Arse reckonings?Here's the address. You want to see or betetr leave with the financial statement #259524 (ársreiknings in Icelandic)
Arse reckonings?Here's the address. You want to see or betetr leave with the financial statement #259524 (ársreiknings in Icelandic)
No, just a bunch of people ITT who can't read a financial statement or who are just trolling (hi Maz)Originally Posted by Zpiritual
As was said before, the Income Statement isn't where the information is. It's in the balance sheet, cash flow, and, as always, in the notes.
So CCP raised $16.5M in equity over 2010. The shares were issued in 09 and CCP received the money from existing investors over the course of 2010. This is how they improved their cash position.
The loan CCP took out is repayable on October 28, 2011 and is listed as Current maturities of non-current liabilities in the balance sheet with a value of $11.8M (see note 19, pg31). It was interest only until its maturity this October.
CCP lists an operating profit $6.5M but this relies exclusively on the capitalization of in-process R&D. It is the most accurate and appropriate way to treat those expenses, but it can make it difficult for the inexperienced to understand what is going on with the company.
CCP increased its development asset by $23.5M in 2010 and amortized $6.5M of its existing intangible assets. This shows as a net capitalization of $17M. In the cash flow statement you can see that net cash from operations is $17.3M vs cash charges for investment activities (development + other) of $25.9M. Raising net $16M only improved their cash position by $7.4M
TLDR CCP is burning $8M a year in cash. They have to repay $11.8M this October which will wipe out their current cash balances. This leaves a rather large hole which can only be filled through further debt or equity instruments.
CCP is making an accounting profit but is RAPIDLY running out of cash thanks to the cost of WoD and Dust. They are desperate for money and need MT to show investors/banks that their business is improving. They are also carrying a large amount of capitalized development that should really be written off, wiping out the "retained earnings" of the balance sheet.
Interesting, generally a sign of low liquid capital(what is rather unlikely considering the 11M cash) or short/medium therm measures in times of big investments laying ahead of you.The Board of Directors recommends that dividends shall not be paid to shareholders in 2011.
Also nearly 17M more in the development cost asset(probably mostly on dust/WOD).
+11.7% more profit from sales, however 12.6% less profit after all expenses(higher publishing costs, higher general and administrative costs, probably by dust).
Basically it shows a steady growth on sales(10%), however the overall profit goes down by higher costs/investments compared to 2009. Keep in mind that this kind of reports always show a bit more positive than reality is most of the time.
Assuming you want a steady profit after all expenses or a growth(what looks nice to investors) this looks like:
A: They expected a bigger profit from her sales.
B: Lower costs during the year.
C: Most likely a mix of both.
So they might try to shove in MT to keep on track with the total gains after all expenses without reducing the money they can spend on her projects. Considering that the total amount of money they need to spend will be higher with dust getting closer to release(PR, advertising, servers, support team, maintenance team, beta testers, extra man power to hold release dates) they might require it to keep a positive balance till they actually make money with dust(keep in mind they have the extra risk on top of it if the product fails).
Nope - the $11M in cash is going away October 28th with their required $11.8M maturity payment on their loans.Originally Posted by The Djego
They are in deep trouble.
A ok, missed this. Yeah then it is probably just the lack of liquid capital at this point.Originally Posted by Ash2k7
As someone who has nothing to do with economics, isnt a lump sum repayment of a 11m dollar loan kinda crazy? Surely is set up to be paid off over time?
They put out bonds, which can be paid off over time or in one lump sum, much like how you can buy government bonds.Surely is set up to be paid off over time?
nah, you just grab the next loan when it's due.
if you saved up some until then, it'll be lower, sure vOv
Yes, if they have not then it makes their position on the balance sheet a lot better than it really is.Originally Posted by Caius Sivaris
This is true, and no one said it wasn't. What we said was that you can use that in order to lie about your balance sheet position. Because the depreciation of the asset, if it is not something with strict depreciation rules, something like say "a game engine" is going to come pretty much whenever the company wants it. Until that time they can "buy assets" at whatever stated value and use those "asset purchases" to hide what otherwise would be losses.Originally Posted by Grarr Dexx
In short, if you buy an asset that is worth less than its purchase price, but record it at its purchase price you have hidden a loss.
