Free cash flow was 274.48, -410.02, -53.69, 269.51 and 229.95

Facts

To know if the company has plenty of cash to pay its obligation, we need to use the cash from operating activities over total liabilities; below are the results:

  • Cash from operating activities was 195.52, -456.08, -55.83, 268.61 and 226.52
  • Total liabilities was 371.84, 563.29, 415.87,364.31 and 8,531.86
  • Cash flow solvency was 0.53,-0.81, -0.13, 0.74 and 0.03

Explanations

The cash flow for solvency indicates that for five years of operation FMD had no cash available during 2008 and 2009 and recovered in 2010. It was still not sufficient that in every $1 of debt, they can only pay their obligation at .7 and .03, respectively.

Written by: Rio, Nelly, and Dyne

Edited by Cris

Baidu.com

Baidu Inc (BIDU) Has Increasing Net Margins

July 12th, 2012 Posted by Company Updates No Comment yet

BAIDU Balance Sheet

Liquidity

In value investing, we consider the past performance of Baidu.com Inc relative to its liquidity. When we say liquidity in a business, an account that will come out in our minds is the cash on hand or cash in banks. Inventory and receivables fall under current assets, which are easily convertible to cash within a short period of time. To determine how liquid the company is, we have to calculate ratios on current resources of the company.

Current ratio, quick ratio and working capital of BAIDU from 2007 to 2011:

  • Current ratio in percent was 2.73, 3.36, 3.46, 3.44 and 3.60. Average of 3.32. Baidu.com Inc has an average current ratio of 3.32 which means that current assets are 332 percent greater than current liabilities.
  • The quick ratio in percent was 2.73, 3.36, 3.46, 3.44 and 3.60. Average of 3.32. This ratio focus on the monetary assets of the company, the ratio is also 3.32.
  • Working capital in the dollar was 1094.29, 2003.15, 3443.15, 6230.6 and 11441.61. Average of 4842.56. It shows a consistently positive result per period for five years and still increasing yearly with a very high balance in 2011 (twice the numbers of 2010 balance).
  • Therefore Baidu was able to meet its current obligations.

Cash Conversion Cycle

One of the objectives of a business is its consistency in maintaining a sound financial position. To determine it is to consider its resources which contribute much to generating cash for operating its business.  The said resources are inventory and receivables. Baidu.com Inc has no inventory account and its payable was in 2010 only. The receivable turnover ratio has an average of 26 times turn per period in five years and 15 days to collect.  Its cash conversion cycle has an average of 12 days. To calculate CCC is to add inventory conversion period and receivables conversion period minus payable conversion period.

Asset management ratios from 2007 to 2011 of BAIDU:

  • The receivable Turnover ratio in percent was 27.14, 34.47, 27.52, 20.01 and 19.34. Average of 25.70.
  • Receivable Conversion Period in days was 13, 11, 13, 18 and 19. Average of 15.
  • Cash conversion cycle in days was 13, 11, 13, 2 and 19. Average of 12.

How efficient is Baidu’s overall process of converting product or services into cash? For the past five years in operation, the cash conversion cycle of Baidu.com Inc has an average of 12 days. Generally speaking, the faster the conversion, the less money is tied up in inventory but it depends upon the nature of the business. Baidu has no inventory and payables balance, but purely receivables aside from cash account.

Further interpretation of the cash conversion cycle:

Particulars 2007 2008 2009 2010 2011 Ave.
Inventory Conversion Period 0 0 0 0 0 0
Days’ Receivable 13 11 13 18 19 15
Days’ Payable 0 0 0 16 0 2
Cash Conversion Cycle 13 11 13 2 19 12

Leverage

What kind of leverage does the company used in the course of normal business? Baidu used its working capital and current assets, particularly short-term investments to continuously run its normal business operation.

