Don't know how to post a spreadsheet and make the columns line up. I added a column for year to year changes and it's very enlightening. If anyone has a better idea on posting columns, please let me know. Here are some thoughts based on the numbers as I see it. Keep in mind I'm certainly no CPA or FA wiz...
- Gross Margin has almost doubled year to year to 10.41%. However, General and Administrative expenses have tripled year to year. This is reflected in the smaller growth in Net Profit Margin.
- Operating Profit Margin has increased marginly to 4.14%.This identifies the recurring, core earnings of the company. EPS is often shown as operating EPS to help eliminate confusion created when non-recurring items like other income are included.
- Net Profit Margin increases by .6% to 4.87%. This is a slight improvement. Industry average for conglomerates is about 10-11% We still have work to do but this is typical of growth companies.
- Working Capital has fallen from +$10M to -$2M. This is the net difference between current assets and current liabilities. Typically a decrease in working capital can be seen as a negative, for the business has less cash on hand to meet immediate business needs. However, most businesses merely take on corporate debt to bolster the appearance of the Working Capital account. To reveal a negative number is somewhat alarming, but also speaks to transparency.
- The Current Ratio is the standard test of Working Capital. The Current Ratio has decreased year to year from 2.68 to 0.94. A decrease in the Current Ratio is representative of the decrease in Working Capital. The rule of thumb is to have twice as much in the CA account as the CL account. During a growth phase it is expected that cash and equivalents should be tighter, thus lowering the Current Ratio. I would relax a bit if I could see the specifics of the Current Liability account.
- The Quick Ratio or Acid test has decreased from 1.21 to 0.48. This is the Current Ratio with inventories removed from the Current Asset account. 1 is standard implying that a cash strong company should have $1 in cash or equivalent on hand to cover $1 of current liabilities. PBLS currently has $.48 per $1.
- Capitalization has improved from $79.6M to $92.7M, a 16.54% change year to year. This is Market Cap as defined by the total debt and equity of the corporation instead of O/S times pps. Year over year PBLS saw it's Market Cap grow by 16.54%
- Our Debt-to-Equity Ratio remains at $0 as long as $0 long term debt is shown on the balance sheet. Standard Debt-to-Equity is 2.5-3% for conglomerates. Based on GAAP, long term debt would be included in the financial statement if PBLS had incurred any. Therefore, lack of a line item for debt implies that debt remains at $0.
- Because PBLS shows no LT debt, Book Value is equal to Market Cap. Again, PBLS demonstrated a 16.54% increase in Book Value year over year. Not to shabby if you ask me and 2007 numbers are right around the corner.
- Goodwill has increased by 37.37%. Goodwill is something that PBLS incurs when it buys a company. Basically, Goodwill is equal to the amount paid for an acquisition over the book value of that acquisition. Goodwill is then depreciated over time. A 37% increase in Goodwill in light of the mulitude of acquisitions made in 2006 demonstrates that PBLS is not over-paying for companies.
- Machinery & Equipment has increased by 306.94%. Most of this is probably pit equipment at Murphy. Probably one of our safest investments right now.
- Accounts Receivable saw a 253% increase year to year. This significant increase in A/R is probably due to the large pit contracts. These type of contracts typically offer more favorable terms of payment for the buyer of the aggregate. This number should be decreased. They need to hire some no-neck Italians from Jersey to do some collecting.
- General and Administrative Expenses increased by 307.95%. Given the number of new companies purchased and the latest hirings, it was assumed that G&A expenses were going to increase dramatically. They will continue to increase during the growth phase of PBLS if they continue to hire such quality employees.
Biggest positive besides the transparency is the increase in the margins and the stability of the Goodwill account. Typically margins decrease during acquisition periods and especially when buying distressed companies. Stability in Goodwill means that they are not over-paying for the assets in the companies that they buy.
Biggest concern would be the decrease in Working Capital, the lack of line items in the Liability accounts, and the fact that $0 debt was included on the balance sheet. I was also under the impression that we took on some LT debt with the Best Jets acquisition.
Keep in mind that these numbers represent 2006 and not the last 5 months of 2007. With the new Pit contracts and jet sales, things in the Revenue and Working Capital department should have changed dramatically (hopefully for the better).
All of this makes better sense if you can see the numbers in a spreadsheet. And of course, all in MOSO. I don't know anything about financial statements.
Ren
"Experience: that most brutal of teachers. But you learn, my God do you learn." C.S. Lewis
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