Go to Jeff Salisbury LWGate Home Page.From: Harvey Brion <hbrion@ieee.org>
Subject: Re: [CANSLIM] Re: CHTT (was: Identifying NEW leaders)
Date: Thu, 08 Aug 2002 22:08:02 -0700
Previous Article (by Date): Re: [CANSLIM] Stock Screening Gene Ricci
Articles sorted by: [Date]
[Author]
[Subject]
Katherine, The graphic certainly gives one a warm fuzzy that they're managing debt. From 30:1 to 3.92:1 over 6 years is definitely in the right direction. Just goes to show you that you need to dig a lot deeper than DGO. I need to get more familiar with the moneycentral.msn site. (I found the 10 year summary in table form, but did you generate the graphic yourself?) Thanks again. -Harvey Katherine Malm wrote: > Hi Harvey, > > One more thing that I meant to include last night might help...that is, I > always like to get perspective on something like this. See the attached > graphic showing CHTT's D/E over time... (available at > http://moneycentral.msn.com/investor/invsub/results/compare.asp?Page=Financi > alCondition&Symbol=CHTT ) > > Katherine > > ----- Original Message ----- > From: "Harvey Brion" <hbrion@ieee.org> > To: <canslim@lists.xmission.com> > Sent: Thursday, August 08, 2002 3:20 PM > Subject: Re: [CANSLIM] Re: CHTT (was: Identifying NEW leaders) > > > Thanks Katherine, I now feel a little better about the debt but it is a > bit > > scary. Normally, I'd expect buybacks when the debt is down and there's a > lot of > > cash lying around, but I guess it makes sense to go into debt to buyback > shares > > if (1) the stock price is considered way undervalued and (2) the cost of > > financing (interest rate) the buyback is exceptionally low. > > > > I calculated from the 10Q that the buybacks over FY99 thru Feb02 were made > at an > > average share value of $12.83 or 38% of the current price so they've made > a > > hefty return on their investment.. Sounds like they're managing their > debt and > > I guess we just have to "have faith." -Harvey > > > > Katherine Malm wrote: > > > > > Hi Harvey, > > > > > > The high Long Term Debt to Equity comes from 2 sources: an aggressive > stock > > > buyback program (reducing equity) and a strategy of financing > acquisitions > > > via debt (increasing debt). The latest deal, for example, was a purchase > of > > > SelsunBlue from Abbott Labs for about $75m, financed with $45m in > > > borrowings. The company seems to be fairly aggressive about using > leverage > > > where possible, and that is not surprising given the mature products > that > > > they take under wing in their portfolio reshaping program. They are also > > > fairly aggressive about managing their debt facilities, most likely to > take > > > advantage of lower interest rates where possible. For example, they > sold > > > Ban in early 2001, then used the proceeds to retire $52m in senior debt. > > > It's not all that uncommon for companies to rejigger their debt to > equity > > > ratios given their chosen business strategies. Interestingly, in June of > > > this year, they announced a proposed primary offering of 1.8m shares, > but > > > withdrew the offering, citing "adverse market conditions." While a D/E > of > > > nearly 400% sounds scary, the more important thing to look for is their > cash > > > flow and ability to cover interest payments. If financing acquisitions > > > through debt also allows them to build a broad product offering and > increase > > > net income as a result, then the interest paid becomes an investment, so > to > > > speak. If they do a lousy job of executing their strategies (sell non > > > performing brands, acquire others, extend existing lines), then the > interest > > > will kill them. So far, so good. > > > > > > Beyond the D/E issue...CHTT was just an example thrown out in the > > > discussion on "consumer stocks." Just as in the discussion of P&G > earlier > > > today, the "N" can come from many sources. Sometimes it's something as > > > simple as leveraging a brand properly, as P&G has done with the Crest > > > spinbrush and Crest Whitening Strips (by the way, about $50 for the box, > > > premium pricing, but still a fraction of what it would cost to have it > done > > > with a special light activated process like Brite Smile's (BSML), or > done > > > "professionally" by a dentist.). > > > > > > Katherine > > > > > > PS > > > Here are some quotes form CHTT's 10Q, which you can see in full at > > > > http://www.edgar-online.com/bin/edgardoc/finSys_main.asp?dcn=0000931763-02-0 > > > 02300 > > > > > > "We have historically financed our operations and acquisitions with a > > > combination of internally generated funds and borrowings. Our principal > uses > > > of cash are working capital, servicing and repayments of long-term debt, > > > acquisitions, repurchases of our common stock and capital expenditures." > > > > > > "In fiscal 1999, our board of directors authorized repurchases of our > common > > > stock of up to $10.0 million in the aggregate. In April 2000, our board > of > > > directors authorized repurchases of up to an additional $10.0 million of > our > > > common stock. Under these authorizations, 172,500 shares at a cost of > $3.9 > > > million were repurchased in fiscal 1999 876,500 shares at a cost of $9.5 > > > million were repurchased in fiscal 2000 and 14,000 shares at a cost of > $0.2 > > > million were repurchased in fiscal 2001. In February 2002, we > repurchased, > > > and returned to unissued, 44,000 shares for $0.6 million. As of May 31, > > > 2002, the remaining amount authorized by our board of directors under > our > > > stock buyback plan was $5.8 million; however, we are limited in our > ability > > > to repurchase shares due to restrictions under the terms of the > indenture > > > for our 8.875% notes and our senior credit facility. > > > > > > We believe that cash provided by operating activities, our cash and cash > > > equivalents balance, the net proceeds that we receive from our currently > > > pending offering of common stock after debt repayment and funds > available > > > under the revolver of our senior credit facility will be sufficient to > fund > > > our capital expenditures, debt service and working capital requirements > for > > > the foreseeable future as our business is currently conducted. Any > > > acquisitions that we make in the future may require us to obtain > additional > > > financing." > > > > > > ----- Original Message ----- > > > From: "Harvey Brion" <hbrion@ieee.org> > > > To: <canslim@lists.xmission.com> > > > Sent: Wednesday, August 07, 2002 1:13 PM > > > Subject: Re: [CANSLIM] Identifying NEW leaders > > > > > > > These look interesting Katherine. It's hard to get excited about > > > > cosmetics and weight loss products but with the high GRS rating, > they've > > > > obviously been doing well. I see they all have strong EPS estimates > for > > > > this FY. CHTT looks the strongest in cash flow and ROE and I favor > > > > smaller companies anyway so I'd lean toward this one. The chart is > > > > pretty wide and lose, so not classic CANSLIM. Do you have any idea > what > > > > their 389% debt to equity ratio is all about? -Harvey > > > > > > > > Katherine Malm wrote: > > > > > > > > > Here's another view of "consumer" stocks--take a look at stocks like > > > > > NBTY, WTW, CHTT, all of which have pros/cons, but nonetheless > > > > > something unexpected. Who would've thought that HD might've done so > > > > > well simply by consolidating a fragmented industry and redefining > > > > > "home improvement"? Sometimes it's the unexpected which does the > best > > > > > while everybody else is looking to the obvious. Katherine > > > > > > - > > -To subscribe/unsubscribe, email "majordomo@xmission.com" > > -In the email body, write "subscribe canslim" or > > -"unsubscribe canslim". Do not use quotes in your email. > > ------------------------------------------------------------------------ > Name: CHTTKeyRatios.jpg > CHTTKeyRatios.jpg Type: JPEG Image (image/jpeg) > Encoding: base64 - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
Previous Article (by Date): Re: [CANSLIM] Stock Screening Gene Ricci
Articles sorted by: [Date]
[Author]
[Subject]