SKULLCANDY, INC. Recommendation: BUY
Target Price: $15.51
Market Price(11/18/12): $9.05
Investment
Summary
After
valuating the intrinsic value of the current stock price and analyzing the
economic outlook for the industry, I suggest a strong hold/buy on Skullcandy
equity. I recommend this buy due to what has been happening in the tech
industry, the upcoming holiday season and the cheap buy-in opportunities of a
well performing company.
The
historical performance of the stock is short, but very sweet. For being publicly
traded for only 18 months, it has beaten market expectations, especially in key
financial ratios. As far as how the company is run, a new CEO has come to
better improve the overall appeal of the deflated equity price and the
financial reports are very strong. 3rd quarter reports are promising
as the company heads into the final, most profitable quarter of the year while
looking to break its own revenue records.
Skullcandy
has taken some heat lately from critics who are optimistic about the success of
the newly designed Apple ear buds that were released with the new iPhone 5. The
error in this optimism for Apple headphones from many consumer reports is the
new headphones were merely an improvement in fit and comfort, but not in sound.
Those who care enough about the quality of music they listen to will buy more
comfortable, better quality headphones from companies like Skullcandy who
provide affordable quality and comfort in their products.
Business Description
Skullcandy is an audio company that specializes in headphones,
earphones and ear buds that are catered to a younger, artistic generation.
While Skullcandy is a publicly traded company, it is a non-conventional
corporation, doing what it can to stay away from the Wall Street stereotype.
Skullycandy headphones use bright colors and abstract model names to get
recognition and maintain the individualistic nature of the company while developing
and distributing its products to retailers worldwide. Skullcandy was a local
name in Utah but word spread quickly as the Park City-based company gained
reputation with skiers, snowboarders, and skateboarders around the world. The
company broke through the international market in 2008 when it began
distributing to retailers in Europe. Since then the company has kept producing
new designs and products modeled after professional surfers, skateboarders and
snowboarders. Skullcandy has a strong, innovative design team that has always
focused on putting out creative colors and design for all their products which
keeps the consumers coming back for more.
Industry Overview and Competitive
Positioning
The audio industry is a tricky
one, with new technology and ergonomic design features coming out every month.
To be competitive in this market you need to have innovative minds on your team
that know what the public is wanting. Skullcandy has been a smaller company in
the past but has grown with overseas operations and public relations coming
from professional riders such as Dan Brisse and Tanner Hall. The company is now
competing with Bose, Harman International, and Sony, which are pretty big names
in the sound industry. The chart below gives a comparison of competitors in the
industry and an industry benchmark. Although Harman’s information is available,
Sony and Bose are privately held so their information is not so easily
accessible. The industry rundown is found below:
|
Skullcandy
|
Harman International
|
Sony
|
Bose
|
Industry Average
|
LFY Revenues
|
280.13M
|
4.31B
|
N/A
|
N/A
|
212.96M
|
LFY Net Income
|
26.74M
|
335.73M
|
N/A
|
N/A
|
N/A
|
Beta
|
N/A
|
2.02
|
N/A
|
N/A
|
1
|
LT Debt
|
0
|
0
|
N/A
|
N/A
|
N/A
|
Free Cash Flow
|
21.24M
|
219.87M
|
N/A
|
N/A
|
N/A
|
P/E Ratio
|
8.89
|
7.94
|
N/A
|
N/A
|
13.90
|
|
|
|
|
|
|
Valuation
It was
interesting going through the valuation process of the company since it hasn’t
been around for too long but the analysis is correct and proves for an
interesting look at how the company is being treated in the market. Since the
company doesn’t have enough historical data, the correct Beta is not listed and
therefore cannot be calculated into key valuation methods such as the CAPM.
Skullcandy also has very little debt and does not issue dividends, contributing
to the calculation of the Divend Discount Model. I will use the Dividend
Discount model and other evaluation models to show the current intrinsic value
of the equity, based on third quarter reports and theoretical intrinsic value.
Even
though the company does not issue dividends, the DDM shows the most accurate
calculation. The other two methods used for the price calculation show a price
based on a on average of a volatile industry so even though they are less
accurate, they still show just how undervalued Skullcandy is on the market.
