Technoman, make sure your calculations are correct, once again I do not have their numbers. However, you should take the incremental sales (namely 200,000,000 or so) and assume they need an additional $60,000,000 in working capital for that but do not use the existing working capital since it support their current sales rate, as a matter of fact, you should take their current working capital and look at what percentage of sales it is, it seems like 50%, unless a big part of their current working capital is cash on hand, which I do not know. I did not realize that on top of the $75 mm convertible they also have a $35 MM line of credit, how much of this is used? When I run a company, I usually tried to keep my working capital at 30% of sales, but it is possible that in the semi cap it is as high as you infer (and I am using round numbers of $50 MM working capital and $100 MM sales)
If your numbers jive, then they are in good financial position to support the sales growth expected. Let's hope the orders materialize, since they need about 8 to 9 $MM a year to cover the interst payment on the $110,000,000 in dedt load (well, only to the extend they draw on the credit line).
Zeev |