A company with a high proportion of long-term debt is said to be highly leveraged. From the company’s standpoint, the greater the proportion of its invested capital (long-term liabilities and owner’s equity) that is obtained from its shareholders, the fewer worries the company has in meeting its fixed obligations.  In the case of BIDU, its debt ratio has an average of 25, which means, its total liabilities is 25 percent of its total assets and 35 percent of its total equity. Likewise, the solvency ratio has an average of 1.09, which indicates that BAIDU is 109 percent solvent. Solvency ratio is derived by dividing net income plus depreciation divided by its total liabilities. Detailed data below:

Financial leverage ratio of BAIDU from 2007 to 2011:

  • Debt ratio in percent was .24, .22, .23, .24 and .34. Average of .25 which means that the company’s total debt was 25 percent of its total assets.
  • Debt to Equity ratio in percent was .31, .27, .30, .31 and .53. Average of .35 which indicates that BAIDU’s obligations represent 35 percent of its equity.
  • Solvency ratio in percent was .99, 1.23, 1.06, 1.33 and .82. Average of 1.09. The company is 109 percent solvent.

It is important to know who is in control of the business, is it the creditors, banks or the owners? For the company, the creditors have 22 percent claims on the company’s total assets, while the stockholders have 75 percent claims. However, in 2011 the banks or bondholders have 10 percent claims.

Related ratios follow:

  • Current liabilities to total assets in percent was .24, .22, .23, .23 and .19. Average of .22.
  • Long-term liabilities to total assets in percent was 10 percent in 2011 only.
  • Stockholders’ equity to total assets in percent was .76, .78, .77, .76 and .66. Average of .75.

The creditors’ claims on the total assets of the company are calculated by dividing the company’s current liabilities by its total assets while the owners’ or stockholders’ claims is the quotient of stockholders’ equity over total assets.

BAIDU Income Statement

Baidu.com Inc’s income statement is one of their financial statements used to provide information on the revenues and expenses of the company; and ultimately the income and the profitability of its operations.

Income

Total revenue means the total earnings or sales operation. Business like internet information providers in the 21st century boomed. Thus, Baidu’s total revenue had a high increase of 9 and 11 times in 2010 and 2011 respectively against 2007. Likewise, gross profit, operating profit, and net profit increased from 10 to 20 times compared to 2007 amounts.

Data below detailed the income from 2007 to 2011.

  • Total revenue was 1,744.43, 3,198.25, 4,447.78, 7,915.07 and 14,500.79.
  • Gross profit was 1,095.62, 2,039.00, 2,829.07, 5,763.58 and 10,592.88.
  • Operating profit was 547.15, 1096.74, 1,604.94, 3,958.77 and 7,576.66.
  • Net profit was 628.97, 1,048.11, 1,485.10, 3,525.17 and 6,638.64.

The above amounts tell us that Baidu.com Inc’s income trend was yearly increasing thus the company’s operation and management is doing good to boost yearly increase in their income.  This shows a sound and profitable company in terms of their income generating properties.

Margins

Looking into the company’s various margins (gross, operating, pretax and net) computations against sales showed that:

  • Gross profit margin was 62.9, 63.8, 63.6, 72.8 and 73.0.  Gross profit margin was total revenue less cost of revenue, depicts that almost two-thirds or three-fourths of total revenue. And it went down from 2008 to 2009 but increase in 2010 and 2011.
  • Operating profit (OP) margin was 35.4, 36.4, 37.9, 51.3 and 52.2.  It shows a dip in 2007 but gradually recover in 2008 and 2009 but leap high in 2010 and 2011.
  • While net profit margin was 36.1, 32.8, 33.4, 44.5 and 45.8.  This depicts an opposite to OP wherein margin in 2007 increased then it dipped down in 2008; gradual increased in 2009 and leaped high in 2010 and 2011.

Explanation

Both gross profit and operating profit margins decreased in 2007 mainly due to worldwide economic crises and increased cost of revenue and operating expenses. In 2008 to 2009 it gradually recovered, thus 2010 and 2011 rose to higher margin meaning sales or revenue almost double every year.  Net profit margin increased in 2007 due to the growth of 108 percent in total revenue but dipped down in 2008 and 2009 to 32.8 and 33.4 percent. And the company had recovered that in 2010 and 2011, it grew to 44.5 and 45.8 percent. This means that the company has increasing favorable net margins.

