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To: Roy F who wrote (629)1/2/2001 9:28:39 AM
From: Labrador
   of 6947
 
So where will the new year take KVHI? siliconinvestor.com

November, December have not brought holiday cheer to KVHI. Will the new year turn the company's share price around?

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To: Roy F who wrote (629)1/2/2001 8:04:04 PM
From: Roadkill
   of 6947
 
Since we won't know for another month, I thought I would engage in some WAGing about 4Q numbers to pass the time.

I find the timing of this private placement interesting. Done the first business day of a new quarter, the timing suggests it could have been done last quarter if that suited the parties' interests. If KVHI had a money-losing quarter, the dilution created by the private placement would actually decrease the EPS loss. (I suspect this accounting trick is precisely why AMZN repriced its employees' stock options a few months ago, but I digress). Accordingly, if KVHI had a money-losing 4Q, it would be a great thing to dilute the shares a little at the end and use a larger number for the EPS calculation, thus minimizing the loss from a per-share perspective. But KVHI didn't do this. This suggests that KVHI, at a minimum, had a break-even 4Q. I know this was the forecast, but given the weaker economy, I was unsure of the effect on the consumer products, which still make up a significant portion of revenues.

Back to lurking.

RK

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To: Roadkill who wrote (631)1/2/2001 8:13:51 PM
From: Sector Investor
   of 6947
 
<<This suggests that KVHI, at a minimum, had a break-even 4Q. I know this was the forecast, but given the weaker economy, I was unsure of the effect on the consumer products, which still make up a significant portion of revenues.>>

messages.yahoo.com

Most thread activity is on Yahoo! Come on over if you want to talk.

messages.yahoo.com

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To: Roadkill who wrote (631)1/2/2001 9:15:08 PM
From: Labrador
   of 6947
 
>>If KVHI had a money-losing quarter, the dilution created by the private placement would actually decrease the EPS loss.<<

I think that you are reading too much into the date. I certainly would not postulate earnings merely because the shares were sold in Jan. For accounting purposes, if the stock were sold on Dec. 31, for example, only one-day's worth of shares would be considered -- it's a weighted-average calculation.

It is outstanding that a major shareholder took such a large increased position. Demonstrates confidence -- esp. in the current environment.

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To: Labrador who wrote (633)1/2/2001 9:55:37 PM
From: Roadkill
   of 6947
 
>>I think that you are reading too much into the date. I certainly would not postulate earnings merely because the shares were sold in Jan. For accounting purposes, if the stock were sold on Dec. 31, for example, only one-day's worth of shares would be considered -- it's a weighted-average calculation.<<

The most recent Q release doesn't indicate it's a weighted average. Is that an accounting convention? If that's the case, you're correct that one day wouldn't make a lot of difference. But I'm not sure that it is weighted. Do you have a link that might help?

>>It is outstanding that a major shareholder took such a large increased position. Demonstrates confidence -- esp. in the current environment.<<

No one argues with that! It isn't the grand press releases that define a quality company, but the small things it does that make sense. Whenever a company I invest in does something that seems silly, I take that as a red flag. I can't tell you how many times that rule has saved me from companies with what appear to be fabulous outlooks in untapped markets. In any event, KVHI has been doing a lot of things lately that are quite logical, including this move. As a long-term follower of KVHI, I'm very pleased.

RK

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To: Roadkill who wrote (634)1/3/2001 7:16:59 AM
From: Labrador
   of 6947
 
>>The most recent Q release doesn't indicate it's a weighted average. Is that an accounting convention? If that's the case, you're correct that one day wouldn't make a lot of difference. But I'm not sure that it is weighted. Do you have a link that might help?<<

Here's info on primary EPS; the same approach on fully diluted EPS.
Applying GAAP and GAAS § 4.03


APPLYING GAAP AND GAAS
Copyright 1999 by Matthew Bender & Company, Inc.


PART II: GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
CHAPTER 4. EARNINGS PER SHARE



NOTE: The primary source document for this chapter is FASB Statement No 128.


Applying GAAP and GAAS § 4.03

§ 4.03 Computing Basic EPS



Although the calculation of EPS can become quite complicated for some enterprises, computing the basic EPS is a relatively simple computation for each income component. Basic EPS is used for companies that have a simple capital structure. The basic EPS for such companies is computed as the ratio of income available to common stockholders (the numerator) to the weighted average number of common shares outstanding during the period (the denominator).

The weighted average is used to reflect the effect of increases and decreases in the outstanding common shares during the period. This is an attempt to make the computation consistent with dividends. A holder of common stock is only entitled to dividends if the stock is outstanding when the dividend is declared. The changes in common stock can be the result of reciprocal transfers or stock dividends and stock splits. Additionally, any contingently issuable shares for which all necessary conditions have been satisfied by the end of the period (i.e., they really are no longer contingently issuable) are included in the weighted average shares outstanding as of the beginning of the period in which the conditions were satisfied.

