LE, I will address each one of your comments EVEN THOUGH this obviously makes NO difference to you. I'm doing this NOT for your benefit (since that doesn't matter), but so others can see how LITTLE "research" you really do.
YOUR COMMENT:
"Ira has been pushing the idea that FAMH makes gross margins of about 30 percent... reading the income statement, they seem to be claiming grosses of about 57 percent!"
MY RESPONSE:
Ira has said REPEATEDLY that the first 6 months of 1997 were very good, but the ratios are NOT representative of what their overall year is expected to be.
YOUR COMMENT:
"the income taxes FAMH pays appear to be only about 10 percent, although just about every other company I see pays taxes of 30 percent to a third of their income."
MY RESPONSE:
As noted previously, the ratios for the first six months were better than what is to be expected for annual ratios. Income tax estimated payments are often based on proportionate amounts of what you expect for the whole year.
As of last June, they were not expecting the LAST six months of the year to be as high in sales as the first six months because of permanent placements, etc. during the first six months. The last six months DID, however, generate more sales than were expected last June.
Furthermore, estimates for the current tax year are only required to meet the previous year's tax liability unless your current year tax is lower than the previous year, in which case you only need to be within 10% of the current year's tax liability to avoid penalty.
YOUR COMMENT:
"They appear to be getting about three times the temps salaries for placing them."
MY RESPONSE:
Permanent placements were better than expected in the first six months of 1997. Permanent placements have very little "burden." That means, for example, that if the gross revenue from a placement is $6,000 (that's 20% fee for placing someone into a $30,000 a year job), there is NOTHING paid out for "Wages-Temps," or "Workers Comp-Temps," or "Payroll Tax-Temps," etc.
Obviously, the margins instantly improve.
YOUR COMMENT:
"Although their offices are in competitive, big city markets like Dallas, St. Louis,"
MY RESPONSE:
While there is an office in Dallas, there is NO office in St Louis. It is located in Rolla, MO, which is a very small town about 100 miles from any big city.
YOUR COMMENT:
"Why did they have interest expenses of over $18,000, despite the fact that their investor packet (numbers dated June 30, 1997 - end of the first half) says that bank loans on that date are ZERO, long term debt is ZERO, and that FAMH has only about $13,000 of notes payable?"
MY RESPONSE:
They could have had long term debt that was paid off as late as June 29, 1997, and be able to show "ZERO" bank loans. Interest could have been paid throughout the first six months. I feel you are REALLY stretching on this one.
"Principle" payments are NOT shown as "expense" because they are NOT SUPPOSED TO BE shown as "expense." The offset would show up, in this case, on the Balance Sheet and NOT on the Income Statement.
YOUR COMMENT:
"Perhaps they have debts they just avoid mentioning in the investor packet?"
MY RESPONSE:
Quite UNLIKELY!! Also reference the "Response" to the next "Comment."
YOUR COMMENT:
"For that much interest, it would be a huge expense they 'just happened' to leave out."
MY RESPONSE:
For that much interest, it would NOT likely be AN EXPENSE ITEM. It would more likely be a DEPRECIABLE ITEM or possibly a line of credit which could have been used AND paid off. BOTH of these are items for which the Balance Sheet DOES account!
It's late. Time for me to rest. Perhaps it is time for LE to "give it a rest."
Brad |
