Since the 2008 recession, the United States economy has been dealing with the “new normal” of slow economic growth. While it has been eight years since one of the worst U.S. recessions in history, the economic recovery appears to be fading and cracks are beginning to show in the bullish bias. Unemployment has made a dramatic recovery, but mostly due to part-time, temporary, or other underemployment.
In April 2016, a survey detecting business confidence among small business owners showed the lowest reading since 2014. Among the worries that were noted by business owners was a slow first quarter, concerns with sales and profitability, rising costs of labor, etc.
With uncertainty brewing across the U.S. economy, companies of all sizes have made downsizing a top priority. Cutting off wasteful spending in order to achieve a more lean business model allows companies to survive in a slow growth environment. One such company that lives and thrives by this type of lean strategy is Halitron, Inc. (OTCPink: HAON).
Halitron is a roll-up, equity holding company with a market cap around $1.4 million, as of May 2016. The Newtown, Connecticut-based company focuses on acquiring assets for sales, marketing, and manufacturing with the purpose of creating roll-up, low-cost operations through vertical integration. In other words, Halitron seeks out businesses and brands that can be operated through Halitron’s existing operational means or can work autonomously. This is all in an effort to keep costs as low as possible, while maximizing resources. Halitron, Inc. operates in two business segments: sales & marketing and manufacturing.
The company’s scalable business model allows the company to employ 37 people across eight countries. While Halitron’s wage costs are highest at its Newtown, CT headquarters, the company’s lean structuring gives Halitron an average hourly labor wage of $4.03 in U.S. currency equivalents.
Halitron is led by 23-year industry veteran, Chief Executive Officer Bernard Findley. Mr. Findley has been working with distressed and growth companies of small and medium capitalization over the course of his career with success. Findley’s experience turning-around 16 distressed businesses over the past five years plays a huge part with his work at Halitron. Upon successful revival of the brands, Findley eventually sold off the brands, where they remain in business today. Halitron’s CEO focuses on the value of the business and its strengths can allow the once-distressed brand reemerge as a restructured, thriving business. Bernard Findley is also the company’s largest shareholder with over 165.3 million shares, as of December 2015.
Major Acquisitions In 2016 Bring Shape to Halitron
The equity holding company has been extremely active with acquisitions in early 2016. Over the course of the past five months, Halitron has completed four acquisitions that hold significant value to the company’s future.
“We have had an extremely busy start to the year. Four key acquisitions including three niche brands and the acquisition of a diverse factory and warehouse strategically located just over the border near Tijuana, Mexico has setup the solid foundation for our acquisition roll-up strategy for years to come. We have recently signed two more letters of intent for niche brands that will fit perfectly within the vertically integrated business model that we have developed, (otcmarkets.com)” detailed CEO Bernard Findley.
Halitron bolsters its manufacturing footprint with the new Mexico factory and gives the company the advantage to acquire other brands and businesses that can be vertically integrated and manufactured in Halitron’s Mexico plant. In addition, the Mexico plant provides Halitron with the advantage of lower wage costs, which amount to around $3.73 an hour in U.S. currency-equivalent.
In addition to the Mexico manufacturing plant, Halitron acquired ArchivalPhotoPages.com, ArchivalMuseumSupplies.com, PiecesInPlaces.com from Plastic Retail Displays, LLC in early 2016. Along with these website business acquisitions, Halitron acquired customer lists that total to around 316,000 potential customers. CEO Bernard Findley notes that these customer lists contain are still relatively untapped and could help boost sales in the future.
Halitron’s Current Active Holdings
As of May 2016, Halitron, Inc. has quite a number of different holding companies that are operational and generating revenues for the company. Among Halitron’s current active holdings are:
- NDG Holdings, Inc.
- PRD Holdings, Inc.
The company’s NDG Holdings, Inc. engages in digital marketing solutions such as search engine optimization, email advertising, website development, etc. This is an important business for the fact that it can help market Halitron’s products and businesses or be used as a standalone service to other businesses and website owners.
PiecesInPlaces.com supplies various folders, files, and other important document holders to customers in the medical, dental, and manufacturing industries. While Halitron faces competition from larger rivals such as Staples, Inc. (NASDAQ: STPLS), Halitron has the advantage by being able to produce the supplies at low cost, listed on PiecesInPlaces.com, rather than using reselling techniques that the large department stores use. The brand also sells to the end user so the business captures a large portion of the margins. The website currently has customer lists totaling around 40,000.