Stock dividends, stock splits, and reverse stock splits change the total number of shares outstanding. Significantly, however, they do not change an individual stockholder's proportionate ownership share. For example, suppose that an individual owns 10,000 shares of stock of a company that has total shares outstanding of 50,000. If the company issues a 2-for-1 stock split, the individual would now own 20,000 shares of the 100,000 shares outstanding--still 20 percent of the outstanding shares. Because stock dividends, stock splits, and reverse stock splits do not affect individual stockholders' proportionate ownership, their effect is reflected retroactively in EPS for all periods presented. The following example illustrates the computation of the weighted average number of shares outstanding.

Example: The company had several transactions affecting the number of shares of common stock outstanding during the year. The transactions and the number of shares involved were:



Change in
Shares from Total Shares
Transaction Outstanding

_________________ _______________
Shares outstanding 1/1 10,000
Shares issued 4/1 8,000 18,000
Shares reacquired and held in treasury 6/1 (3,000 ) 15,000
Issued 10% stock dividend 7/1 1,500 16,500
Shares reacquired and held in treasury 8/1 (6,000 ) 10,500
Shares issued 9/1 12,000 22,500
Issued 2-for-1 stock split 12/1 22,500 45,000

The computation of the weighted average shares outstanding for the period is illustrated in Exhibit 4-1:



Exhibit 4-1

Computation of
Weighted Average
Shares
Outstanding


Retroactive Retroactive
Adjustment Adjusted Adjustment Adjusted
Number of Shares Weighting Weighted Stock Weighted Stock Weighted
Time Period Months Outstanding Factor = Shares Dividend Shares Split Shares

_____________ _____________ _________________ _____________ _____________ _____________ _____________ _____________ _______________
1/1 - 3/1 3 10,000 3/3 = 10,000 110% = 11,000 2 = 22,000

_______________
Weighted Average for First Quarter 22,000

4/1 - 6/1 2 18,000 2/3 = 12,000 110% = 13,200 2 = 26,400
6/1 - 6/30 1 15,000 1/3 = 5,000 110% = 5,500 2 = 11,000

_______________
Weighted Average for Second Quarter 37,400

RETROACTIVELY
ADJUST FOR 10%
STOCK DIVIDEND
(column labeled
Retroactive
Adjustment Stock
Dividend)
7/1 - 8/1 1 16,500 1/3 = 5,500 2 = 11,000
8/1 - 9/1 1 10,500 1/3 = 3,500 2 = 7,000
9/1 - 9/30 1 22,500 1/3 = 7,500 2 = 15,000

_______________
Weighted Average for Third Quarter 33,000

10/1 - 12/1 2 22,500 2/3 = 15,000 2 = 30,000

RETROACTIVELY
ADJUST FOR
2-FOR-1 STOCK
SPLIT (column
labeled
Retroactive
Adjustment Stock
Split)
12/1 - 12/31 1 45,000 1/3 = 15,000 = 15,000

_______________
Weighted Average for Fourth Quarter 45,000

_______________
Total For Year 137,400
Divide By Four Quarters 4

_______________
Weighted Average Shares for the Year 34,350

_______________

_______________

The numerator for basic EPS is even simpler to determine. The only point to bear in mind is that income available to common stockholders (IAC) is not the same as income reported in the income statement. Further, it is important to understand that the "control" income figure is the income from continuing operations, rather than the net income figure. Because senior securities have a claim on income before common stockholders, the claims of all senior securities need to be deducted in determining IAC.

Interest on debt is included in income. The claims of preferred stockholders, however, are not deducted in computing income for the period. Therefore, these claims on income (the dividends on preferred stock) must be deducted from income to compute IAC. Likewise, these claims should be added to any loss for the period in determining IAC. This adjustment should be made for each income component for which EPS will be disclosed.

The dividends on preferred stock should be deducted in the period in which they are earned. To determine the amount of preferred dividends that are earned during the period, it is necessary to know whether the preferred stock is cumulative. If it is cumulative, current period dividends are earned whether or not they are declared. If, however, the preferred stock is noncumulative, the dividends are not earned until they have been declared. The following example illustrates the computation of IAC when the company has preferred stock outstanding.

