Dear jwk: OK, since I have wiped out all the enthusiasm for this stock let me post what MIGHT be good news. I have been rereading the 10Q for little "nuggets" of info. Damn, wish they wouldnt make it so difficult. Anyhow, first I have to post below the detail of the Long term Contract costs and income recognition:
December 31, 1998 June 30, 1998
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Costs incurred on uncompleted contracts $ 80,464,000 $56,806,000
Estimated earnings 23,437,000 19,345,000
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103,901,000 76,151,000
Billings to date (96,078,000) (70,756,000)
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$ 7,823,000 $ 5,395,000
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Damn, wish I knew how to format the table--ANYHOW--here comes the potential good news.
I think our buddies at TAVA may be SANDBAGGING earnings recognition. Here is why-- Take the earnings RECOGNIZED on work completed to date--23,437,000 and 19,345,000, respectively for the periods presented and divide them by the COSTS AND EARNINGS, this represents total revenue of 103,901,000 and 76,151,000, respectively for the periods presented and you get a profit percentage of 22 1/2% (for current period) and 25.4% (for comparable period)
AHA!!! Is it not reasonable to assume that CURRENT profit percentage consisting of much higher gross margin mix of business would be GREATER not LESSER than the comparable period??? What I THINK they have done, is low ball the estimated earnings (this is easy to do, merely increase the estimated costs) on the UNCOMPLETED contracts--which is the lions share of the business at the moment. This is not unusual, and actually, I encouraged it with my clients as you never know what might happen in the future to drive estimated costs up. However, in my judgement it appears they REALLY acted conservatively here. This is just an educated guess, analyzing the accounts. Hope this helps your mood. JDN
PS: What this means, IF I am correct, is that as these contracts either near completion or complete it is highely likely the ACTUAL earnings will be GREATER than recorded to date. |
