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StemCells Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 3, 2010 06:25AM
StemCells Inc. (STEM) filed Quarterly Report for the period ended 2010-09-30. Stemcells Inc. has a market cap of $114.1 million; its shares were traded at around $0.9 with and P/S ratio of 115. Stemcells Inc. had an annual average earning growth of 5.5% over the past 5 years.STEM is in the portfolios of Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:
Management forms its best estimate on a quarterly basis, after considering actual sublease activity, reports from our broker/realtor about current and predicted real estate market conditions in Rhode Island, the likelihood of new subleases in the foreseeable future for the specific facility and significant changes in the actual or projected operating expenses of the property. We discount the projected net outflow over the term of the leasehold to arrive at the present value, and adjust the reserve to that figure. The estimated vacancy rate for the facility is an important assumption in determining the reserve because changes in this assumption have the greatest effect on estimated sublease income. In addition, the vacancy rate estimate is the variable most subject to change, while at the same time it involves the greatest judgment and uncertainty due to the absence of highly predictive information concerning the future of the local economy and future demand for specialized laboratory and office space in that area. The average vacancy rate of the facility over the last seven years (2003 through 2009) was approximately 74%, varying from 62% to 89%. As of September 30, 2010, based on current information available to management, the vacancy rate is projected to be approximately 74% for 2010 and 2011, and approximately 70% from 2011 through the end of the lease. These estimates are based on actual occupancy as of September 30, 2010, predicted lead time for acquiring new subtenants, historical vacancy rates for the area, and assessments by our broker/realtor of future real estate market conditions. If the assumed vacancy rate for the remainder of the lease had been 5% higher or lower at September 30, 2010, then the reserve would have increased or decreased by approximately $90,000. Similarly, a 5% increase or decrease in the operating expenses for the facility would have increased or decreased the reserve by approximately $77,000, and a 5% increase or decrease in the assumed average rental charge per square foot would have decreased or increased the reserve by approximately $27,000. Management does not wait for specific events to change its estimate, but instead uses its best efforts to anticipate them on a quarterly
Third quarter ended September 30, 2010 versus third quarter ended September 30, 2009. Licensing and grant revenue increased approximately $25,000, or 25%, in 2010 compared to 2009, which was primarily attributable to higher grant revenue at our acquired operations. In the third quarter of 2010, revenue from product sales was approximately $25,000, or 16%, lower as compared to the same period in 2009. This decrease was primarily attributable to large orders for certain products in the third quarter of 2009 that have not recurred in the third quarter of 2010.
Stocks Discussed: STEM,