Trilobyte,
Just got around to calling -- thanks fo the reminder (I almost forgot again). Confirmed your info -- that they completed expansion looking to purchase another company, earnings estimates.
After talking to Rod Rice, and upon reflection, it does make sense to capitalize some of the advertising expenses. However, it just makes me a little nervous -- after all it's not an asset that retains any monetary value (once the ad is up, the money is gone) -- though I guess it does retain some economic value for the company.
Talked about the buyback. They have 9.1 M shares, 9.5 M shares fully diluted. Not directly because of options granted, simply because of strong cash flow.
Apparently, things worked out quite well with Stilson & Stilson (the direct market production company). Stilson and Stilson didn't meet the specified bonus criteria, which has meant a lot less dilution for the stock -- but the infomercial has been doing fairly well. (All their warrants/options have expired or have been nixed)
Once they pick up another product, the stock may again suffer because of the additional risk of unknown expertise of management in the area (even though they say that their expertise is in direct marketing). Rod Rice mentioned that they would try to have a non-fitness product.
Clement
PS Re: QZar -- I have a friend in the investment club that I'm in, who researched the stock. There were some fairly good warnings signs operationally that they were having problems -- i.e. My friend went up to one of their locations which was supposedly fully operational, but in actual fact they were several months behind without their snackbar and a few other strong cash generators. Given their rapid expansion plans -- if that was how they were operating with so few -- the question of how they were going to handle hundreds had to be asked. Also, those many delays for Q-Cities...
The kicker however was something that you could not have foreseen -- the "mistakes" in the financial statements. I guess it really pays to do your homework -- but somethings, you just can't find out (but that I guess is fairly rare) :). Apparently, as well, the analyst who recommended it basically fed everything that the company gave him into his earnings model without very much independent research.
Towards the end of their fairly high stock prices, they also were paying a fairly high premium on their debt. |
