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[Bobwins]

Hi Mike,

Thanks for the DD. I concur with your findings about the industry although the info from other companies was much more downcast than what I got from WHAI. I think the firm's specializing in only temp nurses were the worst and one had opened up to general staffing to replace their falling revs.

I also like your find about a one time rev effect of cross selling. Of course, they have been acquiring so aggressively that they may not be done benefiting from that effect but it could come quickly because they haven't bought anything that I recall in 2005.

How important is their national footprint?? I was thinking that healthcare is becoming a size driven industry, with more not less national players. The fact that all these regional players are willing to sell to Whai says they may have run up against the expand or sell out corporate decision. He may have found some good values if the regional players had good operations and people but didn't want to invest to expand. If the clients(hospitals, clinics, nursing home facilities) are national, they would likely want to minimize their sources for simplicity. I wonder if that is helping whai?

Their balance sheet is not pretty. The working capital deficit isn't quite as bad as the numbers show because a big hunk of current liabilities is their expanded line of credit. This greatly increases current liabilities but most companies typically pay interest only. Subtract the line balance and you are close to even on working capital, which is how they are surviving.

Down the road, even with only organic growth, they will have to continue to increase profits to finance this growth. They need to decrease liabilities while assets are increasing (a/r) due to sales increases. They could offset this by aggressively following a/r but they are probably already doing that. Hospitals ain't going to pay much faster than 45-60 days. They are currently turning a/r at 56 days. If they increase the $$$ level of a/r but increase a/r turn levels down to the forty five days, they could grow without new financing if all things remain equal. They did a great job from q4 2004 to q1, growing revs from 22 to 40 million and only increasing a/r 5 million. So maybe they can handle it.

I like the aggressive attitude of the company. It is sales driven into a huge industry. There still appears to be room for them to grow profitably but we will have to see if they can be consistent and survive the switch to paying taxes.
.50eps this year would be a mighty achievement. Looking forward to q2 to see how they stack up. Bobwins