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Technology Stocks : Vitech America tackles Brazil
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To: Tom Dooley who wrote (5)4/5/1997 11:42:00 PM
From: Michael Burry   of 153
 
My research:

VTCH increased 4Q revs 40% ($29.4M vs $21M) but experienced a poor
earnings comparison of .38 4Q 96 vs. .77 4Q 95. The .77 of 4Q 95
represents the bulk of the .84 total for all of 95. Hence, the
comparison is poor due to extraordinary earnings in 4Q 95. The
company's reason:

"Operating margins in the fourth quarter of 1995 were unusually high as Vitech benefited from the opening of its manufacturing facility in Brazil without experiencing the full selling, general and administrative costs associated with the operation. As Vitech scaled up to meet demand in 1996, total personnel at the manufacturing
facility grew six-fold to over 300 employees, inventory increased, and the costs associated with launching direct sales and consumer inancing programs were incurred. The infrastructure is now in place for the Company to meet its goals for 1997. "

I accept this. The earnings prgression during 1996 was
1Q 96 .12 --> 2Q 96 .20 --> 3Q 96 .25 --> 4Q 96 .38

This is an average 48% sequential growth in EPS during 96.
The falloff to .12 during 1Q from the .77 of 4Q 95 is consistent
with their story. It does appear they are benefitting at the
bottom line from the infrastructure they put in place.

This does not concern me. The balance sheet is not bad, with 1.7M
in cash and 1M in LT debt. Current Ratio is 4.16, which is
excellent, and cash flows were positive during 96 (a feat for
any start-up). The company is well positioned.

Mike
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