The
first Fair Value per share analysis gives us a look at what the company should
be worth relative to the other companies in the industry. The industry average
P/E ratio multiplied by the Earnings per Share of Skullcandy lets us see what
the price of Skullcandy should be. The second method uses current capital
values from the 3rd quarter financial reports that help us estimate
the price of the equity. I will stick with my first method as I have more value
in that method.
The
fair value of Skullcandy is set at $18.34 per share; meaning that this equity
is traded at nearly 50% of its theoretical fair value price in the market as of
today.
Overall,
the most accurate methodology used is the Dividend Discount Model. That model
generates a share price of $15.51 while the two Fair Value per Share methods
produced share prices of $18.34 and $13.78. The fact that the most accurate
method produces a price in between the less accurate models makes sense and
adds to validity of the theoretical intrinsic value of the company, as it is
extremely undervalued.
Other
factors that boost the intrinsic value of Skullcandy include the Earnings per
share ratio (low ratio = cheap and healthy) and the increasing revenues over
the last 18 months. I would expect revenues in skyrocket with the approaching
holiday season.
(Blue -
EPS, Red - Revenue)
The
chart below also gives us some useful information that we can visually track
over the last 18 months. The Orange line represents the Return on Assets
starting from when the stock began its public trading and has increased
steadily ever since. It is currently in the position to keep moving in that
upward direction. The Blue line on the chart here shows the Price/Earnings
ratio of the company for the last 12 months. With a low P/E ratio, we can
assume a cheap, solid buy in equity.
The
WACC was calculated from the most recent financial statements showing the
capital structure of Skullcandy. The company carries very little debt which is
extremely impressive for a company this successful and this young.
Skullcandy
is so impressive that is has beaten out the Russell 2000 Consumer Index of
small cap stocks for the last few years in nearly every key ratio. This report
was pulled directly from Bloomberg with the only editing being in the
formatting of the chart so it is easy to follow: Green = beat market returns,
Red
= lost vs market returns
HIGH/LOW
|
2013 F
|
2012 F
|
Current
|
2011
|
2012
|
2009
|
2008
|
H
|
SKUL Return on Equity
|
22.05
|
23.01
|
24.26
|
|
|
|
|
|
Russell 2000
|
19.17
|
19.4
|
18
|
18.8
|
14.69
|
12.2
|
10.4
|
H
|
SKUL Return on Capital
|
|
|
22.51
|
25.22
|
|
41.82
|
|
|
Russell 2000
|
|
|
15.94
|
16.09
|
15.11
|
13.84
|
13.38
|
H
|
SKUL Operating Margin
|
|
|
14.96
|
18.14
|
11.15
|
25.71
|
26.4
|
|
Russell 2000
|
|
|
9.85
|
9.97
|
9.5
|
8.24
|
9.35
|
L
|
SKUL Price/EPS
|
7.81
|
9.08
|
9.43
|
14.39
|
|
|
|
|
Russell 2000
|
14.07
|
17.6
|
19.31
|
25.62
|
14.11
|
|
|
L
|
SKUL Price/Book
|
1.43
|
1.86
|
1.99
|
3.21
|
|
|
|
|
Russell 2000
|
1.62
|
1.8
|
2.37
|
2.17
|
2.57
|
2.24
|
|
L
|
SKUL Net Debt/EBITDA
|
|
|
0.07
|
-0.3
|
4.18
|
1.77
|
0.39
|
|
Russell 2000
|
1.97
|
2.21
|
2.15
|
2.1
|
1.98
|
2.57
|
|
What
really brings down the price of the stock are the short sellers. There is much
speculation of Skullcandy of whether it can really stay and compete as a
publicly traded company on Nasdaq. The nature of the company is the opposite of
what is marketed towards most financial gurus on Wall Street and because of
that there is must negative connotation with Skullcandy. The chart to the right
breaks down how much of the publicly traded shares are sold short, giving a
clear indicator of what the market thinks of Skullcandy. Nearly 60% of all
shares float are sold short as of Oct. 15, 2012.
