Well, Brad, as usual... your need to hype gets the best of you...
<<<<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.>>>>
Ira has said (repeatedly) just the opposite! For the second half, he has claimed the same revenues (about $4.2 million-- hint, Brad, 4.2 + 4.3 = 8.5 million) and the same net profits (about $1.2 million) for weeks now. To me, the same profits, divided by the same revenues... equals the same margins.
<<<<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.>>>>
Well, you seem to be admitting that their numbers are wrong here, given that you explain it by having them use the previous year's numbers. Thank you.
They were obviously NOT expecting lower margins in the third and fourth quarters. How do I know this? Simple. They released a statement, on Nov. 24, saying that third quarter earnings were twice as high as the previous quarter, and that they predicted fourth quarter earnings would be three times as high.
You alluded, Brad, to the predicted "18 to 21 cent" earnings for the year in your original "overview" post, #1144, which I encourage everyone to read.
Real companies make allowances for taxes based on what this year's earnings are, not last year's. I don't know how they could expect their tax rate would be 10 percent.
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.>>>>
Not really. First of all, if you check out firms that do a lot of permanent placement (HIR, for example), they still have a very significant cost of sales.
In addition, Jennifer (of the current PR firm) told me that the 1997 split was 85/15 in favor of temp revenues. She said the information came from Ira, who was in the room at the time. If you wish to call her a liar, go right ahead. I trust her, though.
<<<<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.>>>>
So it is. I could swear a previous post put it just outside St. Louis. Don't know where I got that idea. I obviously had no intention to post something that could be so easily disproved.
Now, the full quote (nice out of context chop, there) asked how they could charge companies three times the temp salaries, although they operate in highly competitive big cities.
I'll suppose that they could charge that ratio in a small town...are you claiming that the Rolla office drives the company profits? Or is it the reverse, that Phoenix, Dallas, Houston, and New York City are small towns?
Re: the interest payments... if FAMH had provided useable balance sheet numbers (i.e., had compared 1997 numbers to the end of 1996), then we could see how much debt just disappeared... but they somehow "forgot" to do that in the investor packet, crushing any chance of doing a lot of work with the figures.
What a lucky break for them.
I'm sure, as you theorized, that they could have just carried lots of debt until June 30, then paid it all off at once... even though at that point they had at least $750,000 in cash laying around, or so they claim. Great business practice, hoarding cash and debt at the same time.
Now someone can explain to me why they would bother to carry $13,000 in notes payable if they really had $750,000 in the bank.
Give the hype a rest.
L.E. |
