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Strategies & Market Trends : Free Cash Flow as Value Criterion
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To: Pancho Villa who wrote (195)11/11/1997 12:04:00 PM
From: jbe  Read Replies (1) of 253
 
Re: TLC. I think "the street" is taking a big risk.

It is true that TLC has remarkably good cash flow and free cash flow -- at least if you estimate the two by the simplest, rough-and-ready method of equating cash flow with operating cash flow, and subtracting capital expenditures (and dividends) from that to get free cash flow.

But if you use that method (as I do), you MUST look at your cash flow numbers in conjunction with the debt numbers. And looking at the latest 10-Q balance sheet, it looks to me as if TLC has absolutely humungous long-term debt, which cancels out the seeming advantage of positive cash flow. Sooner or later, they are going to have to use all that yummy cash to pay off their debt (which is growing apace), and with no profits coming in, how are they going to do it?
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