cocacolabuffet's  Instablog

Third Quarter 2009 Earnings Highlights

    -- Revenue for Q3 2009 increased 131% to $4.9 million from $2.1 million in
       Q3 2008.
    -- Gross profit (exclusive of depreciation and amortization) increased
       112% to $1.9 million for Q3 2009 from $0.9 million in Q3 2008.
    -- Q3 2009 gross margins decreased slightly at 39.1%, vs. 42.6% for Q3
       2008.
    -- Income from operations increased 150% to $1.3 million from $536,000 in
       Q3 2008.
    -- Net income increased 112% to $1.1 million from $506,000 in Q3 2008.
    -- Diluted earnings per share increased to $0.27, from $0.14 in Q3 2008.
    -- Weighted average number of diluted shares outstanding was 3.95 million
       as of September 30, 2009, compared to 3.56 million as of September 30,
       2008.
    -- Completed an initial public offering of 1,700,000 ordinary shares at a
       price of $6.75 per share, traded on NASDAQ Capital Market on September
       10, 2009.

Contracts:
    -- Awarded $960,000 in Mountain Torrent Forecasting contracts covering
       eight projects in four provinces.
    -- Awarded $1.6 million Municipal Sewage Treatment contract in Kuancheng
       County of Hebei Province.
    --Awarded $1M Phase One Contract for Wastewater Treatment Plant  in      Jinjing Newtown in Baodi District of Tianjin Municipality in Northern China.

The Bureau Labor of Statistics (BLS) announced today that the unemployment rate increased from 9.8% in September to 10.2%, the highest since 1983. 190,000 non-farm jobs were lost. 8.2 million people lost their job since December 2007, the beginning of the economic meltdown. In October, the number of unemployed persons increased by 558,000 to 15.7 million.

On a normal day, one would have taken this as a disastrous number. After all, 10% was thought of a psychological level just like Dow Index 10,000. But, nothing, nada!

The news received fairly silent treatment from the market as the market wanders around a very narrow range for the most part of the trading day (It's 2.34pm EST now). With a number like this and there is no triple digit sell-off, not even a double digit sell-off, not even a knee-jerk reaction, there is only one obvious reason: People are not panicky. People saw it coming and people believed this was as bad as it could get.

On the hind sight, it probably should not be a surprise after all. The survey of 52 economists by Wall Street Journal in September reported that most economists still expected the unemployment rate will climb to 10.2%, from today's 9.7%, before falling early next year. These economists also in general expected jobs being added in the next 12 months although they expected only 200,000 jobs will be added. They expected the unemployment rate to stay as high as 9.3% in December 2010.

This is quite consistent with the Fed's forecast in September FOMC minutes. The Fed expected the unemployment rate to stay around 9.4% in 2010 and come down to 8% only in 2011.

So, now we know people did see it coming and it should not come as a surprise that the unemployment rate will stay high for quite a while (which is typical of recessions in 1990s and 2000s). The next question we have to get ahead is: Is 10.2% as bad as it can get?

Related posts:
http://cocacolabuffet.blogspot.com/2009/11/how-much-longer-can-productivity-be.html

The Bureau of Labor Statistics (BLS) reported a stunning 9.5% jump of productivity in the third quarter. Productivity , simply put, is output per labor hour. With unemployment rate expected to top 10% soon, workers who still have jobs are beeing squeezed to get the job done. How much longer can companies go without hiring by simply squeezing every bit out of productivity?

 

Although history does not always repeat in the same manner, it may be fun to do a little bit of pre-weekend economics homework by looking into the past. I looked at the economic downturn in the last 40 years. The economic downturn refers to the peak to trough of the US economy as marked by National Bureau of Economic Research (NBER).

 

The first date marked the peak of a business cycle while the second date marked the trough (the end of the downturn) and the number in parenthesis marked the quarter.

 

1. December 1969(IV) --November 1970 (IV)

Productivity peaked 1 quarter after the end of downturn. Unemployment peaked 1 month after the end of downturn.

 

2.November 1973(IV)-- March 1975 (I)

Productivity peaked 1 quarter after the downturn ended. Unemployment peaked 1 month after the end of the downturn

 

3. January 1980(I)-- July 1980 (III) 

Productivity peaked 2 quarters after the downturn ended. Unemployment peaked in the very same month the downturn ended.

 

4. July 1981(III) --November 1982 (IV) 

Productivity peaked 2 quarters after the downturn ended. Unemployment peaked 1 month after the downturn ended

 

5. July 1990(III)-- March 1991(I)

Productivity peaked 4 quarters after the downturn ended while unemployment 15 months after the downturn ended

 

6. March 2001(I)-- November 2001 (IV)

Productivity peaked 7 quarter later although there was a significant spike 1 quarter after the downturn ended.Unemployment peaked 17 months after the end of downturn

 

7. December 2007(IV) --  ???

 

By a very quick look at these numbers, one may notice a difference between the periods in 1970s,80s and the periods in 1990s,2000s. During downturns in 1970s,1980s, productivity and unemployment peaked soon after the end of the downturn (within a quarter or two for productivity and a month or two for unemployment). In contrast, productivity and unemployment peaked long after the end of downturns was marked in 1990s and 2000s (as long as 5 quarters and/or 17 months).

 

What contributed to such a long lag between the bottom of the downturn and the peak of productivity and unemployment? A wild guess of mine would be technology and outsourcing. Technology nowadays enables a company to go by just fine without many in-house supporting services such as accounting, human resources, customer services. These tasks can all be outsourced in order to save cost. I suspect this will also be the case for this downturn. Productivity and unemployment rates can stay high long after the trough has been reached.

 

Ok, now. The next question is: Have we reached the trough yet?