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To: Reginald Middleton who wrote (53)	2/2/1999 3:51:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 419

All too true! That's why I am a believer in free cash flow. Now we have had this discussion before, and before you jump all over me, let me define free cash flow as cash flow from operations - sinking fund for the replacement of long-term assets. In other words, it does not penalize a company for investing in its future in the form of expanded facilities, but it does treat expenditures for R&D and the like as expenses in the current period. Michael Murphy suggests some alternatives for the treatment of R&D expenses, but I'm not sure that this makes sense because R&D is a much bigger gamble than a manufacturing facility. When you build a plant you can be certain that it can generate product, but when you put funds into R&D who knows what, if anything, will result. Perhaps there is a simple way to move from earnings to free cash flow, which would certainly make more intuitive sense. TTFN, CTC