The allegation was that CCP was in effect doing this, because the game resources that it is creating are not worth what they say they're worth. Note that this may or may not be true.
BUT also note that it doesn't matter, because with regards to bankruptcy what matters is your cash position, and your cash position is not seen on your balance sheet, only the statement of cash flows.
You have to look at both in order to be able to determine the strength of a company [and you would like to have independent evaluation as to the value of held assets and their ability to be liquidated]
It is not hard to get negative taxable income by deferring official losses and depreciating assets on a different schedule [I.E. you can internally record a depreciating asset in a different way than you do so externally]. You can also oftentimes defer prior net tax losses to the current year as to offset gains.Originally Posted by RoemySchneider
Not really. Businesses are less likely to amortize than individuals due to a varying number of reasons. But think of the loan as it is in terms of their total revenue. Its what, 10%? So to be analogous would be a 10k loan for an individual making 100k/year payable in a lump sum.As someone who has nothing to do with economics, isnt a lump sum repayment of a 11m dollar loan kinda crazy? Surely is set up to be paid off over time?
So, how badly does lets say 3k accounts suddenly unsubscribing hurt them?
Can't see this info from work for myself . Might be interesting armchair analysis anyways from you guys for the thread.
Not too terribly badly, its about 150k on the cash position for October assuming a 12 dollar/month average subscriber.
Guild Wars has been running for at least 6, although to be fair there's no lasting death penalty and no monthly sub.Originally Posted by Erdiere
Nope.Originally Posted by Leboe
Businesses raise money for the short term, so a mortgage style payment would fuck shit up. Borrow $11M in 08, pay off 3.5M per year. Instead CCP had to only pay the fairly low interest cost and needs to roll over their financing in October or pay off the loan.
Businesses are better than people at making balloon payments. Businesses also tend to be better at making good use of cash flow instead of spending it all on hookers and coke like people.
is it already too late for
"inb4 community discovers major tax-fraud within ccp"?
Depends a bit what you expecting. CCP might be not able to keep a positive balance/lacking additional money to do Dust if they go with a constant payment.Originally Posted by Leboe
You could basically say, I don't have the extra liquid capital to pay it over time, but in 3 years I will have a product that is worth something on his own, a reduction in costs after the core development is done where I only have to do maintenance and additional revenue from the sales of this product itself.
It is kind of risky and probably CCP expected(like anybody in the IT) to finishing the product in time to have Dust on the market at the time thy need to repay the loan, or get another on her finished product to pay the first one up.
I've never actually done this in practice, so take my notes with a grain of salt, but I've studied it enough in theory to not be totally talking out of my ass. Here's a decent tl;dr for you all.
Income statement: For FY 2010, CCP earned $59.2M in gross revenue, and spent $52.7M on operating expenses - GMs, servers, advertising, credit card fees, all that. On top of that, they spent $1.3M on interest, $1.5M on adverse changes in exchange rates, and actually earned $1.7M in tax credits(see my reply to Roemy below for an explanation). Total profit on the year was $5.4 million.
Balance sheet: The biggest change here is an increase of $17 million in capitalized development costs, which is to say the amount of money they've spent "buying" code over and above the depreciation in the value of old code. That $17M total is $23.5M in expenses minus $6.5M in depreciation, and it looks to cover all three games. The company also raised $16M from selling additional stock to its existing owners(this technically happened in FY 2009, but they actually got the cash in FY 2010). On the liabilities side, they didn't borrow any new money, but they do have a rather hefty loan(almost $12M) coming due this October.
Cash flows: As you might expect from the above, the cash flows were positive mostly because of the stock sale. They sold $16M of stock, and total cash went up $7.4 million, which means that their burn rate is about $8.6M for the year. The vast majority of this can be explained with profit less net capitalized development(those two combined yield $9.6M in negative cashflow), with the other million coming from the net of things like running up liabilities(+$1.3M), tax credits(+$2M), income tax paid(-$1.7M - it's based on taxable income in 2009, which was positive), burning down inventory(+$0.8M), purchases of property and equipment(-$2.4M), and some other small fry.