Example: The following facts apply to Corporation A:



Preferred stock outstanding:
10,000 shares,
$ 100 par value,
3% dividends,
participating

Net income:
19X1 $ 100,000
19X2 100,000
19X3 100,000
19X4 100,000

Total dividends declared on preferred stock:
19X1 $ 30,000
19X2 --
19X3 50,000
19X4 60,000




Case 1. Assume that the preferred stock is noncumulative. The following adjustments are made to net income to determine IAC for years 19X1
through 19X4:
Preferred Dividends
Year Net Income - Earned = IAC

____________ __________________ ____________________________________ __________________
19X1 $ 100,000 $ 30,000 $ 70,000
19X2 100,000 -- 100,000
19X3 100,000 50,000 50,000
19X4 100,000 60,000 40,000

Case 2. Assume that the preferred stock is cumulative. The following adjustments are made to net income to determine IAC for years 19x1
through 19x4:
Preferred Dividends
Year Net Income - Earned = IAC

____________ __________________ ____________________________________ __________________
19X1 $ 100,000 $ 30,000 $ 70,000
19X2 100,000 30,000 a 70,000
19X3 100,000 30,000 b 70,000
19X4 100,000 50,000 c 50,000

a The dividends are in arrears, but are still earned in 19x2.
b The $ 50,000 dividends declared represent a payment of the 19x2 dividends in arrears and $ 20,000 of current
year dividends. There are $ 10,000 dividends in arrears at the end of 19x3. Again, all $ 30,000 of 19x3 dividends
are earned since they are cumulative.
c The $ 60,000 dividends declared represent a payment of the 19x3 dividends in arrears, the current year
dividends of $ 30,000 plus an additional $ 20,000 dividends for the current year under the participation feature.
Therefore a total of $ 50,000 in dividends are earned in 19x4.
Once the IAC and the weighted average shares of common stock
outstanding for the period are determined, the basic EPS can be
computed as follows:



IAC

Basic EPS = _______________________________
Weighted Average
Shares of Common
Stock Outstanding

To illustrate, assume
that XYZ Company had
IAC of $ 20,000. XYZ
computed the weighted
average shares
outstanding for the
period to be 25,000.
Basic EPS can be
calculated as:

Basic EPS = $ 20,000 = $ .80
25,000 sh

If XYZ has a simple capital structure, it would report its EPS for net income as $ .80 on the face of its income statement. An entity with a simple capital structure need only report one EPS number for each component of income.

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To: Roadkill who wrote (631)1/3/2001 7:47:46 AM
From: Roy F
   of 6947
 
(OT) RK,

You're still around!!! Good to 'hear' from you after such a long quiet period. KVHI just keeps plugging along... loving it.

Roy

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To: Roy F who wrote (636)1/3/2001 8:38:02 AM
From: robert b furman
   of 6947
 
Hi Roy,

I'm not sure a detailed analysis on EPS or number of shares outstanding is the central point regarding KVHI'S current actions.

I think it speaks volumes that the original fund to invest in KVHI was the "go to fund" for the entire SPO.The fact that these funds will be used for development of a low profile antennae(for automotive use - they're getting close to my need for the Harley <VBG> ) and a fiber optic modulator that will rewrite the bandwidth capabilities that can be fed into an optic cable - or recieved by a satellite on a mobile platform is HUGE.

These develope and advance the killer applications of satellite - Mobile internet access.The fact that funding is obtained for the buildout (to me indicates that a working prototype was demo'd).KVHI has for a long time emphasized that patents would protect their designs.The ability to obtain funding thru an SPO - (which always dilutes ownership) at a price that in fact supported the price of the stock SAYS IT ALL !!!

THESE GUYS ARE GOOD!!! and people with much larger positions than us are grabbing a bigger peice.

IT APPEARS CLEAR TO ME !!!


AAAALLLLLLLLLLLLLLL !!!! AAABBBOOOAAARRRRRDDDDD !!!!!!


Bob

I think this suggests KVHI is close to Niche leadership in two huge high growth potential markets. Not to mention their leadership in existing products(stabilized antennae platforms and FOGs).


This is the strongest evidence to date that we are beyond concepts. We have effectively begun buildout of the first commercial entries in two dynamic and sought after products.

Now let's announce a couple million dollar sales award for the long awaited current sensors.HEHEHEHE

In short don't sweat the EPS.With margins that KVHI likes - worry about the ramp up and earnings shall soon follow.

I just love this company !!!!!


Bob

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To: robert b furman who wrote (637)1/3/2001 9:10:44 AM
From: Roy F
   of 6947
 
Hi Bob,

Your thoughts are always enlightening... and entertaining. I hadn't considered that they may already have a prototype, but I did figure that Wisconsin, being a reasonably conservative investor, was well assured of their investment's prospects.

Their relationship with KVH is clearly very positive and MKVH has, once again, handled the situation beautifully. I've been wondering where they would get funding for further expansion. Great solution.

It just keeps getting better.

Regards,

Roy

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To: Roy F who wrote (638)1/3/2001 9:29:48 AM
From: robert b furman
   of 6947
 
Hi Roy,

Being able to attract Dr Dalton and Mr Seavey as tech consultants and getting funding from an original stock holder just really shows Martin must be of great class and character.

I would really like to meet him someday.His track record oozes class. JMHO

Bob

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