Financial
Analysis
The financial statements for this year are looking very solid,
showing growth and preparation for further growth in the upcoming quarters.
Overall, I only found a couple things to that aren’t consistent with the
outlook:
·
Total Cash dropped this last quarter
by about $6 million which prompts us to ask the question, where did all that
cash go? The inventories on the balance sheet show an increase in product of
about $10 million that I assume will be distributed to retailers over the
remainder of this quarter in anticipation of big sales revenue during the
holiday season.
Earnings
The earnings reports show strong revenue streams and even stronger
projections for the next coming years. Sales have been increasing annually
along with free cash flows. With the holiday season coming up and a company
that has very little debt, there will be large cash flows to report for the
fourth quarter, making it a record-breaking quarter and year from the company.
·
Income from operations went up to
$10.6 million this quarter, a 29.1% jump from last quarter.
·
Net revenue was reported at $71
million this quarter, a 17% jump from the same quarter last year. The fourth
quarter in 2011 showed a remarkable 37.5% growth from the 3rd
quarter of 2011. Historical patterns and new products this year both show
extremely positive outlook for this last holiday quarter of 2012.
Cash
Flow
The ever-increasing cash flows have proven strong for Skullcandy,
beating market banchmarks, expectations and even its own projections. Cash was
spent on investing activities from acquisitions which shows the company is
expecting to grow and expand in the coming years. Even with these investments
the company still produced higher net cash flows from previous years,
indicating growth at an accelerated rate. For me, this company will be
reporting exponential numbers in the fourth quarter where the share price will
jump significantly.
Balance
Sheet & Financing
The thing that really brings Skullcandy into the limelight for
investors should be the debt situation: there is none. This company has
historically been a company that has stayed away from debt and leveraging in
order to maintain strong financial statements. As well all know debt isn’t a
bad thing, but for Skullcandy, staying true and “not buying when you don’t have
money” has proven very beneficial. No dividends and zero long-term debt show
that they are very financially independent and do the majority of their
financing in house, which is a great selling point for investors.
Investment
Risks
The risks that are incorporated when involving a tech company like
Skullcandy are self-explanatory: it’s a tech company.
That doesn’t mean you have to pull the plug on it but there are some
things to take into consideration:
·
The Tech Wave: There are many people are
firms that build their investing platform on riding out the wave of popular and
trendy tech products. With the world so fierce when looking at the tech
industry, it is truly a dog-eat-dog world and new technology and cheaper
manufacturing are daily battles that are fought with serious consequences. Your
company can be up one day but can be plummeting the next with news of a faster,
lighter, better product coming from your competitor. So just watch your back.
·
Targeted Market Share: When a
new, hip company comes along to get attention from kids it might get exactly
that: attention from kids. Skullcandy is a younger company that is targeting
younger consumers and therefore losing a large part of the market share. When
competing with companies like Bose, Sony, and Harman, Skullcandy may want to
reconsider the type of products that it produces and look into diversifying.
These three competitors put their audio technology not only in headphones, but
in home theater systems, commercial sporting arenas and the best selling luxury
automobiles in the world. If Skullcandy really wants to compete with the big
wigs, it must increase its market share.
·
Shorting: In recent financial
findings, it is reported that sixty percent (60%) of its shares are sold short.
This goes to show there is much speculation in this young company and this
shorting is driving down the share price.
Figure 1: Income Statement
in millions
Source: Company Documents, Student Estimates
Fiscal year is January-December. All values USD
millions.
|
2007
|
2008
|
2009
|
2010
|
2011
|
5-year trend
|
Sales/Revenue
|
35.35M
|
80.38M
|
118.31M
|
160.58M
|
232.47M
|
|
Cost of Goods Sold (COGS) incl.
