There may be several scenarios about how revenue will be generated by this company. TCBG brings two things to the table. They have first rights to the Volpak machine, and they have rights to certain trade-named drinks. In some instances, their partnership arrangement is with a distributor, which will market its own trade-named drinks to its own customer base. In other cases, TCBG may market its trade-name drinks to TCBG's customer base or that of the distributor. I assume there is a different profit sharing agreement for each scenario.
The news releases typically describe gross number of units produced, and gross profits. It remains unclear how the revenue will be distributed under each of the above scenarios.
There is still no information about the cost of the Volpak machines, and the arrangement for paying the manufacturer. There are also substantial installation and maintenance costs that have not yet been disclosed. It has not been clarified what effect these costs will have on earnings.
Will additional financing be required to support lease or purchase of the Volpak machines, or their installation? What form will this financing, if needed, take. And, what effect will this have on net earnings?
The TCBG investment report, available by fax-back, appears to be a promotional piece. The earnings projections depend on what suppositions were made about costs of operation, and how earnings were to be distributed to the partners. If one accepted the projected earnings at face value, then the company appears as a candidate for enthusiastic purchase. In my view, however, there is too much ambiguity in the information presently available about this company.
Steve |
