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Axion International Holdings, Inc. Message Board

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  • mikebert mikebert Sep 4, 1998 8:17 AM Flag

    A september to remember

    I posted cash flows normalized to sales in
    message #1446. The data you presented were misleading in
    that you showed 1 quarter of cash flow, then 2
    quarters of cash flow, and then 3 quarters of cash flow. I
    broke it down into the cash flow for each quarter. Your
    numbers suggest than negative cash flow is getting worse
    each quarter. My numbers show that negative cash flow
    was largest in the second quarter and has declined
    somewhat (although still negative) in the
    third.

    The reason for the negative cash flow is, of course,
    obvious. Its the increase in DSO. Simply put, it is taking
    ANLT longer to get paid for the work they do, but they
    have to pay for the work as it is completed. This is
    understandable. The company did mention that the size and scope
    of their projects has increased and that means it
    will take them longer to get paid (most customers
    don't want to pay for large chunk of the cost of
    project until it is complete).

    Because of ANLT's
    small size and rapid growth the problem is a lot more
    noticeable (i.e. the cash flow difficulties) than it would
    be for a larger company. And this shows up in the
    volatility of their stock.

    So the question is,
    really, what is the impact? Is the company going to go
    out of business? No. How will the stock be affected?
    Adversely. But it already happened. This stock is 28% off
    where it was when the most recent 10Q issued and this
    whole issue was raised. I didn't look at the 10Q all
    that closely when it first came out, but it was
    obvious from the stocks reaction that something was wrong
    with it. Later, HCOR and you did me a service by
    raising the issue--prompting me to look into it. It is
    now clear to me than the rapid drop from 29 to 21 was
    likely due to this issue.

    Anyways, the stock has
    already taken the short term hit expected for the cash
    flow issue. If you wanted to exploit this issue with a
    short, you are too late, you should have shorted when it
    was at 29.

    With the recent market weakness,
    the stock fell nearly 30% further. A short co

 
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