All Eyes On YTB
YTB’s Annual Report (YTBLA.OB) came out last week with a 15% increase in total revenue for the year of $162.5 million, and an increase of more than $7 million travel commissions. This during a very difficult year not only for the company, but the entire economy. If you keep up with financial data and the Annual Reports of late, you would be hard pressed to find a company that is thriving in the current economic climate. Taking the time to look around the industry right now, (and this is just the Travel Industry) you find a net loss of $121 million for Avis/Budget, even worse for Hertz who lost $1.2 billion in Q4, the MGM Mirage lost $1.15 billion, Expedia, the third largest Agency in the country took a hit for $2.76 billion, and Joystar who is now bankrupt showed up with $535 dollars in cash.
About the only good news out there for Agencies right now is the life vest thrown their way by the new Administration with $15 billion in stimulus money in the hope that this will be enough to keep those still around alive. Unfortunately it was to little too late for Joystar, and Cruise Value Centers, while a report late last weekend documented that Liberty Travel closed 4 of it’s 7 Maryland locations, (closing 31 Liberty locations in all) Safe Harbors Travel Agency was also hit with layoffs, and AAA of the Mid-Atlantic is reducing its staff’s hours.
So with all this doom and gloom surrounding how tough things are right now, anybody want to take a stab at the reason for YTB’s $4.5 million loss?
Because it’s MLM.
I kid you not, and apparently there are people who are very serious that it’s the “flawed business model” that has placed YTB in a very vast and growing list of companies that are attempting to survive these very troubling economic times. (And some wonder why I don’t get wrapped up in all the fuss any longer.) When you’ve been reading the garbage on the internet about YTB for as long as I have, you develop an immunity to the venom thrown your way. The negative speculation never ends up the way critics predict, and I don’t see any reason why I should start now with the type of track record they have. Before YTB’s 2007 banner financial year, YTB endured criticism quarter after quarter that they wouldn’t make it into the next year…then the next year…and the next.
And apparently all eyes are on YTB as we’re at it again via the direction of a “going concern” letter that was issued by YTB’s Auditors in it’s Annual Report. Would it surprise you that “going concern” letters are becoming more commonplace with companies like DayStar Technologies, and General Motors, with others to follow according to Greg Milmoe, a partner at Skadden, Arps, Slate, Meagher & Flom? That’s not to say that a company that gets a “going concern” letter is doomed to bankruptcy. Sanyo turned things around late last year, along with Eddie Bauer who worked through the doubts and stigma associated with such an opinion.
A letter such as this is part of an Auditors job, to provide it’s professional opinion on the health and viability of company, and it’s up to the company to follow that direction if they want to remain solvent and in business. We’ve seen a number of changes in the way YTB has done business with drastic cuts in spending with the illumination of CRTA Trainings and opting for First Class On-line Training. Another notable absence this year was Coach’s Birthday Bash in which expenses usually sore into the millions. The company has also shored up capital reserves, evidenced by major cutbacks in the second half of the year, such as a halt to the building project at the Home Office.
Other changes involved the elimination of non-current inventory, which resulted in one time losses of $3.0 million due to the legal issues the company is facing at this time. But the word “pyramid scheme” keeps popping up even with a company statement that has been in front of everyone viewing YTB for the last couple of years that you pay for a Travel Agency (the product) not the opportunity to recruit as a Rep. There are those who either aren’t intelligent enough or simply want to ignore this fact of two separate companies. Personally, it’s hard to ignore the separation when you’ve received two separate 1099′s since the very beginning to hand over to your CPA come tax time. One 1099 is for the travel you sold, and one for the team building you’ve done.
Yet the spin is to mesh the two together, and that everyone is paying money to recruit, recruit, recruit, because there’s a phobia about building a team of people to work with that’s reserved only for the Direct Sales model.
Direct Sales is a model the founders of the company know very well, and have been successful in for close to 30 years. It’s amazing how failures that are more than 3 decades old come to the surface in an attempt to prove some point that Coach isn’t all that smart or can’t be trusted as a business man. It’s as if the mentoring by A.L. Williams in the early 80′s never existed as a lesson on how to build a successful business that produced a team of agents with annual sales of $2.5 billion during a 20 year career with what is now known as Primerica. It’s hard to fathom how anyone can skip over two decades of success, but we are talking about MLM here, and for critics you never focus on the successes, only the failures in order to keep everyone in line with their own perception of reality.
Over the last week I’ve seen a number of comments that “the writing is on the wall”. Oddly enough, none of the writing documents the 20 years with A.L. Williams, the Travel Weekly Power List, the membership with the DSA, the investments into both SAP and Convergentware, cruise sales with both Carnival and now Princess later this week, (be on the lookout here about Princess here later this week) and a the new print on demand site with Mailpound that was announced at Red Carpet Day last week, in front of 1500 passionate TSO’s.
Maybe because what they call “writing” is nothing more than graffiti designed to cover up what I’m actually experiencing with the company right now. That’s what graffiti is designed to do, to show evidence of decline.
We certainly have our work cut out for us in cleaning up the graffiti all over the internet right now. It’s time consuming, it’s uncomfortable, and one always needs a shower after dealing with such toxins. That’s why I don’t like to get wrapped up in it any longer. Like everything else that the company has had to deal with, time and natural progression will wash much of it away when you take the right steps and make the right choices.
In these tough economic times, only the strong will survive. With so many eyes and focus right now ONLY on YTB, it’s hard for some to take the blinders off and see the entire picture. Challenges come in many different forms and YTB has certainly had it’s share of challenges. It’s what you learn and how you adapt to the challenges that can make a person and a company stronger. When you take the proper steps to answer the chanllenges, there is very little anyone can do to when you reach the other side.
