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Technology Stocks : THREE FIVE SYSTEM (TFS) - up from here? -- Ignore unavailable to you. Want to Upgrade?

To: dfloydr who wrote (2322)	8/31/1998 12:59:00 PM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

D Floyd notes: Question for all. TFS is getting some good buys on their stock here. N.O. has tallied some 200,000 shares that appear to have been bought in and today is seemingly adding to that total. What are now the actual effects of all this company buying? Case 1: Are these shares just held in the company's name? In this case EPS stays the same, just the ownership name has changed. In this case, they could be resold at say 12 or 15 for a profit. In this case a hostile buyer would have to reckon with the shares held by the company. Or they could serve as collateral for cash needs in the future. Case2: Are they removed from circulation? In this case EPS goes up as more shares are bought in. In this case liquidity is diminished as cash is used to buy shares. In this case to regain liquidity via the equity route TFS has to go through the underwriting process again. (Bet they wish now they had taken N.O.'s hints about raising money some six months ago!) ____________________________________________________________________ Hi Floyd...Yep, they should have raised the money before. Their unwillingness to do so cost the shareholders big time. Insofar as your questions are concerned: The repurchases of shares results in an increase of "Treasury Stock." Treasury stock is simply retired stock that is no longer outstanding, and is almost never re-issued other than for acquisitions or exercised corporate options. Whether the reduction in shares increases earnings is dependent on the "costs" associated with the repurchases, almost always either forgone interest income on what otherwise would have been cash balances, or increased interest expense because of borrowings arranged to make the repurchases. At the moment, the company hasn't bought back enough for them to be borrowing for that purpose, as my "guess" is that they currently have re-acquired approximately 300,000 common. On balance, the "cost" (in interest costs, whether forgone or actually expensed) of re-acquiring one share of TFS (with the stock in the 8's) is about 30-35 cents per share fully taxed. If the earnings on the common stock exceed that amount by a reasonable degree, per share earnings will be augmented by the buybacks. That appears to comfortably be the case now for 1999 reporting periods. Have a good day.