Question is, why did this quarter's earnings add so little to book value? There's been no share buybacks or dividends, so where's the money going?
I'm happy to report that I did eventually receive a reply, and all my questions were answered to my satisfaction by Mr. Murray Smith.
Just out of curiosity, has anyone ever tried to get in touch with the corporate office via email? I sent them a message a week ago and still haven't received a reply. I know one of the things about small companies is that they don't have a dedicated investor relations department, so some lag time is to be expected, but I'm just wondering if others have had more success communicating with them.
The company's competitive advantage is its engineering expertise, and that's a relevant edge even with additive manufacturing. Someone's still gotta design the product blueprints that get fed into the computer, after all.
Way I see it, the real threat is to the company's component products segment - after all, if you use additive manufacturing to build the whole widget from the inside out, there's no need to contract out to a company like UFP to make components for you. But that's not going to be a problem until the new technology becomes cost efficient enough to become the dominant form of manufacturing, and that's probably at least a decade or two away. By which point UFP could be looking like an entirely different company. This company is nothing if not adaptable.
In short, it's something worth paying attention to, but not a reason to sell or refrain from buying the stock, especially at these prices we're seeing right now. Just some thoughts. :)
Who's to say UFP won't be utilizing this new technology to manufacture their products when it eventually does become widespread? Unlike eBooks, it isn't the product itself that might be rendered obsolete, just the current method of producing it.
Sure, as far as I can tell the loan first popped up in their 10k for fiscal 2008: http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=6505325-802-232962&type=sect&TabIndex=2&companyid=2223&ppu=%252fdefault.aspx%253fsym%253dufpt
Ctrl-F "Bank of America" and it'll bring you straight to it.
I also noticed that the amount of the loan was almost exactly the same as the sum they paid for their 2009 acquisitions, but it was taken out two months before their first acquisition and more than half a year before their other ones. I emailed their investor relations department about this, but never received a reply.
It's true that for many companies it's wise to take advantage of the super low interest rates now, but only if you can put that money to use and earn a higher return than your borrowing rate. As far as I can tell, UFPT is just letting that cash sit there. Combined with their liberal use of stock awards and significantly higher than average executive compensation for a company their size, it makes me concerned about how they're handling their finances. Their outsized growth the past few years has made this a non-issue for investors so far, but I'm worried about what will happen when their growth slows down.
Did some quick and dirty research on the company, it seems like a solid enterprise selling at a fair price. Why are so many players not only bearish on the company, but are so convinced that it's gonna take a hit that they're willing to risk a short? What do they know that we don't?
You mean for their Grand Rapids facility? Wasn't that acquired in 2008 when they acquired Stephenson & Lawyer? Why would they take out a mortgage on it one year later?
Does anyone know why they borrowed 4 million in 2009 when they had 15 mil in cash just sitting around at year end? I looked through the 10-K but couldn't find any info. I like UFPT but I'm a bit concerned about how they're managing their cash. Thanks for any assistance!
Although I like ERTS as a gamer, I'm not sure about my stance on it as an investor. On one hand, they are an extremely well diversified company with a lot of promising IPs...on the other hand, they've been losing money year after year after year. Their operating expenses are extremely bloated and they've been repeating "fewer, bigger, better" for a long time now, but they've yet to see an annual profit.
I believe that they can turn around, but I'm not sure I see a catalyst in their future yet. The Star Wars MMO might do it if it's as good as people hope, but I don't think it's wise to bank entirely on that considering the generally lukewarm reception of pretty much every single MMO released since World of Warcraft, plus at this point we don't really know enough about it to make a call either way.
That clears things up a lot. Thank you for your patience in explaining this stuff - I learned a lot and I will definitely take your advice in seeking out more information about basic accounting. Cheers! :)
Ah hah, I think I get it now! I suspected as much before, but then I got confused because I read about how you're supposed to look for an operating cash flow ratio ( operating cash flow / current liabilities ) greater than 1, otherwise the company may have trouble paying its bills. According to the way cash flow is calculated, the operating cash flow ratio shouldn't matter because you've already taken into account the cost of paying your accounts payable (through net income) before coming up with a cash flow figure, right?
Thanks for the explanation! I'm still not sure I get it, though I definitely understand accounts payable better. Let me see if I can explain the point I'm stuck on...so, a balance sheet is essentially a snapshot of a company's financial condition at a single point in time, right? If you have $1 million in current liabilities on your balance sheet, then generally speaking, by the same time next year, you would've had to pay at least $1 million to your creditors. Your balance sheet next year would still list a similar amount of current liabilities, since you would've taken on more payables during that time to replace the ones you've paid off, but that doesn't change the fact that at least $1 million would've had to come out of your pocket from today to one year later.
In order to fund that $1 million, logically, your operating cash flow for the year has to equal or exceed $1 million, doesn't it?
Sorry, I'm still extremely new to this investing thing (mostly self educated at this point), and came upon something I don't understand. I thought I was just missing something glaringly obvious, but I didn't realize it was so complicated that someone more knowledgeable wouldn't be able to explain it. Thank you for trying to help regardless.
Hmm, I'm afraid I still don't understand how JJSF is paying down its current liabilities. Even if you don't have to pay them off in full at the end of each year, you'll still have to pay them eventually, yeah? And when your business creates new current liabilities, you'll have to pay that down too. Just from a mathematical standpoint, I don't see how that's possible when the amount of cash flowing into the company every year is less than the money the company owes each year for three consecutive years.
Maybe there's something really obvious I'm missing? The only thing I can think of is that current liabilities is already factored into operating expenses, so the cost of paying them is already incorporated into the income statement. Hence net operating cash flow is already discounted the amount of the period's current liabilities. Could this be the case?
Can you explain further? Investopedia's definition of current liabilities is: "A company's debts or obligations that are due within one year."
Yeah, but don't current liabilities always have to be paid off by the end of the year? I'm wondering where JJSF is getting the money to pay off their short term debts when annual operating cash flow is less than the amount they borrow every year. Yeah, they have a strong balance sheet and they can definitely dip into their massive cash reserves to pay off any outstanding accounts, but their cash and current assets have been increasing from year to year so they're probably not doing that, right?
Where is JJSF getting the money to pay off its short term debt? Annual free cash flow has been lower than current liabilities for the past three years (operating cash flow ratio < 1), but they're not using their cash reserves to pay down debt because cash has actually been increasing. Where's the money coming from?