Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Guy, VPHM paid $116 Million for Vancocin and is amortizing it over 25 years.
$116 Mil/ 25 years= $4.64 Mil/ year= $1.16Mil/ Qrtr.
If the 25 year amortization were cut in half to 12.5 years, the amortization cost/ qrtr would double.
$116Mil/12.5 years= $9.28 Mil/ year= $2.32Mil/ Qrtr.
Difference is $1.16 Mil/ qrtr.
$1.16Mil / 52Mil dil shares (Q1 #)= 2.2c/ share
Whether that would be relevant to VPHM's market cap or not is a matter of opinion.
>>>swb173....I can't imagine that Vphm would pay 10.5 million in cash in 2005 to Lilly and spread the payments over 25 yrs for accounting purposes. That is a tax losing proposition that doesn't make sense. They do talk about adjusting the goodwill intangibles so maybe...... <<<<
On the other hand, they paid cash for the rights to Vancocin and are spreading that cost over 25 years so why not?
Initially, I had problems with the concept as well but if one looks at it in terms of a portion of the cost of purchase that does not become due until certain sales parameters are met, it makes more sense. VPHM has a ton of tax credits anyway so taxes are not a concern.
Honestly, I have more problems with the 25 year period that they are amortizing the cost of the product over. That seems like an awful l-o-n-g time, particularly in the fast changing world of medicine. But then again, some beady eyed auditors must have come up with this, so I'm going along with it. Also as I recall, even if they cut the life of Vancocin in half to 12.5 years it would not have a dramatic effect on current earnings.
Note- Just checked, Q1 diluted earnings would have been reduced from 36c to 34c if the cost of Vancocin was amortized over 12.5 years instead of 25 years. So not a big issue.
I'm so confused...That doesn't look anything like the picture of Bobwins I have come to appreciate.
I had always thought this was a picture of big Bob holding his big sign.
http://www.rallymonkey.com/video/kenindex.swf
CFK- Earned 14c vs 3c a year ago in their s-l-o-w quarter. I would have been happy with earnmings at double a year ago and was hoping for 10c. The spring thaw in Canada basically shut down the roads to heavy equipment for much of last quarter.
Tomorrow should be a very good day for CFK. With those results, I'll be surprised if this one stays in single digits.
DXPE and what a difference a day makes. Last week I was kicking myself for not selling DXPE after it appeared on that top ten under $10 list and hit $8. Today visions of dollar-plums are dancing in my head after their earnings report.
With its low float and being in the oil service sector, I think it is a very good candidate for a double from todays close.
BTW, here is a recent SEC public filing from XYBR which is the company that WHAI's new CFO just left earlier this week:
State below in reasonable detail the reasons why the Forms 10-K, 20-F, 11-K, 10-Q, 10-D, N-SAR, N-CSR, or the transition report or portion thereof, could not be filed within the prescribed time period.
As previously disclosed, Grant Thornton LLP advised Xybernaut Corporation (the “Company”) on April 14, 2005, that it resigned as the Company’s registered independent accounting firm because it could no longer rely on management’s representations. In addition, the Company confirmed that it continues to face a severe liquidity crisis and possible insolvency, and as a result, the Company has retained Alfred F. Fasola, a consultant with extensive financial and management restructuring expertise, to advise the Company with respect to reducing costs, conserving cash, restructuring and other alternatives to attempt to maximize shareholder value.
The Company has also previously announced that investors and others should refrain from relying upon the Company’s historical financial statements, together with the related audit reports the Company received from Grant Thornton LLP, for the years ended December 31, 2002 and 2003, and interim quarterly reports for the quarters ended March 31, 2003, June 30, 2003, September 30, 2003, March 31, 2004, June 30, 2004 and September 30, 2004.
On April 19, 2005, the Company announced that its Audit Committee had concluded its own internal investigation and had reached the conclusion that there were, among others, violations of the Company’s disclosure and internal controls.
2
WHAI...I know it has turned into one of the favs of this board but as I have said before I would be very careful about investing any substantial sums here. Forward guidance from management sounds great but can they actually produce those numbers?