In sum, CCP is earning a paper profit, but because a huge proportion of their paycheques go to dev teams, they're actually burning cash fairly fast(net burn of $8.6M last year) and getting a gigantic code asset to show for it. They actually have more value of code than they have in total equity. As long as their code is worth money - i.e., as long as the three games are successful - that's fine, but it puts them in a bit of a cash crunch in the short term. They only have $11.2M of cash on hand, which is enough to get them to spring 2012 before they go broke(and, in practice, they're going to need cash to run, so they'll hit the wall earlier than that), and they have a loan worth $11.7M coming due on October 28th of this year. They've just hit up the investors for a huge cash injection a year ago, so that well is probably dry, and the terms of their loan state that they can't really borrow any more.
Now, it's not as bad as that might sound. While they have other liabilities - prepaid subscriptions, future tax bills, some money owed to their suppliers, etc. - that one loan is all they have in the way of bank debt. But this is a company that's burning cash, and if I were a bank, I'd want to ask some serious questions about release dates of their other would-be income sources before I agree to roll over(and expand, in all likelihood) the loan.
It's important to remember that financial accounting and tax accounting are completely separate. For example, let's say you hold a bunch of stock in a company and it spikes. This is a gain in the value of your assets, and you show a profit on your financial statements. However, you only have to pay tax when you sell it(in most countries), because corporate tax is usually based around the principle of hitting companies up only when they actually have money to pay the bill. So if your company lost money on its operations, then you can actually get a loss on the income that the tax agency sees, and they'll say "Okay, the next $10M you make is tax-free, to cancel out the loss you just took", even though your financial accounting shows a profit.Originally Posted by RoemySchneider
I'm pretty sure that what happened in CCP's case is that they're capitalizing development costs for the financials and expensing them for their tax returns. That is to say, when they report how well they did to investors, the dev team's salary is counted as buying an asset(specifically Eve/Dust/WoD code). When they report to the tax man, they count it as an expense and record no such asset. The net increase in that asset for FY 2010 was about $17 million, which dwarfs their $5.4M profit.
(It should also be noted that there's absolutely nothing wrong with them doing this, and that it doesn't imply that anything fishy is going on - in fact, there's a good chance that it's actually legally required of them. As long as the games they're making aren't flops, the value of that code as an asset is real, and it will earn them revenues as they go along)
I'm pretty sure "arse" derives from the word for "end". So actually, yes.Originally Posted by LuigiThirty
Question : how does the infamous stack of unspent PLEX appears in the statement, if at all? Lots of assumption about the number of unspent PLEXes around maybe it's time to see a definite answer.
No, because nothing here indicates fraud. Like I said to Roemy, tax accounting is very different from financial accounting, so the two giving wildly different results is quite plausible. Given how focused the company is and the usual treatment of capitalized development expenses, I'd be more surprised if it wasn't the case.Originally Posted by Cortess
"Deferred income" under Current Liabilities on the balance sheet. More detail available in note #23. This will include both PLEX and people who buy long subscriptions, though(since someone who buys a year of time on Dec. 31st has given CCP $131.40, but they've only provided about 30 cents worth of the service that was bought, the rest is service that they're now on the hook for providing).Originally Posted by Caius Sivaris
Yeah.Originally Posted by Herschel Yamamoto
Also some countries provide R&D tax credits. Some of it is to encourage economic activity, but much of it is to reflect that you are burning cash while typical accounting measures may show you as being profitable and liable to tax. Since govenrments usually want to get as much money out of you as possible, they've created ways to better match your tax payable with your cash profits.
I fly out tomorrow, but I'd unironically like those of you with accountant/bizdev experience to dissect this thing, I'll have a full 'do nothing' day in Reyk on Wednesday and the business stability of CCP given its new properties is a serious concern of mine.