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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (32706)	2/23/2002 5:28:44 PM
From: reaper	Read Replies (1) \| Respond to of 99280

Zeev -- thanks again. Couple of things (i) revenue -- seriously, don't pay any attention to it. they changed their revenue recognition policy so the decline is not so severe as what you see on the face of the P&L (they were previously over-stating revenue). they also changed the nature of their contracts which has the effect of lowering A/R despite the fact the the economic value of bookings is not materially declining. (ii) the depreciation / amortization is mostly amortization from the Platinum deal. they have no meaningful capex needs ($22mm so far this year; $89mm year before; $200mm prior two years when they were growing). (iii) cash flow before financing $790mm in FY97; $1,040mm in FY98; $1,267mm in FY99; $1,566mm in FY00; $1,383mm in FY01; on pace for over $1,000mm in FY02 (March). This is why I have a high-level of confidence that ongoing cash generation before financing will exceed $1 billion a year going forward (again, absent economic disaster but in the event of economic disaster my shorts go to zero so I'm OK). (iv) you over-state the interest rate hit. they are ALREADY paying 6.25 - 6.77% on their debt. pricing at 300 bps over treasuries would have put them at +/- 7.50% (on a 5-year note). so if they have to pay 500 bps over now, that's 9.50%. so that's 300 bps of INCREMENTAL interest expense over what they're already paying. i still don't think capital AVAILABILITY will be a problem, but hey I could be wrong. but frankly, there is something very wrong with the world if Americredit and other sub-prime lenders have access to the capital markets but CA with $1 billion a year of cash generation does not. Again, I'm hedged, so if CA can't get credit then Americredit and their breathren will go to nil. Cheers