Expenses

Expenses from 2007 to 2011are as follows:

  • Cost of revenue was 645.41, 1,155.46, 1,616.24, 2,149.29 and 3,896.88.
  • Selling, general, administrative expense was 411.16, 659.8, 803.99, 1,088.98 and 1,692.81.
  • Research and development were 140.7, 286.26, 422.62, 718.04 and 1,334.43.
  • Income tax, total was -12.75, 116.07, 198.02, 536 and 1,188.86.
  • Tax rate in percent was -2.1, 10, 11.8, 13.2 and 15.2.

Explanation

  • Cost of revenue; selling, general and administrative expenses; and research and development illustrated a yearly increasing trend. Income tax decreased in 2007 but gradually increased from 2008 to 2009 and then increased again by 44 to 64 percent in 2010 and 2011. Reviewing the expenses of the company, their cost of revenue had an average of 32 percent of the total revenue.
  • Selling, general and administrative expense; gradually increasing; showed an average of 17.7 percent against total revenue.
  • Research and development accounted for 9 percent while income tax expense represented an average of 4.7 percent of total revenue.
  • The company managed their expenses well because they still have 36.6 percent of their average total revenue. This means operations earned an average net profit after all expenses and taxes.

Profitability

To check their general earning power of the company we computed the following:

  • Return on asset was 23.7, 26.6, 24.1, 31.9, and 28.4. This tells us how much profit the company generated for each dollar on total assets.
  • Return on equity was 31.1, 33.9, 31.2, 41.9, and 43.4.  This tells us how much was earn by the stockholders on the money invested intine company.

Looking into their return on asset and equity, the company’s trend increased for the first two years but dipped down in 2009 due to the worldwide economic crisis but leaped high in 2010. Return on the asset in 2011 decreased meaning management operating performance decreased by 28.4 percent in utilizing their total assets. Returned on equity earned a high rate of 41.9 and 34.4 percent in 2010 and 2011 showing more than the average of 36.3 percent yearly.

Operating Profit

Their operating profit margin showed the return on sales which dipped down in 2007 to 35.3 percent which means an increase of direct cost of revenue and operating expenses. The company recovered gradually that it reaches a high of 51.3 and 53.9 percent in 2010 to 2011 respectively;  more than the average of 50.4percent yearly. This means they earned good that they use this to their advantage by using the profit back in their business operations as shown in the data below:

  • Operating profit margin was 35.3, 36.4, 37.8, 51.3 and 53.9. This tells us the return on sales or operating profit per dollar of sales.

Using the expanded DuPont method computations as follows:

  • Net profit margin was 36.1, 32.8, 33.4, 44.5, and 45.8. This tells us how much income left against revenue.
  • Capital turnover was 65.7, 97.0, 88.1, 92.0, and 84.3. This tells us the rate of return on common equity or how well the company uses its stockholders’ equity to generate revenue.
  • Financial cost ratio was 100 percent from 2007 to 2011.  This tells us that the company’s interest burden (pretax profit divided by EBIT) showed 1.00 meaning they have no debt or financial leverage.
  • The financial structure ratio was 131.4, 129, 128.7, 130.8, and 145.1.  This measure the financial leverage of the company and use as equity multiplier which is equal to the company’s debt to equity ratio.
  • Return on equity wherein the formula is net profit margin times asset turnover times equity multiplier was 56, 53.6, 37.9, 41, and 31.1.

To get the return on equity using the DuPont method; The net profit margin was the percentage of net income against revenue multiply by asset turnover or capital turnover multiply by equity multiplier or financial structure ratio.