D&A
|
18.16M
|
41.12M
|
60.85M
|
75.08M
|
116.93M
|
|
COGS excluding D&A
|
18.13M
|
40.98M
|
60.43M
|
74.4M
|
114.9M
|
|
Depreciation & Amortization Expense
|
30,000
|
140,000
|
415,000
|
677,000
|
2.03M
|
|
Depreciation
|
30,000
|
140,000
|
415,000
|
677,000
|
2.03M
|
|
Amortization of Intangibles
|
0
|
0
|
0
|
0
|
0
|
|
Gross Income
|
17.18M
|
39.26M
|
57.47M
|
85.51M
|
115.54M
|
|
|
2007
|
2008
|
2009
|
2010
|
2011
|
5-year trend
|
SG&A Expense
|
7.35M
|
18.04M
|
28.57M
|
67.6M
|
71.38M
|
|
Research & Development
|
0
|
0
|
0
|
0
|
0
|
|
Other SG&A
|
7.35M
|
18.04M
|
28.57M
|
67.6M
|
71.38M
|
|
Other Operating Expense
|
0
|
0
|
0
|
0
|
0
|
|
Unusual Expense
|
0
|
0
|
0
|
0
|
2M
|
|
EBIT after Unusual Expense
|
0
|
0
|
0
|
0
|
(2M)
|
|
Non Operating Income/Expense
|
13,000
|
54,000
|
111,000
|
(14.56M)
|
(1.76M)
|
|
Non-Operating Interest Income
|
-
|
-
|
-
|
-
|
-
|
|
Equity in Affiliates (Pretax)
|
0
|
0
|
0
|
0
|
0
|
|
Interest Expense
|
91,000
|
586,000
|
8.34M
|
8.39M
|
7.47M
|
|
Gross Interest Expense
|
91,000
|
586,000
|
8.34M
|
8.39M
|
7.47M
|
|
Interest Capitalized
|
0
|
0
|
0
|
0
|
0
|
|
Pretax Income
|
9.76M
|
20.69M
|
20.66M
|
(5.04M)
|
32.93M
|
|
Income Tax
|
3.5M
|
7.67M
|
8.32M
|
4.65M
|
14.31M
|
|
Income Tax - Current Domestic
|
4.31M
|
7.7M
|
8.63M
|
7.53M
|
13.32M
|
|
Income Tax - Current Foreign
|
0
|
0
|
0
|
0
|
0
|
|
Income Tax - Deferred Domestic
|
(809,000)
|
(27,000)
|
(313,000)
|
(2.87M)
|
982,000
|
|
Income Tax - Deferred Foreign
|
0
|
0
|
0
|
0
|
0
|
|
Income Tax Credits
|
0
|
0
|
0
|
0
|
0
|
|
Equity in Affiliates
|
0
|
0
|
0
|
0
|
0
|
|
Other After Tax Income (Expense)
|
0
|
0
|
0
|
0
|
0
|
|
Consolidated Net Income
|
6.26M
|
13.02M
|
12.34M
|
(9.69M)
|
18.62M
|
|
Minority Interest Expense
|
0
|
0
|
0
|
0
|
4,000
|
|
Net Income
|
6.26M
|
13.02M
|
12.34M
|
(9.69M)
|
18.62M
|
|
Extraordinaries & Discontinued Operations
|
0
|
0
|
0
|
0
|
0
|
|
Extra Items & Gain/Loss Sale Of Assets
|
0
|
0
|
0
|
0
|
0
|
|
Cumulative Effect - Accounting Chg
|
0
|
0
|
0
|
0
|
0
|
|
Discontinued Operations
|
0
|
0
|
0
|
0
|
0
|
|
Net Income After Extraordinaries
|
6.26M
|
13.02M
|
12.34M
|
(9.69M)
|
18.62M
|
|
Preferred Dividends
|
0
|
0
|
9.99M
|
30,000
|
17,000
|
|
Net Income Available to Common
|
6.26M
|
13.02M
|
2.35M
|
(9.72M)
|
18.6M
|
|
EPS (Basic)
|
3.89
|
0.49
|
0.09
|
(0.36)
|
0.93
|
|
Basic Shares Outstanding
|
1.61M
|
26.78M
|
26.78M
|
26.78M
|
20.08M
|
|
EPS (Diluted)
|
3.89
|
0.49
|
0.09
|
(0.36)
|
0.79
|
|
Diluted Shares Outstanding
|
1.61M
|
26.78M
|
26.78M
|
26.78M
|
23.57M
|
|
EBITDA
|
9.86M
|
21.36M
|
29.31M
|
18.58M
|
46.19M
|
|
Copyright 2012 FactSet Research Systems
Inc. All rights reserved. Source FactSet Fundamentals.
