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Technology Stocks : FSII - The Worst is Over?
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To: Running Bull who wrote (1009)5/30/1997 1:49:00 PM
From: Stratajema   of 2754
 
If the $6MM order was not pushed out this quarter, I estimate that it would have contributed about $2MM or 8 cents to FSI's income BEFORE income taxes. This is just a rough approximization. When the sale is recognized they will essentially be deducting only the cost of goods sold. Most sales expenses and of course all other administrative and infrastructure expenses are being deducted in the current quarter. So this order pushout can really skew the bottom line. The good news here is that FSI management was smart enough not to extend credit terms to this customer just so they could record the sale.

FSI has preannounced a 10c to 15c/share shortfall or approximately a $2.3M to $3.5M loss. However, I would speculate this estimated shortfall includes a tax benefit and that the real operating loss could be about 10% higher.

FSI's operating breakeven point has recently increased because of infrastructure expansion (new building and equipment) and debt. Given the amount of time it takes to turn an order into a recorded sale, I think analysts are being very bullish to think that FSI can make 80c/share on a fully taxed basis for FY 1998. Hindsight reveals these analysts couldn't even estimate this year's income with any measurable accuracy.

- David
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