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  • red_wombat80 red_wombat80 Mar 15, 2006 8:27 AM Flag

    Look closely at the cc and figures!

    monty -

    Interesting anlysis, and gives one something to ponder. However, I think that you are being a tad too pessimistic. I would look come at it from a different angle.

    Revenue has been growing at about 17% clip over the past 3 years and over 20% for the past two. The growth rate for non-SCSS revenue is even faster since the % of total revenue for other customers has grown. I should do the math and figure out the exact growth rates but I'm too lazy.

    Therefore if we assume that the non-SCSS revenue grows by 20% (and with 60 new products and recent history, this should prove conservative) then by 2007 when the major impact on SCSS take place, this revenue will grow from $13.4M to $19.3M. Add to this 50% of the SCSS business (I'll go along with a 5% reduction in price) and you have another $7.5M. This does result in a revenue drop from $29.1M to $26.8M, but this would still be the second highest revenue amount in the company's history, so they should still be able to maintain profitability and then grow from this new more diversified base. Also, this does not assume that the total Select Comfort business grows, which would lead to more than $7.5M in sales to them as the 50% (times .95 to account for the lower pricing) of the larger pie might be more like $10.0 (assuming 15% growth per year). This would result in total revenue of $29.3M.

    This is all speculation, but to my way of thinking it is as likely as your results. Where did you get $25,106k in revenue for 2005? I'm not sure how this table will look pastred in, but I see $29,106k.

    4th quarter ended 4th quarter ended
    12/31/2005 YTD 12/31/2004 YTD
    Sales $7,563 $29,106 $6,573 $24,199
    Net Income $671 $2,049 $416 $1,090
    Average Shares 3,636 3,626 3,559 3,526
    EPS $.19 $.57 $.12 $.31

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    • red_wombat80

      You are correct. My mistake. Typing late in the night. The total Sales were $29,105,626. Thank you.

      As I said though, I want to see the 10-K before I give some more concrete figures. I was just trying to promote a closer look at the figures after I heard the conference call. My main concern is that it appears to be a race against time. I agree that the sales have been growing quickly, but I am also interested to get a handle of the EMS contribution against the proprietary contribution. Even if the proprietary products had a 50% margin, at 11% of total sales it will still need a lot of leg-work to make up the difference. Furthermore, as Kreuger mentioned, the 4th quarter contribution is misleading because of the sales mix which arose because of the timing differences with orders from different customers and their own products. So it is not so much the headline sales figure which bothers me, it is the gross profit margin. Kreuger made several comments about competitive pressures and it is obvious a problem in the EMS area. He was asked if the other supplier for SCSS was local or offshore and he responded that he knew who it was but was unable to disclose.

      I'm, not trying to put any particular spin on things. I'm actually optimistic by nature. I'm just trying to get a handle on the situation and am sharing my thoughts because a number of posters like yourself have also taken the time in the past have shared your own insights.

      Good Luck

      Monty.

 
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