WHAI recently hired a CFO, Bruce Hayden. First, it seems odd to me that a $200 mil company went without a CFO for so long. Hopefully they won't have to restate their earnings 2 days after they are released like they did last quarter.
Take a look at the company that WHAI's new CFO came from. Hayden was CFO of XYBR which is a former high flyer that is now trading on the pink sheets. When Hayden arrived last November XYBR was over $1, now the SP is at 11c or about 10% of when he arrived there. While one could argue that he had no control over past shenanigans at XYBR, his credentials from his previous employer are certainly not nearly as stellar as the recent WHAI conference call would lead one to believe.
To sum it up "Caveat Emptor"
Oil services...10 bagger, I agree with you that oil services are a great place to be invested in now. Some other oil services companies are CFK, DWSN, TGE and ENG. I currently own all but TGE. DWSN (oil and gas seismic services) has been weak due to a somewhat disappointing quarter which company said was due to wet weather which slowed field operations. They also had a secondary from which I believe there has been an overhang of stock to work through. The coming quarters should be very good.
Here are my 6 picks:
DWSN
BPTR.ob
JOB
NKBS
IECE.ob
CHAR.ob
TD Waterhouse is sure acting up today. Anyone else having problems getting quotes and account balances? I see it has a new look so maybe there are bugs in the software. I just hope it is not a look into the future in their merger with Ameritrade.
WHAI... I bought some of this not too long ago but then sold after I did more DD. (I know I should have done the DD first but as luck would have it, I made a few bucks).
The company has grown exponentially through acquisitions. Sales in 03 were $4mil, in 04 they were $40 mil, and in 05 they now project $200 mil. The company broke even in 03, they lost $25 Mil in 04 (65c/share) and they project to earn 50c in 05. The CEO is only 32 and has no experience in running a company of this size. He is a great promoter but I question whether he will be able to execute. I think some of that inexperience may have showed in the latest quarter when they revised their earnings the day after they were announced.
The negative tangible bookvalue is also a concern but so is their liquidity. Per the last 10Q, current liabilities exceeded current assets by a substantial margin. ($41mil vs $29 mil).
As for that rosy analysis by Dutton and associates, the company is paying for it and paying well. It appears that they just renewed their subscription for $55,000 and that was cash up front.
If mgmt can produce the numbers they are projecting then stockholders have little to worry about. However, I believe they need to show more results before I would jump on this bandwagon.
VPHM... besides the fact that VPHM's vancocin is a very difficult drug to manufacture, the CEO also has been saying in recent conference calls that it would take likely take years for someone to get a new version of the drug approved by the FDA. Time and money is on the side of VPHM with this one.
CFK...Niles, thanks for mentioning this one earlier. I took on a good size position in CFK myself over the last week. I don't agree with the concerns for the seasonally weak quarter we are in. Already preannounced and well known so they are discounted by the market. This quarter will be compared to last year's seasonally weak quarter. That should actually make it easier for a strong comparison. With the price of oil so high I'm sure everyone planned ahead as much as possible so they can keep drilling and working in spite of the road thaw restrictions.
CHAR and Oil in Khazakstan.. The leader of that country wants to adopt new rules requiring more transparency in the country's oil sales to fight corruption there. Corruption has been a big concern of companies and their investors who operate in the region. This is something oil companies have wanted and should particularly benefit companies like CHAR, which is currently up 20c to $2.90...It is by far the cheapest oil company out there, IMO. They expect production to grow from 8000 to 14000 bopd by the end of the year.
http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh17754_2005-06-17_14-22-57_ste...
PYOL..3 of the 4 sellers are retired and the fourth who is still working does not work for PYOL. They all have the same last name (Hathaway) so they are apparently related. Only one even lives in the area the company is based in. One of the 4 had been the CEO of PYOL but retired a year ago. It appears that they clearly wanted to cash in their chips here.
The buyer paid $2.50/share, which is not much less than the $2.76 that I paid for PYOL today. I think it is a positive for the company. PYOL is about the cheapest domestic O&G micro out there. It traded at $6 not that long ago. Earned 9c last quarter which works out to a PE of under 8.
VPHM-What will be the maximum derivative liability cost?
