Re: RSH
<< I think when i looked over the 1Q numbers, just eyeballing it, looked to me like the Graham net-net was around $3 and change>>
Graham would have you capitalize leases which would wipe this out and leave you at about -$2.
Net net is a shortcut for pegging a liquidation value (actually Graham liked to buy at 2/3 of NCA). Not even close.
You just can't realistically expect to ever buy a retailer as big and well known as RSH for its liquidation value which by definition leaves you a going value of zero.
This ties in to what might be somewhat of an answer to covenant: Current ratio of 3.2 and quick ration of 1.8 are pretty good for a $4B company. They're cheap insofar as the little bit of earnings they need in order to justify a higher price. My bet is that they'll get there and that their liquidity is entirely adequate to get them there.
In a perfectly healthy company, they'd be criticized for holding way too much cash. The 9% dividend is a bit silly, a gimmick -- i daresay even a bit of a fraud -- but what the hell while it lasts (we should make it through the next payment but I'll be shocked if the rate lasts for a full buck (2 years), and surprised if it makes it through this year.
I'm quite satisfied with this part:
SOURCES OF LIQUIDITY
As of December 31, 2011, we had $591.7 million in cash and cash equivalents, compared with $569.4 million in 2010. We believe that our cash flows from operations and available cash and cash equivalents will adequately fund our operations, our capital expenditures, and our maturing debt obligations. Additionally, we had a credit facility of $450 million with availability of $421.9 million as of December 31, 2011. |
