This post is very long, but very important. Read it carefully.
I have to hand it to Ira today. Grace under pressure. Finally getting the hang of offering the stockholders solid information. If I listened the conference call today as an introduction to FAMH, I'd be pretty impressed.
<<<Well, does anyone think Ira would publicly state about 11 cents per share if the audited financials did not show it?>>>
Yes, Rick, as a matter fact, I do. And I have proof enough to convince any reasonable human being.
<<<I look forward to anyone's comments on my statements; especially from Little Engine.>>>>
Here they are, Rick. I know you may dispute the math and/or not be able to follow it, but I post for those that can follow along.
My absolute favorite part of the conference call was the fact that Ira admitted to deceiving everyone on the earnings.
At this point, you are probably saying, Little Engine, you are a naysayer and I hate you. You are just being negative. You are making this up. Shut up already.
I'm sorry. He did admit it. Not in so many words, but if you listen to the tape replay CLOSELY, as I just did, it's right there for everyone to hear. He didn't stutter.
First, Ira NEVER says that the "eleven cents" is the net earnings per share. I thought he did a couple times, but it turns out he never said that directly. Just said things like the 504 money is "not included in the net." Never said what the net actually was.
Repeating... Ira NEVER said that NET earnings are 11 cents per share. Nitpicking? Actually, no. A very important point, as you will see.
Second, using the "average share" method discussed earlier (I used 20 million for first six months, 25 million shares for second six months of 1997), the eleven cents per share figure would have meant NET profits (that's what I keep hearing people assume, that the eleven cents is NET profits) of $2,475,000 on the $8,500,000 in revenues. This would be net profit margin of 29.12 percent, as Richard roughly demonstrated in reverse in his last post (with the wrong share numbers, I might add). Repeat, that's 22.5 million shares times 11 cents per share.
Nothing wrong with your math, Rick. You just didn't take it far enough.
Glad you are all with me so far... don't worry, there's a huge payoff coming. Worth your while to read further.
I take the following definition from the Microsoft Investor Glossary...
Gross Operating Profit: The operating revenue minus cost of goods sold. Gross profit identifies the amount available to cover other operating expenses before depreciation.
As stated, other operating expenses (office rents, taxes, etc.) must be subtracted from the gross profit before calculating the net profit.
Okay, so FAMH is claiming (or most of you THINK they are claiming) that net profits are along the line of 29 percent, while similar companies, like SOSS, somehow post only 3.3 percent net margins.(It would be an excellent idea, for anyone wishing to send an angry post to me once you are done reading this, to first review how a typical placement company, SOSS, reported revenues in their August 1997 SEC filing, found at sec.yahoo.com
By the way, Rick, the reason that SOSS posted 29 percent GROSS margins that high (very high for the industry), according to their filing, was that they began doing a lot of Information Technology (highly profitable) placements.
Okay... here is the stake in the proverbial FAMH heart.
Ira and Jennifer, on the conference call, talk about gross margins in the placement industry. Ira says GROSS margins (definition above) range from 18 percent on the low side to about 25 or 26 percent on the high side. He then states that Firamada does better than that, close to a 30 percent GROSS margin. He says those words VERY plainly.
Did everybody catch what just happened? Especially if you assume the net profit margin is indeed actually 11 cents per share, or 29 percent? If that WERE true, then...
Ira just stated, on tape no less, that the GROSS profit margins are EXACTLY the same as the NET profit margins.
In order for that to be true, then a) FAMH has NET margins TEN TIMES HIGHER than every other placement company, b) They did not spend ANYTHING in operating expenses for all of 1997, and c) They paid no taxes on their "net profits" of 29 percent.
This wouldn't happen. This didn't happen. This couldn't happen.
But...but... Ira said so! Actually, he pulled a huge Bill Clinton here. He keeps saying "earnings" are 11 cents per share, although he is talking about GROSS earnings, not NET earnings.
Perhaps he can avoid a future lawsuit that way. He did cover himself further by saying these were "rough figures" from the accountants, I noticed. Rough indeed... on any shareholders.
When the audit shows the GROSS earnings as 11 cents per share, Ira will point and say "there they are, just like I told you, eleven cents per share of earnings." The only problem is that the NET earnings will probably be a tenth of that, about one cent per share, current P/E of about 27.
About now you are calling your broker, unless you don't understand --- or won't admit --- that there must be a substantial gap between gross and net earnings.
Feel free to get a conference call replay at 1-800-567-1533, 24 hours a day, and listen to what Ira actually said. I have a feeling the replay is about to be suddenly disconnected.
If anyone is set to attack this, do it mathematically, for goodness sake.
Regards,
L.E.
P.S. If I were a market maker (or anything of the sort), trying to influence anyone, I would have released this at about noon tomorrow, not tonight. Think about it. |
