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Non-Tech : GRIN (Grand Toys International Inc) -- Ignore unavailable to you. Want to Upgrade?

To: Frank McVerry who wrote (181)	5/3/1999 10:07:00 PM
From: Frank McVerry	Read Replies (1) \| Respond to of 495

My analysis of the Q1 earnings report Sales up 80% !!! Diluted earnings per share up 75% !!! Fantastic !!! Wonderful !!! Now for a look at the details… First, the Q1 sales/earnings report has been published in $ this time, so I have converted these to percent of net sales for easier comparison with the previous 1998 earnings report and my guess for 99Q1 ANNUAL REPORT FOR 1998 % ########################## Net sales 100.00 Cost of goods sold 66.57 Gross profit 33.43 Operating expenses: Selling, general and administrative 26.85 Loss (gain) on foreign exchange 3.92 Interest 2.11 Bad debt expense .44 Depreciation and amortization .67 Total operating expenses 33.99 Earnings (loss) before income taxes (0.56) Net earnings (loss) (0.96) MY GUESS FOR 99Q1 % #################### Net sales 100.00 Cost of goods sold 66.57 Gross profit 33.43 Operating expenses: Selling, general and administrative 26.85 Loss (gain) on foreign exchange 0. Interest 2.11 Bad debt expense .44 Depreciation and amortization .67 Total operating expenses 30.07 Earnings (loss) before income taxes 3.36 Net earnings (loss) 1.64 ACTUAL 99Q1 $ (%) ################# Net sales $8,626,916 (100) Cost of goods sold 5,990,128 (69.4) Gross profit 2,636,787 (30.6) Operating expense 1,961,961 (22.7) (Gain) on foreign exchange (137,041) (-1.6) Earnings before taxes 811,867 (9.4) Income taxes 477,851 (5.5) Net earnings $334,017 (3.9) Earnings per share, basic $0.21 Earnings per share, diluted $0.21 Notes: * My guess for gross profits was that it would remain about the same as the 1998 average of 33.43%. In fact it has fallen to 30.6% - almost 3 full percentage points. I believe most of the blame for this will go on the lower value of the CAN$ in relation to its historic value (perhaps many of these sales were for goods which they contracted to buy around the lows for the CAN$, last October ?). Although this is a little disappointing to see, the good thing is that it has had very little impact on the net earnings...read on. * My guess for the foreign exchange adjustment was that it would go from a loss to zero, but in fact this has now become a GAIN of 1.6% and a net benefit to the bottom line. So maybe the CAN$ revival over the past 7 months has been more valuable than I thought. * Operating expenses excluding currency effects have gone from the 1998 average of 30.07% to the Q1 figure of 22.7% - a big fall of more than seven percentage points. Now, the report doesn't break-out where this reduction has occurred but my guess is such a large reduction can only come from SG&A. What have they done to achieve this ?...moved from a conventional warehouse to a large tent ?!...10% across -the-board paycuts ?!...heating and lighting now supplied by candles?! I don't know, but it appears this lean-and-mean little company is now even leaner and meaner, a trend that has been in place since at least 1996. This is really to be expected from a company where management and employees hold a large percentage of the shares and so will usually do what is required to improve long-term shareholder value. The 80% sales increase - I was expecting 50% - has been a pleasant surprise to myself and no doubt other investors, but even more of a surprise is the way it has been taken to the bottom line with 75% earnings growth - this I did not expect. ... Anyone think they'll beat last year's Q2 earnings of 1c ?! Frank