Figure 2: Balance Sheet
in millions
Source: Company Documents, Student Estimates
Assets
Fiscal
year is January-December. All values USD millions.
|
2007
|
2008
|
2009
|
2010
|
2011
|
5-year trend
|
Cash & Short Term Investments
|
-
|
21.62M
|
1.73M
|
37.54M
|
23.3M
|
|
Cash
Only
|
-
|
-
|
-
|
-
|
-
|
|
Short-Term
Investments
|
-
|
-
|
-
|
-
|
-
|
|
Total Accounts Receivable
|
-
|
24.48M
|
29.27M
|
46.68M
|
50.62M
|
|
Accounts
Receivables, Net
|
-
|
24.48M
|
29.27M
|
46.68M
|
50.62M
|
|
Accounts
Receivables, Gross
|
-
|
25.49M
|
30.74M
|
49.68M
|
51.22M
|
|
Bad
Debt/Doubtful Accounts
|
-
|
(1.01M)
|
(1.48M)
|
(3M)
|
(599,000)
|
|
Other
Receivables
|
-
|
0
|
0
|
0
|
0
|
|
Inventories
|
-
|
9.45M
|
17.86M
|
22.56M
|
43.98M
|
|
Finished
Goods
|
-
|
9.45M
|
17.86M
|
22.56M
|
43.98M
|
|
Work
in Progress
|
-
|
0
|
0
|
0
|
0
|
|
Raw
Materials
|
-
|
0
|
0
|
0
|
0
|
|
Progress
Payments & Other
|
-
|
0
|
0
|
0
|
0
|
|
Other
Current Assets
|
-
|
2.44M
|
2.82M
|
8.87M
|
12.48M
|
|
Miscellaneous
Current Assets
|
-
|
2.44M
|
2.82M
|
8.87M
|
12.48M
|
|
Total
Current Assets
|
-
|
57.99M
|
51.68M
|
115.64M
|
130.37M
|
|
|
2007
|
2008
|
2009
|
2010
|
2011
|
5-year trend
|
Net
Property, Plant & Equipment
|
-
|
1.21M
|
2.02M
|
3.97M
|
10.29M
|
|
Property,
Plant & Equipment - Gross
|
-
|
1.38M
|
2.53M
|
5.16M
|
12.99M
|
|
Buildings
|
-
|
-
|
-
|
-
|
-
|
|
Land
& Improvements
|
-
|
-
|
-
|
-
|
-
|
|
Computer
Software and Equipment
|
-
|
266,000
|
666,000
|
1.03M
|
2.81M
|
|
Other
Property, Plant & Equipment
|
-
|
744,000
|
1.37M
|
2.74M
|
5.06M
|
|
Accumulated
Depreciation
|
-
|
178,000
|
511,000
|
1.19M
|
2.7M
|
|
Total
Investments and Advances
|
-
|
0
|
0
|
0
|
0
|
|
Other
Long-Term Investments
|
-
|
0
|
0
|
0
|
0
|
|
Long-Term
Note Receivable
|
-
|
0
|
0
|
0
|
0
|
|
Intangible
Assets
|
-
|
169,000
|
247,000
|
991,000
|
27.55M
|
|
Net
Goodwill
|
-
|
0
|
0
|
0
|
13.87M
|
|
Net
Other Intangibles
|
-
|
169,000
|
247,000
|
991,000
|
13.68M
|
|
Other
Assets
|
-
|
3.67M
|
3.7M
|
3.8M
|
402,000
|
|
Tangible
Other Assets
|
-
|
0
|
0
|
0
|
0
|
|
Total Assets
|
-
|
63.04M
|
57.65M
|
124.4M
|
168.61M
|
|
Liabilities & Shareholders'
Equity
|
2007
|
2008
|
2009
|
2010
|
2011
|
5-year trend
|
ST
Debt & Current Portion LT Debt
|
-
|
97,000
|
2,000
|
10.8M
|
9.88M
|
|
Short
Term Debt