I know it’s hard for some to see that other side because the end is near according to some. Stuck in a forest of trees that keep falling all around them.
Me, I just keep my eye on the light I see off in the distance because that’s what I’ve been taught by every mentor I’ve ever come accross in my years of this experiance we call life.
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Tags: Annual Report, Home Based Business, YourTravelBiz.com, YTB International, YTBLA
March 23rd, 2009 at 9:44 am
Just a point or two if I may…. you said:
A letter such as this is part of an Auditors job, to provide it’s professional opinion on the health and viability of company, and it’s up to the company to follow that direction if they want to remain solvent and in business.
Can you address the part of the letter where the auditors said:
A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented
or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment. The Company’s tone at the top was not sufficient to assure the directives of the Company’s Board of Directors were followed. Management did not obtain approval of the Board prior to entering into certain contracts and agreements as required by the Company’s control structure. In addition, controls were not sufficient to prevent management override of controls over approval of disbursements.
These deficiencies were brought up by the old auditors in your 2007 10K filing and their suggestions were not heeded as is evidenced by the above statement. What makes you feel that YTB’s solution is not to fire these auditors and continue allowing the Tomers and Sorensen to treat the publicly traded YTB as their own piggy bank? As a shareholder, I would think that you might be slightly upset about this comment.
You also discuss the increase in travel commissions. It is a bit of a cloudy figure (no surprise there) because this year (unlike years past) the travel overrides paid to YTB (and are directed 100% to Coach) are included in the travel commissions. I suspect the Carnival override alone is in the 7 figures.
And honestly, you experienced sizable growth the first three quarters of the year from 131,000 to 140,000 which likely carried the increased commissions (if there truly were any) before the AG suit took its toll.
March 23rd, 2009 at 1:36 pm
All you had to do John was finish my paragraph to see that I addressed the revamping of the CRTA Trainings that saves hundreds of thousands a month, the cancellation of Coach’s Birthday Bash, saving millions, and how the Home Office build has been put on hold. There are plenty of changes I see that sideline critics like yourself just want to ignore like the rest of my paragraph.
As a stock holder in the company, I’m pleased to see these changes, but sadden that someone like yourself can’t look any further than the next sentence before putting forth questions that have already been addressed.
I was wondering however if you can help me with these travel overrides that I’ve been seeing on the internet that went directly to Coach. It shouldn’t surprise anyone, that nobody has linked or documented this, but was wonder if you could post what you are referring too.
I have not been able to find anything that documents this in the 10K.
Thank You.
March 23rd, 2009 at 4:33 pm
I am very glad you asked. I am surprised you did not see that since you have apparently exhaustively researched the document.
Reporting the overrides this year as commission (not done last year) is stated on Page 37 at the top and again on Page 44 just below the chart.
As to Coach’s override share, look on Page F-46 under employment agreements
March 23rd, 2009 at 6:10 pm
Not exhaustive at all. Just wanted to see how badly you botched up what you read.
Here’s the quote you’re referring to, directly from the pages you specified in the 10K.
The numbers show that YTB paid out 71.5% of the commissions earned to the field, which included some extra bonuses from vendors to the field, not to Coach as you have speculated.
Meaning the overrides are from marketing commission buddy. If the override were travel overrides, it would come from TSO’s from YTB Travel Network, not IBC’s from YourTravelBiz.com.
But thanks for helping me clarify what you were looking at. It was just as I suspected.
May 7th, 2009 at 2:36 pm
[...] spun that part of the compensation to our Executives were from travel overrides. (As found in the comments section of a post concerning the 10K) After correcting (once again) that the overrides are from IBC’s from YourTravelBiz.com, not [...]
June 22nd, 2009 at 8:53 am
[...] actual travel sales. A few clearly don’t understand the difference between gross sales and actual income generated from those sales reported in our SEC filings. If some can’t comprehend that it takes $424 million in sales to generate $27 million in actual [...]
June 22nd, 2009 at 10:29 am
[...] actual travel sales. A few clearly don’t understand the difference between gross sales and actual income generated from those sales reported in our SEC filings. If some can’t comprehend that it takes $424 million in sales to generate $27 million in actual [...]
June 22nd, 2009 at 10:32 am
[...] actual travel sales. A few clearly don’t understand the difference between gross sales and actual income generated from those sales reported in our SEC filings. If some can’t comprehend that it takes $424 million in sales to generate $27 million in actual [...]
June 22nd, 2009 at 10:47 am
[...] actual travel sales. A few clearly don’t understand the difference between gross sales and actual income generated from those sales reported in our SEC filings. If some can’t comprehend that it takes $424 million in sales to generate $27 million in actual [...]
June 22nd, 2009 at 12:55 pm
[...] travel sales. A few clearly don’t understand the difference between gross sales and actual income generated from those sales reported in our SEC filings. If some can’t comprehend that it takes $424 million in sales to generate $27 million in [...]
September 2nd, 2009 at 1:26 pm
[...] is a sham. While YTB’s numbers are fairly straight forward, reporting it’s numbers to the SEC as a publicly traded company, like the travel industry, very few Direct Sales companies do the [...]
September 2nd, 2009 at 7:30 pm
[...] Direct Sales is a sham. While YTB’s numbers are fairly straight forward, reporting it’s numbers to the SEC as a publicly traded company, like the travel industry, very few Direct Sales companies do the [...]
April 19th, 2010 at 2:01 pm
[...] thing I was looking for but couldn’t seem to find anywhere in the 2009 Annual Report was the “Going Concern” that was slapped on the company during the 2008 Annual Report. I documented last year at that time all the changes that the company [...]