RE:RE:RE:RE:RBC: Surprised by the market reactionThis is a very interesting time for the company. I'm just trying to put this puzzle, of the current events together. So after giving it some thought, here is what I came with.
I will say this though.
I'm not seeing this Guidence for 2024 as such a big problem, or such a hurdle
as the market has. The reason I feel this way, is because
the company has shown me something that I was expecting to see.
What I was EXPECTING, as I told Nobody before the ER, that I wanted to see the return of the cash back, that went towards the Inventory in Q2/Q3/23.
Well I saw that inventory cash come back. Where is that cash in Q4/23?
That cash came back to the company at the end of Q4/23, in the form of
Cash on Hand, & Cash Equivalents of $1.6B plus the revolver of $250M that wasn't drawn on
for a total of $1.85B on hand.
Another words, the company is sitting on a load of cash. So I'll explain again.
Finally I see that this Management as being trustworthy. How? Well, if you all recall, they put in roughly $400M in Q2/3/23 in Inventory to make up for the move to Pearson, so they wouldn't have any delays in parts, where it would have delayed their production schedule of 138 planes delievered to clients for 2023. This cash came back in Q4/23. How do I know that?
Well they only had $900M in Cash on Hand in Q3/23 in the Financial Statements. Go check the statements to verify it on your own. If you add the other $400M they put in Inventory in Q2&3/23,
that adds to $1.3B cash on hand for Q1/23 that's what they had in the books. So they used their own cash,
not to pay more Interest for this past Inventory Investment in 2023.
In fact, they ended up with $1.6B cash & cash equivalents for Q4/23. Which says to me that they
made a profit of $300M in Q4/23. $1.3B + $300M= $1.6B. Finally no lies.
They made a profit of $300M in 2023 + $400M of Inventory returned for $1.6B Cash on Hand. I was hoping to see a $750M paydown on the LTD in 2024, and I was hoping that 2025 would have been even stronger, at say another $750M. But the way they spinned it in the ER, I think I see why, they changed their thinking. They are wrestling with a couple of items in Operations in 2024. One is the supply chain, plus they want to deliver more planes in 2024, of the much less profitable CL3500 series. This supply chain event, has not only changed the profitability from not delivering the higher priced Globals, it has also coinsided with the cash inlux into the normal Inventory investment of the company for 2024. Where they now have to do something similar in Q1&Q2/24 as they did in Q2&3/23. But they want to use their their own cash again in 2024, so as not to have to pay more interest for that extra Inventory. Simply, they are upfronting the extra Inventory with cash on hand, for 2024 too. Why? Because they need to do that, for the supply chain to catch-up to their production schedule, of 150 to 155 planes for 2024.
I'll tell you something else thought. When this is all said and done, at he end of 2024, they'll have $750M to put on the LTD and another $750M in 2025. How do I know that? They gotta make another $400M in +FCF from 2024 + $350M from Cash on Hand & there it is for 2024. I think they will hopefully resolve this supply-chain issue, by the end of 2025, to be able to use that Cash on Hand to pay more of the LTD off.
I think that, they are just playing it safe right now, that's all. So I think we'll get a surprise on the LTD repayment in the end of 2024 & 2025. Just thinking about all this, makes me proud of the fact that, they are able to juggle everything going on right now, without having to pay more Interest on this Inventory upheaval, and the Supply-chain constraints. While at the same time, not weakening their Reserve or Cash on Hand position. Very commendable Financial wizadry. The only problem I see, and the market sees as well is, that we are not paying off the LTD faster than we all want.
So what? It'll all get doen when 2025 rolls around.
I know it doesn't make thing better for the people that are running Lines of Credit, and holding on to these shares another year longer etc, because this SP isn't getting any better.
But so what? The company is doing things properly, I'm not seeing cashburns, I'm just seeing prudent patience, put into practice, from a company that used to go through cash like it was water.
Well it can't do that anymore, because they don't have any other assets to sell, or any other companies or divisions like
BT to sell to save their azz anymore.
So they have to practice financial restraint. I HAVE NO PROBLEM WITH THAT. If the market or anybody else sees it any diferent, then that's their shtick. I'm just fine with it.
PabloLafortune wrote: In order to save $75M interest in 2025, they'd have to repay $1B of debt at the end of 2024......who comes up with this stuff.
Overall I don't see an improved balance sheet that could be used to repay LTD but I do see a resilient balance sheet that dealt with a reduction in long term deposits and of course continued cleaning up of the other assets and liabilities.
Still a long way to go to a pristine balance sheet and higher share price. For the same reason less credit worthy clients pay higher interest, more indebted companies have lower multiples.