Hi John - I wonder if this recent amended SEC Form 8K/A may have caused some selling.
(http://www.edgar-online.com/bin/edgardoc/DocFrame.pl?doc=A-1003282-0001047469-99-029749&fmt=text&nad=&x=41&y=8)
"...ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 28, 1999, the Registrant filed a Current Report on Form 8-K (the "IdealDial Initial Report") describing the merger of IdealDial Corporation with and into the Company. This Current Report on Form 8-K/A (the "Form 8-K/A") amends the IdealDial Initial Report by including with this Form 8-K/A the financial statements and pro forma financial information required pursuant to Item 7...."
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From the best I can tell it reflects a restatement of the financials for the IdealDial Corporation purchase. It looks like they had to adjust (1) $816K in depreciation and (2) $1.6 million in goodwill.
From the SEC form (bottom section of the form):
"...(1) To reflect the 146,611 shares of RMI stock valued at $1.7 million which is the number of shares issued in connection with the acquisition of IdealDial Corporation. The excess purchase price over the fair value of the assets acquired has been allocated to goodwill. The pro forma adjustment reflects the incremental goodwill in the amount of $1.6 million. Shares of Common Stock issued for the acquisition were recorded at fair market value as based on the current market price of RMI's publicly traded stock. The final allocation of the purchase price will be made after the appropriate appraisals or analyses are performed. Upon completion of the appraisals and in accordance with the terms thereof, the excess purchase price currently allocated to goodwill will be allocated to the appropriate asset classifications, including customer list and goodwill. While goodwill will be amortized over a period of five years, customer list or other identified intangibles may be amortized over shorter periods, which would therefore increase amortization expense..."
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Therefore, having to amoritize a larger Goodwill amount and adding more depreciatable property will add to overall expenses, it should not directly impact the free flow cash flow. It still will reflect upon their overall earnings number and may make earnings worse by $0.015 - $0.02 per quarter.
Note: I arrive at this number by taking (1) $1.7 million in goodwill divided by five years and multiplying by .25 representing 1 quarter worth of extra Goodwill expenses.....divide this number by 10 million outstanding shares; (2) $816K of 3 year depreciatable assets X .25 divided by 10 million shares.
Conclusion: Do not expect any earnings surprise Monday but maybe even a $0.02/share miss. Expectations <$0.31> /share loss it may be higher like <$0.33>/share loss. The key items to focus on are the number of subscribers and the percent increase in revenues year over year.
EKS |