|
-
|
97,000
|
2,000
|
10.8M
|
9.88M
|
|
Current
Portion of Long Term Debt
|
-
|
0
|
0
|
0
|
-
|
|
Accounts Payable
|
-
|
2.89M
|
5.26M
|
13.46M
|
23.21M
|
|
Income
Tax Payable
|
-
|
-
|
2.77M
|
-
|
-
|
|
Other
Current Liabilities
|
-
|
8.92M
|
8.63M
|
15.53M
|
25.1M
|
|
Dividends
Payable
|
-
|
-
|
-
|
-
|
-
|
|
Accrued
Payroll
|
-
|
-
|
1.94M
|
3.84M
|
7.01M
|
|
Miscellaneous
Current Liabilities
|
-
|
8.92M
|
6.7M
|
11.69M
|
18.09M
|
|
Total Current Liabilities
|
-
|
11.91M
|
16.66M
|
39.79M
|
58.19M
|
|
Long-Term
Debt
|
-
|
27.53M
|
56.4M
|
11.42M
|
0
|
|
Long-Term
Debt excl. Capitalized Leases
|
-
|
27.53M
|
56.4M
|
11.42M
|
0
|
|
Non-Convertible
Debt
|
-
|
0
|
25M
|
-
|
0
|
|
Convertible
Debt
|
-
|
27.53M
|
31.4M
|
-
|
-
|
|
Capitalized
Lease Obligations
|
-
|
0
|
0
|
0
|
0
|
|
Provision
for Risks & Charges
|
-
|
-
|
-
|
-
|
0
|
|
Deferred
Taxes
|
-
|
104,000
|
489,000
|
0
|
3.61M
|
|
Deferred
Taxes - Credit
|
-
|
104,000
|
489,000
|
-
|
3.61M
|
|
Deferred
Taxes - Debit
|
-
|
-
|
-
|
-
|
-
|
|
Other
Liabilities
|
-
|
0
|
0
|
0
|
0
|
|
Other
Liabilities (excl. Deferred Income)
|
-
|
0
|
0
|
0
|
0
|
|
Deferred
Income
|
-
|
-
|
-
|
-
|
-
|
|
Total Liabilities
|
-
|
39.54M
|
73.55M
|
51.21M
|
61.8M
|
|
Non-Equity
Reserves
|
-
|
0
|
0
|
0
|
0
|
|
Preferred
Stock (Carrying Value)
|
-
|
2.92M
|
0
|
0
|
0
|
|
Redeemable
Preferred Stock
|
-
|
2.74M
|
0
|
0
|
0
|
|
Non-Redeemable
Preferred Stock
|
-
|
178,000
|
0
|
0
|
0
|
|
Common Equity (Total)
|
-
|
20.58M
|
(15.9M)
|
73.19M
|
106.21M
|
|
Common
Stock Par/Carry Value
|
-
|
0
|
-
|
3,000
|
3,000
|
|
Retained
Earnings
|
-
|
19.14M
|
-
|
7.27M
|
30.34M
|
|
ESOP
Debt Guarantee
|
-
|
0
|
0
|
0
|
0
|
|
Cumulative
Translation Adjustment/Unrealized For. Exch. Gain
|
-
|
0
|
0
|
0
|
0
|
|
Unrealized
Gain/Loss Marketable Securities
|
-
|
0
|
0
|
0
|
0
|
|
Revaluation
Reserves
|
-
|
0
|
0
|
0
|
0
|
|
Treasury
Stock
|
-
|
0
|
-
|
(43.29M)
|
(43.29M)
|
|
Total Shareholders' Equity
|
-
|
23.5M
|
(15.9M)
|
73.19M
|
106.21M
|
|
Accumulated
Minority Interest
|
-
|
0
|
0
|
0
|
604,000
|
|
Total
Equity
|
-
|
23.5M
|
(15.9M)
|
73.19M
|
106.81M
|
|
Liabilities
& Shareholders' Equity
|
-
|
63.04M
|
57.65M
|
124.4M
|
168.61M
|
|
Copyright 2012 FactSet Research Systems Inc. All rights
reserved. Source FactSet Fundamentals.
