Albert Meyer

Caterpillar's Troubling Bond Issue

I like Gramps' spunk. Accountants have written the rules in such a way that they can make the numbers tell you anything they want. Grumps, take cash from operations, deduct capital expenditures and then deduct actual credit losses recognized in the bad debt allowance account (in substance a loss of cash/capital). That will give you CAT's true free cash flow. Compare that to net income. I haven't done the calc for CAT, but it's a pretty useful tool to demystify the accountants' smoke-and-mirror show. Vendor financing was a game Lucent played... and see what happened to Lucent. Lucent's former CEO, McGinn sits on the board of American Express, but his bio in the proxy statement makes no reference to his tenure at Lucent - go figure. Off the topic, but I just thought I'd throw it in the mix.