Net Profit

  • Net profit margin showed a decrease in 2008 which account for the increase in cost and expenses but tends to increase abruptly in the following years’ cause by higher revenues.
  • Their capital turnover, the company’s annual sales divided by its average stockholder’s equity, showed a down and uptrend. This means that in 2008 and 2010 the company uses its capital or equity more efficiently in converting assets to revenues. But no dividends were paid.
  • The equity multiplier or financial structure ratio expressed that average total assets were more than average total stockholders’ equity.
  • These three multiplied gets us to return on equity of 56, 53.6, 37.9, 41, and 31.1, which depicts a high ratio in 2007 of 56 to lower ratio in 2011 of 31.1. This means a good return on equity in any industry.
  • If computed without the equity multiplier, ratios will lower down to 38.6, 40.9, 29.4, 31.8 and 23.7 for this is due to profit margins and sales while 17.4, 12.7, 8.5, 9.2, and 7.4 was due to returns earned on the debt at work in the business.  Comparing the two, return on equity from internally-generated sales has a higher percentage.

Is there anything that might be a concern in terms of generating an income in the future? Baidu needs to be competitive in order to maintain and increase revenue in the future.

BAIDU Cash Flow Statement

Why are we analyzing the cash flow? It is very important because from here we can determine if the company have available funds for the operation; also we can know, where the cash invested or reinvested and if the company had raised additional funds. There are three activities; which are the operating, investing & financing activities.

Cash Flow from Operating Activities

The cash from operating activities was very impressive, it had continuously increased by 86, 30, 108 and 74 percent from 2008 to 2011, respectively. It indicated that the management was efficient in handling their funds.

To determine the cash from operating activities, we can come up by taking the net income and by adding all the non-cash items like depreciation and any positive changes in working capital.

Below are the results:

  •  Net income or starting line was 628.97, 1,048.11, 1,485.10, 3,525.17 and 6,620.32
  •  Depreciation or depletion was 170.73, 268.59, 306.28, 431.1 and 819.24
  •  Non-cash item was 36.17, 94.04, 81.47, 62.25 and 145.83
  • Another non-cash item was 35.54, 90.11, 86.81, 86.8 and 118.72
  • Changes in working capital were 99.85, 332.59, 391.74, 746.09 and 592.46
  • Total cash from operating activities was 935.15,1, 741.64, 2,264.48, 4,700.48 and 8,178.82

By using the direct method of accounting, the following are the results:

The total revenue had successively gone upward; in 2007, increase to 108 percent, 83 percent increase in 2008, 39 percent increase in 2009, 78 in 2010 and 83 percent in 2011. The accounts receivable represented only to 6 percent of the revenue. Then, the cash received from the customer in percentage over their revenue for each year was 95, 100, 98, 97 and 96 results from 2007 to 2011, respectively. It tells that management was effective in handling their collections.

By getting the total revenue and adding a decrease of receivable or subtracting the increase of receivable for the year; we can determine how much the cash collection for each year. Below are the results:

Facts

  • Total sales in $ million was 1,744.43, 3,198.25, 4,447.78, 7,915.07 and 14,500.79.
  • Accounts receivable increase was 84.83, 11.54, 107.62, 211.38 and 562.43.
  • Cash collection was 1,659.60, 3,186.71, 4,340.16, 7,703.69 and 13,938.36.

Explanation

Data above indicate the cash payment for purchases was consistently increasing. It results in the total cash payments over its total revenue for five years, represents 30 percent meaning, the company had much more cash remaining to cover their general expenses.

To know how much cash dispersed to their supplier we take all the cost of revenue, adding the increase or deducting the decrease in inventory and by adding the decrease or subtracting the increase in accounts payable of the company.

Facts

  • Total cost of revenue was 645.41, 1,155.46, 1,616.24, 2,149.29 and 3,896.88.
  • Total inventory was zero for five years.
  • Accounts payable from 2007 to 2011 was zero except in 2010 at 95.7.
  • Total cash payments for purchases was 645.41, 1,155.46, 1,616.24, 2,053.59 and 3,896.88

Explanation

The total operating expense highly moved upward, giving a bulk increase in 2008 and 2011 by 42 and 67 percent, respectively. The prepaid expense had only decrease in 2009 but the accrued had an increasing result for five years. Then, the total cash payments for operating expense was increasing except in 2009, it had a decrease of 17 percent due to the prepaid which also decreased by 204 percent.

