I don't know that this analysis of cash flow has any restrictions; it's merely an interpretation of what has actually been reported. But concerning the issue of free cash flow, if you're referring to whether the company's overall cash flow has increased or decreased over the third quarter, we know with certainty that it increased by $11.7 m given that this is the change in the balance sheet cash balance from the second quarter to the third quarter. But I am unable to figure whether it was positive or negative from operations. My preliminary analysis which reconciles the company's net loss to its cash flow comes up positive, but this only incorporates the changes in the current assets and liabilities along w/ that estimated additional $20m of depreciation & amortization expense.
Here's how the numbers change. Net loss (85,467) + depreciation 66,266 + receivables 275,269 + inventories 1,169 + pre-paids (2,593) + income tax adjustments (105,049) + accounts payable (32,411) + accrued compensation (4,504) + accrued marketing liabs (19,763) + other accrued liabs (15,519) + deferred revenue 17,115 = cash flow from operations of $94,513.
There are other entries that I cannot determine from published information. For instance, the actual cash flow statement could include "stock plans income tax adjustments" or possible "provisions for uncollectible accounts receivable" or "treasury stock contributions to 401K plans" or "minority interest losses/gains". The change that I find particularly cogent that may have otherwise been overlooked is the decline in the accounts receivable balance. Customers are paying up; this is notable, is it not? And notice that seventy-eight percent of that net loss is immediately recovered by depreciation expense. That depreciation number, however, is just a guesstimate; it may end up higher or lower.
Concerning Schmidt's strategy, I'm buying into it. Given this company's balance sheet, positive cash flow from operations, and future products I would hardly even consider this a turnaround. I can really appreciate the vision and focus of this guy. I do agree with the "OUST THE BOD" sentiment (except Schmidt, of course). This company's stock would leap from present levels, but last year the company's owners did not see fit to do so. Nevertheless, it is my gain; this company at its present value is very affordable. Heck, I would love to see it hit the sevens again during this quarter.
And by the way, is there anyone out there that can suggest a good reading on this JAVA movement? I'd like to get a better understanding of how this language fits into what's being done at NOVL. |
