I totally agree that they'll make it through Christmas 2015 without a liquidity problem. But if Christmas 2015 is even close to as bad as Christmas 2014 then they are done. So a mildly successful Christmas season or even a so-so Christmas season buys them time, but disaster like last year and that is it.
I did buy back in a few shares at $1.42 yesterday hoping for something positive.
I agree that there is no chance of a liquidity event prior to January 2016 but that is only 7 months away. Also, many posters point to the $75 million revolving line like they could draw on it once all liquidity is depleted. Most revolving lines of credit and other debt instruments have liquidity restrictions in place. They can be canceled any immediately payable when your current ratio, quick ratio, debt to equity ratio, etc. falls below a specified level. So, it's true that they can draw on it for short term cash needs like the Christmas inventory increase. But it very likely will not be available if they have depleted all available resources and are attempting to use the revolver just to stay afloat.
I've taken a few college level financial and accounting classes and I tend to agree with timintaz1. The quarter ending March 31st is their historically best quarter from a cash flows perspective because they are converting the Christmas sales receivables to cash during this quarter. So the fact that they generated $33 million is not surprising and it was about half of what they generated in that quarter the prior year. Leapfrog typically generates more than 100% of their annual cash flow in the quarter ending March 31st with the other 3 quarters totaling a negative.
As far of the June, September, and December 2015 quarters go; look back at prior years. They have historically been negative cash flow quarters. Not just last year, but in previous years.If Christmas 2015 is not at least mildly successful then they will be a very serious trouble and if it is as bad as Christmas 2015 then they may not see Christmas 2016. It is that serious in my opinion.
I'm not trying to be negative just realistic. Do not look at the March 2015 quarter's $33 million increase in cash as a positive and an indication that things are on the mend. That positive cash flow is simply a seasonal trend that happens every year and the $33 million was a very low positive cash flow for that quarter. I'd be a lot more focused on the fact that the March 2015 quarter's gross profit was only $3.5 million compared to the prior year of over $21 million, the net quarterly loss was $76 million compared to a year earlier loss of only $12 million, and that sales were down 40% from the year earlier March quarter.
As a disclosure, I have no position long or short in the stock. I sold at about $2.10 taking a big loss. I continue to watch for some positive indication that things are changing but I have not seen that yet.