I was reading through the 10Q verbage on the sr. convertible notes trying to quantify how much the charge to earnings might be in the current and coming quarters. From what I read, I believe it is directly related to the fact that in the event of early conversions of the notes to stock at $2.50/ share, the company also agrees to pay an additional 3 years worth of interest. The notes carry a rate of 6% so that would be an additional 18% charge. The higher the stock price, the greater the likelyhood that the notes will be voluntarily converted by note-holders. Since no-one knows what the stock price will be in the future it is impossible to know exactly how many will be converted and when. The monte carlo stimulation model is a statistical probability model to calculate what the rate of conversion could be. As the price of the stock rises, one would expect more and more conversions. In fact, with the price of the stock currently nearing $7, virtually all of the notes may well be converted. If we assume that all of the notes will be converted in the current quarter, what will that cost be?
There were 62.5 Mil in notes but 3.2Mil were already converted in the first quarter, leaving a $59.3 Mil note balance. 3 years worth of additional interest at 6% would cost $10.67 Million. However, the company still carries $3.77 Mil worth of derivative liability on its balance sheet. $10.67 Mil less $3.77 Mil = $6.9 Mil in additional expenses. That would be the maximum and again that assumes that the entire expense would occur in the current quarter based on all of the bondholders converting their shares in the current quarter. Based on 52 Million fully diluted shares outstanding, that would amount to a 13c charge against earnings and then there would be no more charges. Many expect this stock to earn about $1 per share this year, so while significant it is certainly not a stock killer by any means. This is all IMO, and if someone has a differing view on this, then please share it.
Here is the verbage from the 10Q:
Notes to the Unaudited Consolidated Financial Statements (continued)
Senior Convertible Notes
The senior notes and the warrants were automatically exchanged in January 2005 for the senior convertible notes following stockholder approval of the issuance of the senior convertible notes. The $62.5 million value of the senior convertible notes, which are due in October 2009, is in an amount equal to the aggregate principal amount of the senior notes for which the senior convertible notes were exchanged. The senior convertible notes rank senior in right of payment to the Company’s existing and future subordinated indebtedness and are secured by a first lien on the vancomycin assets which are primarily related to the manufacture, production, preparation, packaging or shipment of vancomycin products and all proceeds of such assets, including accounts receivable generated from the sale of such vancomycin products. The carrying value of the Vancocin assets as of March 31, 2005 that secure the senior convertible notes was $115.2 million. In April 2005, the initial investors in the senior notes exercised their purchase option and acquired an additional $12.5 million of the senior convertible notes with identical terms.
Subject to certain limitations, the senior convertible notes are convertible into shares of common stock at the option of the holder at any time prior to maturity at a conversion rate of $2.50 per share, subject to adjustment upon certain events. The Company may elect to automatically convert in any calendar quarter up to twenty-five percent of the principal amount of the senior convertible notes into shares of its common stock if the daily volume weighted average price of the Company’s stock exceeds $3.75 per share, subject to adjustment upon certain events, for 20 trading days during any 30 trading day period, ending within 5 days of the notice of automatic conversion. If the investors voluntarily convert the senior convertible notes or if the Company effects an auto-conversion of the senior convertible notes prior to October 18, 2007, then the Company will make an additional payment on the principal amount converted equal to three full years of interest, less any interest actually paid or provided for prior to the conversion date. In the case of a voluntary conversion by the investors, the Company must make this payment in cash. If the Company effects an auto-conversion, the Company may, at its option and if certain conditions are satisfied, make the additional payment with shares of its common stock. If the Company elects to pay the additional payment in common stock, then the stock will be valued at 90% of the volume weighted average price of the stock for the 10 days preceding the automatic conversion date. Through March 31, 2005, investors have converted $3.2 million of senior convertible notes into shares of common stock and have received $0.6 in related make-whole interest payments, which reduced the derivative liability.