Figure 3: Statement of Cash Flows
in millions
Source: Company Documents, Student Estimates
Operating Activities
Fiscal
year is January-December. All values USD millions.
|
2007
|
2008
|
2009
|
2010
|
2011
|
5-year trend
|
Net Income before Extraordinaries
|
6.26M
|
13.02M
|
2.35M
|
(9.72M)
|
18.62M
|
|
Depreciation,
Depletion & Amortization
|
30,000
|
140,000
|
415,000
|
677,000
|
2.03M
|
|
Depreciation
and Depletion
|
30,000
|
140,000
|
415,000
|
677,000
|
2.03M
|
|
Amortization
of Intangible Assets
|
0
|
0
|
0
|
0
|
0
|
|
Deferred
Taxes & Investment Tax Credit
|
(808,000)
|
(27,000)
|
(313,000)
|
(2.58M)
|
805,000
|
|
Deferred
Taxes
|
(808,000)
|
(27,000)
|
(313,000)
|
(2.58M)
|
805,000
|
|
Investment
Tax Credit
|
0
|
0
|
0
|
0
|
-
|
|
Other
Funds
|
373,000
|
1.43M
|
15.49M
|
46.68M
|
12.34M
|
|
Funds
from Operations
|
5.85M
|
14.56M
|
17.95M
|
35.05M
|
33.8M
|
|
Extraordinaries
|
0
|
0
|
0
|
0
|
0
|
|
Changes
in Working Capital
|
(5.96M)
|
(19.08M)
|
(6.19M)
|
(18.42M)
|
(5M)
|
|
Receivables
|
(8.26M)
|
(15.21M)
|
(5.26M)
|
(19.78M)
|
(4.22M)
|
|
Accounts
Payable
|
1.39M
|
1.02M
|
2.37M
|
8.2M
|
7.62M
|
|
Other
Assets/Liabilities
|
(158,000)
|
(3.39M)
|
2.57M
|
(3.5M)
|
(4.63M)
|
|
Net Operating Cash Flow
|
(111,000)
|
(4.51M)
|
11.76M
|
16.63M
|
28.8M
|
|
Investing Activities
|
2007
|
2008
|
2009
|
2010
|
2011
|
5-year trend
|
Capital Expenditures
|
(596,000)
|
(932,000)
|
(1.31M)
|
(2.94M)
|
(7.59M)
|
|
Capital
Expenditures (Fixed Assets)
|
(596,000)
|
(763,000)
|
(1.23M)
|
(2.63M)
|
(7.56M)
|
|
Capital
Expenditures (Other Assets)
|
0
|
(169,000)
|
(79,000)
|
(313,000)
|
(31,000)
|
|
Net
Assets from Acquisitions
|
0
|
0
|
0
|
0
|
(29.46M)
|
|
Sale
of Fixed Assets & Businesses
|
0
|
0
|
0
|
0
|
0
|
|
Purchase/Sale
of Investments
|
0
|
0
|
0
|
0
|
0
|
|
Purchase
of Investments
|
0
|
0
|
0
|
0
|
0
|
|
Sale/Maturity
of Investments
|
0
|
0
|
0
|
0
|
0
|
|
Other
Uses
|
0
|
0
|
0
|
0
|
0
|
|
Other
Sources
|
0
|
0
|
0
|
0
|
0
|
|
Net Investing Cash Flow
|
(596,000)
|
(932,000)
|
(1.31M)
|
(2.94M)
|
(37.05M)
|
|
Financing Activities
|
2007
|
2008
|
2009
|
2010
|
2011
|
5-year trend
|
Cash
Dividends Paid - Total
|
0
|
0
|
0
|
0
|
0
|
|
Common
Dividends
|
0
|
0
|
0
|
0
|
0
|
|
Preferred
Dividends
|
0
|
0
|
0
|
0
|
0
|
|
Change
in Capital Stock
|
2.26M
|
358,000
|
(28.24M)
|
285,000
|
71.04M
|
|
Repurchase
of Common & Preferred Stk.
