One of the great things about writing for The Motley Fool is that I'm constantly learning new things. Take yesterday, for instance, when I learned a brand new word, courtesy of alternative energy play American Superconductor (Nasdaq: AMSC). That word (acronym, actually): EBITDAS.
As in EBITDA, plural?
No. As in earnings before interest, taxes, depreciation, and amortization ... and stock options expensing. Call it "pro forma pro forma" earnings, where you take out all the usual bad stuff, and then further extract the stuff that's especially bad for a company that plans to dilute its shareholders by 6.6% this year -- the cost of issuing stock options.
Mind you, "Super" is far from the only company to pooh-pooh stock options expensing. You see thatevery dayat firms like Digital River (Nasdaq: DRIV), Blackboard (Nasdaq: BBBB), and McAfee (NYSE: MFE) -- in fact, name a tech firm, and I'll bet you it's got options issues of one form or another. It's just that Super is the only company I've seen using this particular word to describe what it's doing.
The good numbers
Our vocab lesson for the day accomplished, let's move on to the rest of Super's earnings news, focusing on the full-year numbers. Fiscal 2006 sales were essentially stagnant year over year, rising just 2.6% to $52.2 million. Internally, though, things were much more interesting. The firm's now-reorganized superconductors business saw sales plummet 41% for the year, even as sales at the power systems unit, bolstered by two acquisitions' worth of new revenue streams, more than doubled.
Profits at the two groups also took diverging paths. At the firmwide level, operating losses grew 9%, and net losses 12%. Internally, Superconductors' losses grew faster than did the firm's as a whole, with the operating loss rising 12%. In contrast, Power Systems actually generated an operating profit -- only a 1.3% operating margin, granted, but a profit nonetheless.
The future
Further good news arrived on the cash flow front. According to management, it is on track to cut "cash burn" by more than a third this year. If it meets its target of reducing negative free cash flow (which is what I presume management means by "cash burn") to $20 million, Super should have enough cash so that it won't need to tap the public markets with a secondary offering for nearly two years.
Will it succeed? Can't say. My crystal ball is on the fritz. What I can tell you, though, is that Super allowed its accounts receivable to double in size over the last year, even as sales stagnated. The sooner it collects on its outstanding bills, the better its cash situation is going to look.
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Fool contributor Rich Smith does not own shares of any company named above.
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