In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, or “Statement 133”, the make-whole provision contained in the senior convertible notes is not clearly and closely related to the characteristics of the senior convertible notes. Accordingly, the make-whole provision is an embedded derivative instrument and is required by Statement 133 to be accounted for separately from the debt instrument. As a result, the Company recorded a $7.9 million derivative liability upon the conversion of the senior notes into senior convertible notes in January 2005, which was the fair value based on a Monte Carlo simulation at the time of conversion. Consistent with our policy, we reduced this liability for interest payments on conversions during the first three months of 2005 and further adjusted the liability for changes in the fair value of the derivative liability as of March 31, 2005. Changes in the fair value of the derivative liability are measured using a Monte Carlo simulation model and are recorded as change in fair value of derivative liability in the consolidated statement of operations. In addition, the resulting discount on debt of $7.9 million is being accreted over the life of the senior convertible notes, which is recorded as additional interest expense of $0.3 million for the three months ended March 31, 2005 and has been reduced through additional paid-in capital by $0.4 million to reflect the conversions of $3.2 million of senior convertible notes to common stock.
IECE 61c....Here's a micro-capper that hit a rough spot when it lost some large accounts but appears to be on the road to recovery. It earned 2c in the last 6 months. Of particular interest is recent insider buying by James Rowe on the BOD. It doesn't show up on yahoo's insider purchaser summary because has been buying it in his daughter's name. He has purchased nearly 100,000 shares. He also is a bank president so he should have a pretty sharp pencil.
This is also from a recent PR:
Barry Gilbert, Chairman of the Board and CEO, stated, "Our new prospect portfolio is the strongest it has been in the last three years and our manufacturing representatives are presenting us with excellent opportunities. We are pleased to have added two new accounts. The business has been restructured delivering solid gross profits and excellent inventory turns even though our sales reflect the previously reported loss of Motorola and Teradyne, which historically were a majority of the Company's business. We have removed over $1.5 million annually from our cost structure in the past six months and are also pleased with what we believe to be solid results of our refocused sales force activities.
PDGE... With net income up 73% over the year ago quarter, this one continues to grow top and bottom lines well. The problem is that the eps # remains unchanged at 2c due to rounding. It's too bad that the company didn't find another $40,000 in net income so they would have rounded up to 3c vs 2c.
We're also looking down the eye of a likely active hurricane season right now. Just annualizing the last qrtr which is the slow one gives up a current PE of under 14, and that is fully taxed. Company expectations are for continued growth, so this one will remain a value microcap in my list of holdings.
VPHM, Valuemind asked some good questions including: Why did Lilly sell Vancocin to VPHM? I looked into it when I was looking at taking a position in VPHM. I could find no clear answer in Lilly's PRs or filings. Lilly did not mention that they sold it in any PR.
MSGI mentioned that Vancocin didn't fit well with Lilly's drug lines. That could well be. Lilly has been focusing on numerous new drugs such as Cialis. Other reasons they sold Vancocin could include:
A. Lilly absorbed numerous restructuring costs and actually reported a small loss for their fourth quarter 04. Lilly sold Vancocin that quarter (in October actually). Had they not sold it, they would have reported a larger loss and their stock price could easily have fallen more than it did.
B. Lilly has also expressed concerns about legislation to lower drug prescription prices. That was a real issue in last fall's election. Had the democrats won, Lilly may well have been very concerned about being required to lower the price of Vancocin. They developed the drug years ago and I'm pretty sure they have expensed their R&D costs on it by now. VPHM paid $116 million plus future royalties for the drug so they have plenty of costs to justify its pricing (and even a substantial price increase which they did). It may well be that Lilly felt money in their hand with this one was better for them.
I think it is also pretty obvious that Lilly did not foresee the substantial increase in usage of the drug in spite of the price increase. This has made it an especially attractive bargain for VPHM.
Cleverrox, overweighting strategy.
Don't forgot about all that FORD stock you bought 9 months ago. That also is a 10 bagger.
Uranium stocks, I haven't looked into them (yet) but I know they have been recently discussed on this board. For those interested, here is a link to a recent article making an argument that the jump in uranium prices may only be beginning:
http://321energy.com/editorials/appel/appel060205.html
Len:
I have no doubt that insiders have beaten the market averages by a huge amount. They take virtually no risk when they grant themselves options and then cash those in only after the stock price goes up enough to give them a guaranteed return. I would love to see the practice of granting stock options made illegal, at least over a certain threshold. If insiders of public companies want to participate in the growth of their own successes, then they should go out and buy stock on the open market like all the rest of us!
