Accounts receivable explanation by RGFX from their quarterly report:
Net cash used in operating activities during the first six months of fiscal 1997 was $5.3 million due primarily to increases in accounts receivable of $5.3 million and inventory of $3.9 million. Accounts receivable increased because of the high volume of shipments made towards the end of the quarter and extended payment terms granted to customers as the Company continues to expand its presence in international markets. Inventory levels, specifically consumables and finished goods, were increased to support the potential shift in product mix following the introduction of the PiezoPrintTM 1000 in December 1996 and the PiezoPrintTM 5000 in March 1997.
The provision of RGFX for doubtful accounts was increased from $606,000 on Dec 31, 1996 to $671,000 on June 30, 1997, which is less than the growth rate of revenues. I believe that the cash to finance the above mainly came from a reduction in short term investments. I look at accounts receivable as future money in the bank; however, since the sales are denominated in local currencies and RGFX sells an abnormally high percentage of their products internationally (about 61% last quarter) these revenues may be susceptible to currency fluctuations. Inventories can always be a problem unless they are realistically managed, especially if they represent obsolete goods but, in this case, that does not seem to be such a problem. However, inventories of $10,600,000 (presumably at cost as of June 30, 1997 but up from $6,700,000 on Dec 31, 1996) compared with quarterly sales of $14,000,000 seem high to me and may include some old stock. |