ArchivalMuseumSupplies.com engages in the sale of archival-grade storage to museums, libraries, individual collectors, and more. Among the products sold by the website are museum-grade storage boxes, bags, protective sleeves, and more. The relatively low-competition within the museum-grade storage business provides Halitron with a niche market that is largely recession-proof due to the fact that major customers such as museums and libraries will continue to need these supplies to protect valuable artifacts. Once again, Halitron is able to compete within the space by manufacturing the archival museum products at its Mexico manufacturing plant. In addition to the website, Halitron acquired customer lists totaling 128,000 for the museum supply business.
ArchivalPhotoPages.com is another archival-grade supply company, but focuses on scrapbooking supplies. Halitron hopes to tap the scrapbooking market, genealogy enthusiasts, and other family memories markets through the website. Currently, the website sells a variety of scrapbooking supplies such as albums, paper, photo paper, and various other accessories. Halitron hopes to one day transform ArchivalPhotoPages.com into a new, digital scrapbooking service to help attract a new generation of scrapbook enthusiasts and offer services that can compete with the likes of companies such as Ancestry.com LLC. Along with the website, Halitron acquired the website’s customer list of 148,000 customers.
Lastly, Halitron’s PRD Holdings, Inc. business holds the company’s 12,000 square foot manufacturing division in Tijuana, Mexico. The manufacturing plant specializes in products for the archival storage segmentand various plastic-based products. Halitron notes that the factory has the annual capacity to generate $20 million in sales. In other words, Halitron will be able to have some growing room within its factory to manufacture other items and products in the future.
Halitron’s Share Structure, Financials and Earnings
Turning to Halitron’s share structure, the company had 650 million authorized shares, around 307 million in shares outstanding, and a float of nearly 56 million shares, as of March 2016. As of May 19, 2016, Halitron’s stock trades at $.0048 per share and a market cap of around $1.4 million.
Halitron remains a very young company that has only operated as an equity holding company for just over a year. However, the young company posted some very strong earnings for its first full year under the new, lean, roll-up business model. With the full year ending on December 31, 2015, Halitron reportedly generated revenue of nearly $1.2 million on net income of $146,025 or $.0006 earnings per share (EPS). Meanwhile, Halitron reported that total costs from the company’s operations totaled to just under $60,000 and gross profit margins stood at an impressive 73% for 2015.
Turning to Halitron’s financial statements, the equity holding company reportedly had total current assets of $832,000 and total current liabilities of $738,000, as of December 2015. The company’s assets include $12,000 in cash, $634,000 in accounts receivable and $187,000 in other current assets. Meanwhile, short term debt came in at $223,000 and accounts payable came in at $515,000 for Halitron’s current liabilities.
As Halitron establishes solid footing in 2015, the company is even more optimistic about 2016 and beyond. CEO Findley forecasts that revenue for full year 2016 could come somewhere between $1.2 million and $5 million, as the company focuses on its recent string of acquisitions.
Please take a minute to watch the Halitron, Inc. White Board Presentation:
Halitron, Inc. has shown that its equity holding, scalable business model has potential after strong earnings from full year 2015. Looking forward, the young company still faces a few hurdles that could impact its business.
One of the primary concerns is achieving a line of credit for acquisitions and business funding. CEO Bernard Findley has noted that there have been some difficulties with obtaining a line of credit through traditional banking channels. Unfortunately, this may have more to do with the fact that banks are beginning to tighten up business lending as uncertainty continues to flood the markets.
Another hurdle that Halitron faces is the movement for higher wages. In addition to the widespread movement to raise the minimum wage to $15, the company could potentially be impacted by President Obama’s recent new overtime pay ruling, in which workers that earn $47,476 or less per year care now eligible for additional wages beyond a 40 hour work week. However, due to Halitron’s scalable business, these ruling would maybe impact their headquarters office staff, but the majority of the company’s operations have been outsourced to countries that have a large, reliable workforce that is much more affordable than if the operations were conducted in the United States.
In short, Halitron is a young company, but the entire business is built around the current “new normal” business environment that the country continues to face after 2008. The company’s low overhead and lean business strategy allows the company to operate with more effectiveness. In addition, Halitron’s recent flurry of acquisitions have given the company an entry into various niche markets that are largely recession-proof. As companies large and small continue to cut costs and slash any wasteful spending that is not essential to operations, Halitron continues live and thrive on the idea of effective use of resources by not paying any more than you need to in order to operate. With a one year of impressive results in the rearview mirror, Halitron continues to position for long-term success.