But, it does seem to me that the insiders would drag down the rate of return of the overall stock market averages as well. The cheap shares that the insiders acquire dilute the equity interest of all the stockholders.
No doubt, people who trade on inside information are big winners. Of course, being illegal, their risk is substantially higher as well (jailtime, fines, or fired if caught).
I'm not sure about hedge funds. I haven't seen any numbers of what their average returns are relative to the market. But aren't they a relatively recent phenomenon, at least in large #s?
Bottom line, I agree with you that other than the above and value investors (from Warren Buffet to the microcappers), I can't think of any other major group that has managed to beat the market averages.
>>>Why investors fail:
“Individuals have historically underperformed the markets, earning just 2.6% vs. the S&P 500 gain of 12.2% between 1984 and the end of 2002*. <<<
That is a HUGE difference. It is also well worth noting that on average, mutual funds run by professional money managers have also failed to match the average rate of return of the stock market.
So we have two large groups, one of them are individual investors who have produced rates of return that are far below the performance of the stock market averages and the other are the mutual funds whose managers also have failed to match average market returns.
This raises another question: By statistical definition then, some other group(s) on average must have generated returns which are then way above the norms of the market averages. Who are they? (Other than the statistically insignificant group known as value microcap investors, of course.)
VPHM...cleverox, That $10mil sales number for the month was posted by swb on this board a few days ago. I did not see it myself but it appeared in a health magazine. The question I have is whether it refers to sales at the manufacturer, wholesale, or retail level. I posed that question on the yahoo board but never got a response. If you find out, I'd sure like to know.
JOB.. $1.20 Someone posted about this one last week. I looked into it and was buying today. Trading at 1.20, it has no debt and a tangible book value of $1.03 including 86c in cash.
Was at $3/sh just 6 months ago. They have turned slightly profitable after reducing overhead and selling or trimming some unprofitable branches. The economy is improving now so I see their business (employment services)turning profitable. In a good market, they could earn 30c+/sh annually. That would be dirt cheap for a stock that is trading at just 34c above cash/share.
IPII..I'm very happy with $20 so I sold today. Not to rain on the parade there but they do have some liability hanging out there with their stucco/drivit siding products. Their insurer dropped their coverage as there were too many claims. That is not a short term problem but longer term it could be.
Speaking of water and mold issues, I bought some more PDGE. I don't normally buy ahead of earnings but they have an easy comparable coming up with last year's qrtr ($10.9mil revs, 2c eps). I also see a tropical storm is on its way north from western cuba and should send a lot of precip along the W FL coast. An early wake up call to the Gulf coast and FL that this is expected to be an active storm season.
Picked up some more VPHM as well in the selloff today.
WHAI... This company has grown from $3mil in sales to an expected $200 Mil in sales in 2 years through acquisitions in the medical staffing industry. They are highly leveraged. Current liabilities exceed current assets by a 1.4 to 1 ratio. With all the acquisitions they have a tangible book value of negative $30 Mil. Mgmt forecasts they will earn 50-55c this year. However the market is obviously skeptical at least until these guys prove themselves. The CEO is only 32 and does not have experience in running a company anywhere near this size.
There is plenty of demand in the medical staffing industry but the problem is holding onto qualified staff. Another established company in that industry, MRN, continues to report losses. I looked into both of these but decided to pass.
VLXC... Bigpike, be careful of this one. The numbers sound great but they are probably too good to be true based on numerous posts on Raging Bull (under the old symbol of VLVT). I did make some money on this one earlier this year, but I sold after a news release.
Javeed, the CEO has been promising audited financials for years but never seems to get around to actually doing them. Here is another interesting link dated 5 years ago:
http://www.bangladesh.com/forums/printthread.php3?threadid=244
VPHM, Thanks for the insights MSGI and all- That kind of info gives me the urge to click that buy button again....
VPHM, Steve, very impressive to see still another insider buy in spite of the recent run-up. I think you are right, while it is impossible to know what sales of Vancocin are this Q, all the insider buys suggest that the sales are very strong.
