TheStreet.com's MIDDAY UPDATE
Jan. 22, 1999
Herb on TheStreet
By Herb Greenberg
Senior Columnist
*More Safeskin: An item yesterday suggested the company (SFSK:Nasdaq) hadn't been conservative when it took a charge in 1996 for action that won't occur until early next year. Several CPAs wrote in saying that CFO David Morash's explanation, that the charge merely became a noncash reserve, was appropriate. And Morash himself yesterday said he thought he was being conservative by not reversing the charge, as the column suggested he should've done. The column said that by not reversing the charge, the company benefited from a lower valuation on its assets and, in turn, less depreciation, which would have the effect of boosting gross margins.
Morash, however, says that had the charge been taken, about half would have been for severance, with the writedown of machinery only accounting for $750,000. Based on eight to 10 years of depreciation, "that would add maybe $100,000 a year in gross margin, which is less than one-tenth of one percent of our gross margin." Considering that the company's gross margins have jumped to 52% from 32%, "that's not even a poke in the eye." |
