To: Charles W. Breaux, Jr. who wrote (3615 ) 1/1/2003 8:29:16 PM From: rich evans Read Replies (2) | Respond to The 8K and 10K conference call was very interesting.The CC I think had a lot of good and bad info and was very revealing. The Good are such things as no tax problem, asbestos liability covered by insurance and not material, and most important- 2003 cash flow and earnings will not be affected by any of the past problems which have run their course being mostly a timing issue on revs. The bad news is the 3.6 funding gap revealed during cal 2003. With 11.6 bill in debt and 6.2 bill in cash- to have such a gap requires the cash flow in the next 4 quarters to be only about 1.8 bill- a large reduction from Swartz estimates of 4 bill and the Breens statements at previous cc of 2.5 to 3 bill. Of course the 1.8 bill cash flow correlates with the earnings estimates so we should have known. Of the 3.6 bill gap , the CFO and CEO said 1.8 bill would be from a new bank loan which is going to be 50% of the old loan due in FEB. The remaining should be doable also and is probably the reason for the covertible preferred debt being worked on. The reason I thin for the converts is that the conversion price could be higher then present stock price thus leading to less dilution. Otherwise TYCO could forget about it, and simply issue shares for the puttable converts presently coming due (2.3 bill) in FEB. Frankly I think they will watch and see the stock price and if we get into the 23 range, I would simply issue 100 mill shares, forget about the new financing, the 2.3 debt is gone and so is the funding gap. Anyway from now on this stock is going to trade much more on fundamentals IMO. But can anyone believe all the slanted negative press the last two days from the WSJ, NY times, Reuters etc. Oh well , I guess it preserves buying opportunities and eventually reality and the facts will control.
