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Author: SRL66 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1162  
Subject: 1st Quarter Numbers Review Date: 4/28/2000 2:38 AM
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For those who want to avoid the mind-numbing task of poring through GT's latest 10-Q, I offer my only slightly less mind-numbing summary. Some of this may reiterate Cejhals' prior post:

Sales: down 0.5% sequentially but up 18.2% vs. Q1-99.

Cost of Goods Sold: 78.9%, slightly higher than the 77.9% of Q1-99 but slightly better than the full 1999 figure of 80.4%. GT's COGS from 1996-1998 was never higher than 76.6%. A cut of just 2% in COGS would translate to over $200 million in net income, nearly equal to GT's total net income last year. Make it happen.

Other Expenses: 18.3%, better than the 20.9% of Q1-99 but worse than the 17.3% of full year 99.

Net Income: $63.6 million, up 149% vs. Q1-99, a somewhat deceptive figure because GT's net income in Q1-99 was a paltry $25.5 million after a hefty restructuring charge.

Net Margin: 1.8%, up from 0.9% in Q1-99. I suppose if you are a raging optimist you could say that net margin has doubled compared to last year.

Cash balance: $229.8 million, not substantially different from past quarters. GT traditionally does not hoard cash.

Accounts Receivable Growth: up 4% vs. last quarter, up 24% since Q1-99. Doesn't sound too bad, but when your net income is already low, operating cash flow suffers considerably (see below).

AR Turnover: 61 days, compared to 58 days in Q1-99 and 64 days for 1999 as a whole.

Inventory: up 4% for the quarter, up 12% since Q1-99. Same comments apply from AR growth.

Inventory Turnover: 61 days, compared to 63 in Q1-99 and 64 for 1999 as a whole. A very slight improvement.

Cash to LT Debt: 0.10, same as last quarter. The ratio in the six quarters prior to last year's acquisitions ranged from 0.12 to 0.22.

Flow Ratio: 1.33. GT's flow has been between 1.22 and 1.42 for two years running. They deserve credit for keeping the books in order despite their slipshod performance on the income side.

Operating Cash Flow: The number that really matters. Notably, this item was not trumpeted in their recent press releases. Cash flow was negative $134.4 million for the quarter. Although the increases in AR and inventory were not drastic, they were more than enough to chew up $63 million in net income. In GT's defense, cash flow was also negative in the first quarter of the previous two years, so this isn't anything new or shocking.

So… GT beat the Street estimates, and the recent stock performance has been pleasant. But the numbers are mixed at best. GT basically held the line compared to previous quarters, regardless of what their press releases say. GT's Return on Invested Capital was 2.8% this quarter. It's Cash King Margin was -7.4%. You be the judge.
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