John Bradley

Q.E.P. Company: Flooring the Future

If you only looked at one quarter in isolation, your concern would be my concern too. They certainly had a dramatic increase in AR and inventory. Based on my review, this appears primarily due to a new tool roll-out. You would have to believe Home Depot & Lowes couldn't pay their bills before thinking the AR wouldn't reverse.

You said "this one could be dead in a matter of months." They did clearly state in the 10-Q that they have sufficient working capital for the next 12 months. This does not mean they don't after 12 months, but is a standard comment to divulge if they were in an immediate danger of not being able to pay the bills.

I think your conclusion based on minimal analysis is partly why this buying opportunity has presented itself. I agree with you that on the face of it, the cash appears to be a problem. That is a very keen observation, but I have looked into the situation enough that, in my opinion, it will not be an issue.


On Nov 09 01:01 PM stealthmouse wrote:

> As of 8/31/08, they only had $990,000 of cash and were burning through
> much more than that in quarterly cash flow. It's pretty easy to
> see from that why it's trading at such a low level and for such low
> multiples. Without either turning cash flow positive or procuring
> additional debt or equity, this one could be dead in a matter of
> months.