In order to get the total cash payments for operating expenses, we need to take all the total operating expenses, add the increase or deduct the decrease in prepaid expenses and add the decrease or deduct the increase in accrued expenses. Below is the summary:

Facts

  • Total operating expense was 548.47, 942.26, 1224.13, 1804.81 and 3,016.22
  • Prepaid expense was 2.74, 43.28, -41.48, 25.25 and -1.44
  • Accrued expense was -50.59, -62.36, -393.2 , -371.64 and -491.65
  • Cash payment for operating expenses was 500.62, 923.18, 789.45, 1,458.42 and 2,523.13

Even the total cash paid for the income tax went up, still, the management was efficient, this only represented 6 percent of the total revenue for five years. The total cash paid for the income tax was -12.75, 116.07, 198.02, 536 and 1,188.86 from 2007 to 2011, respectively. It shows, the movement also went up continuously.

Cash Flow from Investing Activities

The cash from investing is where we can see how much the company invested or reinvested and where they invest? BIDU was an internet provider, the composition of their capital expenditures was the purchase of the fixed asset, a little from intangibles and from software development; the other investing cash flow items were net from purchase/sale of investment and a little from the acquisition of a business. Below are the results:

Facts

  • Capital expenditure was  -577.13, -476.81, -450.07, -976.12 and -2,342.46.
  • Other investing cash flow item total was -136.08, -184.29, -86, -241.4 and -11,908.07.
  • Cash from investing activities was -713.22, -661.1, -536.07, -1,217.52 and -14,250.53.

The capital expenditure in 2008 & 2009 was decreasing and went upward in 2010 and 2011 by 117 and 140 percent, respectively. The other investing cash flow items continuously went upward except in 2009 it was down to 53 percent and in 2011, it was jumped to 48 times higher from 2010. It means the bulk of investment of the company was last year represents by 4833 percent increase. It tells us, the management was also vigilant in terms of investment, as we look back, 2009 was the year, the world most in crisis.

Interpretation

It results, the company was financially healthy only in 2008 had a cash outflow amounting to $ -35.64, the rest of the year it had a cash inflow result. It tells us, the company was very efficient.

Cash Flow from Financing Activities

Through the cash from financing activities, we can determine if the company had raised additional funds; is it through by financing or from their stockholders? Below are the results:

  • Financing cash flow items were zero from 2007 to 2010 only in 2011 at 43.97.
  • Issuance   (retirement) of stock, net was 40.7, -35.64, 95.09, 38.75 and 23.18.
  • Issuance (retirement) of debt, net was zero from 2007 to 2009, 86 and 2,358.66 for 2010 and 2011, respectively.
  • Cash from financing activities was 40.7, -35.64, 95.09, 124.75 and 2,425.81.

Written by  Rio, Nelly, and Dyne
Edited by Cris

Interested to learn more about the company? Here’s company research to know more about its background and history and investment valuation for the pricing.

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.

 

Research In Motion Ltd (RIMM)

Research in Motion (RIMM) Interesting Beginning

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

Research in Motion (RIMM) featured picture, a man with the umbrella struggling against the New York City snowstorm 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-90s 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 at the beginning of the 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 the 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 the 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 RIMM.
·    In August 1998, RIMM began shipping [email protected] pager 950.
·    Introduced the 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.

From 2009

·    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.

More in 2011

·    On July 21, 2011, the BlackBerry PlayBook tablet received Federal Information Processing Standard 140-2 certification.
·    On September 2011, RIMM decided to build an 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 multi-platform 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 most of its manufacturing to specialized global Electronic Manufacturing Services (“EMS”). They work 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 the 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 adopting 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 of 2011; the company can meet current obligations.

Does the company have 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 to 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, the 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, the 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:

  • The 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.
  • The 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.

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. The cash flow measures the money flowing into, or out of, a company.

Cash Flow from Operating Activities

The cash flow from operation (CFO) signifies the ability of the management to generate 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 of 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 a cash fund balance in its cash flow.   Cash flow from investing activities from 2007 to 2011:

  • 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.

Explanation

The company could generate 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 are 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? it’s 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 its background and history; value investing guide for the financial status; and investment valuation for the pricing.

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