|
0
|
0
|
(28.64M)
|
0
|
0
|
|
Sale
of Common & Preferred Stock
|
2.26M
|
358,000
|
396,000
|
285,000
|
71.04M
|
|
Proceeds
from Stock Options
|
2.17M
|
146,000
|
0
|
0
|
69.9M
|
|
Other
Proceeds from Sale of Stock
|
86,000
|
212,000
|
396,000
|
285,000
|
1.14M
|
|
Issuance/Reduction
of Debt, Net
|
(425,000)
|
23.86M
|
(95,000)
|
(9.91M)
|
(47.7M)
|
|
Change
in Current Debt
|
(425,000)
|
(463,000)
|
(95,000)
|
10.8M
|
(919,000)
|
|
Change
in Long-Term Debt
|
0
|
24.32M
|
0
|
(20.71M)
|
(46.78M)
|
|
Issuance
of Long-Term Debt
|
0
|
24.32M
|
0
|
0
|
0
|
|
Reduction
in Long-Term Debt
|
0
|
0
|
0
|
(20.71M)
|
(46.78M)
|
|
Other
Funds
|
(548,000)
|
0
|
253,000
|
662,000
|
1.77M
|
|
Other
Uses
|
(548,000)
|
0
|
(326,000)
|
(50,000)
|
0
|
|
Other
Sources
|
0
|
0
|
579,000
|
712,000
|
1.77M
|
|
Net Financing Cash Flow
|
1.29M
|
24.22M
|
(28.08M)
|
(8.96M)
|
25.11M
|
|
Exchange
Rate Effect
|
-
|
-
|
-
|
-
|
(25,000)
|
|
Miscellaneous
Funds
|
0
|
0
|
0
|
0
|
0
|
|
Net
Change in Cash
|
580,000
|
18.77M
|
(17.63M)
|
4.73M
|
16.84M
|
|
Free Cash Flow
|
(707,000)
|
(5.28M)
|
10.53M
|
14.01M
|
21.24M
|
|
Copyright 2012 FactSet Research Systems Inc. All rights
reserved. Source FactSet Fundamentals.
Figure ·: Other Statements or
Exhibits
in millions
Source: Company Documents, Student Estimates
Ownership and material conflicts of
interest:
The author(s), or a member of their household,
of this report [holds/does not hold] a financial interest in the securities of
this company.
The author(s), or a member of their household,
of this report [knows/does not know] of the existence of any conflicts of
interest that might bias the content or publication of this report. [The conflict of interest is…]
Receipt of compensation:
Compensation of the author(s) of this report
is not based on investment banking revenue.
Position as a officer or director:
The author(s), or a member of their household,
does [not] serves as an officer, director or advisory board member of the
subject company.
Market making:
The author(s) does [not] act as a market maker
in the subject company’s securities.
Ratings guide:
Banks rate companies as either a BUY, HOLD or
SELL. A BUY rating is given when the
security is expected to deliver absolute returns of 15% or greater over the
next twelve month period, and recommends that investors take a position above
the security’s weight in the S&P 500, or any other relevant index. A SELL rating is given when the security is
expected to deliver negative returns over the next twelve months, while a HOLD
rating implies flat returns over the next twelve months.
Investment Research Challenge and Global
Investment Research Challenge Acknowledgement:
[Society
Name] Investment Research Challenge as part of the CFA Institute Global
Investment Research Challenge is based on the Investment Research Challenge
originally developed by the New York Society of Security Analysts.
Disclaimer:
The information set forth herein has
been obtained or derived from sources generally available to the public and
believed by the author(s) to be reliable, but the author(s) does not make any
representation or warranty, express or implied, as to its accuracy or
completeness. The information is not intended to be used as the basis of any
investment decisions by any person or entity. This information does not
constitute investment advice, nor is it an offer or a solicitation of an offer
to buy or sell any security. This report should not be considered to be a
recommendation by any individual affiliated with [Society Name], CFA Institute or the Global Investment Research
Challenge with regard to this company’s stock.