I wonder if there is a "seasonality factor" to Vancocin sales?
Vancocin is needed after antibiotics are used to treat another infection. This allows a secondary bacterial infection of "Clostridium difficile" to flourish as it is not affected by other antibiotics. Vancocin is expensive but it is sometimes needed to treat that secondary infection which can even be fatal. It seems that usage would tend to be highest during and after the winter flu and cold season which would include the next quarter to be reported.
IPII certainly had a great day today, up over $3 to $17.74.
This FL stock is much better than owning real estate, even in Naples, FL. Plus it only costs a $9.95 commish to sell it all rather than the realtor's normal take of 5 or 7% for selling real property. Not to mention excise taxes, inspections and other seller costs.
http://finance.yahoo.com/q/bc?s=IPII&t=3m
steve, re VPHM
I posed the question about the sales reported by IMS on the yahoo board. We'll see what falls out there.
BTW, I wish I had some of those conv debs. It would be nice to get 3 years of interest plus VPHM stock at $2.50/ share. We should see alot of conversions in the coming month.
VPHM...steve, another insider buy and it's back to the races. I like this one and would also like to add more but the pullback never seems to come. Lenntinman (not the len here) is doing a lousy job of brow-beating the price down on this one.
GMAI.. Wade, they did make a comment about next qrtr in the last sentence of the PR. I don't see much commonality between the group speculating in the housing bubble and those investing in collectable stamps and coins. Personally, I like this one.
>>>Based on the auction consignments already in house and arriving daily, we also look forward to an active fiscal 2006 first quarter, which begins on July 1, 2005." <<<
VPHM...Steve, do you know if that $10mil in reported Vancocin sales was at retail level or at mfg. sales to VPHM? I expected to see Vancocin sales to VPHM this Q at slightly under $7mil/ mo. If it is at the mfg. level that would be VERY good news.
thanks, cliff
HBP.. Another one I like in the construction supply industry. IPII and BMHC have really taken off and I suspect that HBP will also do very well. HBP trades at a lower P/S, P/B and PE than the others. The higher end and luxury home markets are very hot this year which means more millwork, doors and windows (both in pricepoints and volume).
HOM... I am wary of the CEO there, Frank Fradella. He used to be a CEO/COO of American Eco and USIS. AmEco went bankrupt and USIS is gone as well although I'm not sure what happened to them.
Fradella's Bonus and option plan with HOM is based on meeting thresholds of EBITDA. If he continues to acquire profitable companies by issuing more high interest debt and stock, EBITDA will surely rise but EPS could well go nowhere. In the acquisition of Cornerstone, I calculated that the APR of the financing they arranged was 20.75% (includes the market value of the warrants the lender was given). It will be even higher if the note is paid off before its due date in 2010.
HOME does seem cheap based on the booming FL market they are in and their projections. I had bought some stock earlier this year but as my reservations grew about the CEO, I had been trying to close out my position for some time. I finally closed it out on the small pop earlier this week. Good luck to you guys.
I took a looksie at the financials for both AMRE and NAUC.
The market valuation of both and NAUC in particular is incredible based on its financials. NAUC currently has a $170 Million market cap based on 50 mil shares outstanding. In the first quarter ending 3/05 it had total assets of $42,000 and total liabilities of $130,000. Sales totalled $2,600 with a net loss of $68,000.
And no, the balance sheet and income statement items are not in "000s", they are in actual dollars. Btw, both companies have the same CEO.
Thanks msgi, but I think I'll probably pass on this one.
BWLRF...I missed their 1st qrtr earnings report till now. They went back to profitability with $4.1 Mil in earnings which works out to a little over 1c/ sh....Not too shabby for a 30c stock. But not nearly what I thought they could do when I bought in either. Mining for metals has definitely not been a good place to be invested in this year (to now anyway).
http://www.breakwater.ca/news/050510.htm
Oil stocks...Rogue, Kurt Wulff at www.mcdep.com has some good info on oil stocks. He believes that current stock prices are fair value based on oil averaging $37/bbl, still well below the current market. Personally, I'm not selling here but I don't expect much upward movement until late summer to fall when winter usage and inventory drawdowns starts to become the buzzword again.