Mr. Fun,
I think we need to watch definitions and accounting gimmickry very closely here. There are several issues going on simultaneously.
1. Depreciation for the full year (June 30 1999) was $807 MM. ($7,445 - $6,638) Source: LU Consolidated Balance sheet. Accumulated depreciation was $7,274 on June 30, 1998. Source: 10-Q. So the depreciation recognized for the period was 7445-7274 = 171MM.
2. A significant portion of the one-time charges consisted of asset impairment costs which revalues the asset base. Much of those costs are non-cash. As my note indicated, I have no idea of the size of the non-cash asset impairment charges that should be added back to operating cash flow, or whether LU included such charges in operating cash flow. We will need to see the 10-K for that information.
3. The note receivable is interesting because that is probably where the real difference lies. If it is converted into a market rate financing contract they probably consider it an investment item for cash flow purposes, and not an operating cash flow item. But I believe that if that is the case it is a major distortion of reality. The cash is still uncollected, but instead of considering it a receivable it is now considered a contract. At such time as the contract is converted into cash I will recognize that as a source of cash for operating cash flow.
4. Finally, I do not treat non-cash charges associated with mergers and acquisitions as part of operating cash flow. Instead, I lump them into capital expenditures.
TTFN,
CTC |
