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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Pirah Naman who wrote (23842)4/29/2000 10:50:00 AM
From: Sunny  Read Replies (2) of 54805
 
Pirah, in your first installment you stated that Cree had been consistently Cash Flow
negative. A quick look at the financials support that statement. However, it appears
to me that if you used that one fact as a screen you would have passed up an oppor-
tunity to own a company that appears to be executing almost flawlessly.

Let's look at the rest of the story.

12/98 12/99
Gross Rev 26.3 43.98
Rev Growth 69%
Operating Income (26 Weeks) 7.11 14.65
Operating Margin 27% 33%
Net Income 7.25 15.79

Cash & ST Investments 13.67 19.23
Current assets 30.1 67.7
Fixed Assets 45.0 88.29

Current Liabilities 5.76 14.05
Total Liabilities 18.11 18.73

Current Ratio 5.22 4.8

LT debt 9.88 0

Tot Operating CF 4.23 16.65
Cap Ex -10.38 -23.17
Net Change in Cash -4.9 -4.34

In Summary, their Asset Base has doubled in a year. Which indicates they are investing in
their business. There revenues have increased 69%, Margins have improved 22% Y/Y to 33%,
operating income has more than doubled, LT Debt has dropped to zero.

In other words, the only negative associated with this company is negative FCF and the
source of those funds are from sales of stock.

It appears to me that Cree is a wonderful company, even if you only looked at the numbers.
Once you know the story behind the numbers, it makes me feel even more optimistic about
the future.

Now, I may have misinterpreted your comment wrt CREE and FCF. And you certainly made me
take a much more structured look at why I own this company.
But I come out of it more
convinced that CREE is on solid footing and a very worth while investment.

Sunny
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