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Technology Stocks : The Learning Company (TLC)
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To: Fred Fahmy who wrote (4411)4/6/1998 11:01:00 PM
From: henry watt  Read Replies (1) of 6318
 
call it what you will, but $67m in returns allowances /97 is 17%

of revenue. If they were charged to C & E, how could C & E maintain the same % as previous yrs? in fact C&E should have jumped.

It did not because $53m in credits were issued back to customers & removed from C&E. the rest ( $29m) remain as allowances.

These credits are applied to the new revenues, it lowers A/R and finally appears as lower cash.

The 17% of revenues were bogus, probably just channel stuffing to make the Q estimates. Since all the accounting is with Gaap, no one will notice unless you understand the affect of this treatment on cash.

or put another way,
if you want to declare that rebates are higher than 25%, then
the fund manager quoted in Barron's is right...

TLC overstated revenues under both scenarios.
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