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Author: geekytoo One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 13  
Subject: Re: not so hidden trends for Caché Date: 1/22/2009 4:39 AM
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didn't know that Cache was down to so little cash..whereas Chs has about 250 mill supposedly? Going to be very interesting.

To make an apples to apples comparison, here is a breakdown of both companies' cash and equivalents positions in millions of dollars as of their latest respective 10-Qs. Actually, I got a little carried away with the comparison, because it was so much fun to look at.

CHS CACH ratio
cash and cash equivalents 50.2 2.0 25:1
marketable securities 206.1 23.6 8.7:1

total 256.3 25.6 10:1

quarterly sales 394.2 58.1 6.8:1

market cap 661.3 27.5 24:1
enterprise value 405 6.7 60:1

cash per share 1.45 1.93 n/m*
price per share 3.73 2.08 n/m*

% cash per share 39% 93% 1:2.4

number of stores 1080 297 3.6:1


* It doesn't make sense to compare the cash per share and price per share of the two companies, as they have a different number of shares outstanding.

CACH is definitely a smaller fish than CHS. It has roughly one third the number of stores, but about one seventh the sales. The right measure of cash available is probably much closer to the total shown above than just to cash and cash equivalents. (In the case of CHS, the value of $250 million quoted above matches the total.) Marketable securities are investments the companies make with extra cash so they can earn a little return on the money that the companies don't immediately need. They're typically in bonds and other liquid vehicles that trade easily. For all practical purposes, the companies are free of debt, because they could pay off any debt very easily with cash on hand.

From the market cap, it seems that the street doesn't take CACH very seriously compared to CHS. Considering how the street has punished CHS, that isn't very good at all. Both companies have been marked down a great deal lately. The comparison of enterprise value is even more dramatic. Enterprise value is what it would cost to buy a company, pay off its debt, and have it free and clear. Because the company's cash and equivalents, including marketable securities, are pretty much cash equivalents, they lower the enterprise value relative to market cap. They're a rebate of sorts for anyone who wants to buy the company. Enterprise value is market cap plus any debt minus cash and equivalents, including marketable securities. On this basis, CHS is valued at $405 million, while CACH is valued at all of $6.7 million. If CACH drops much more and if its cash position does not deteriorate too much, it will potentially have more in cash than it is worth, giving it a negative enterprise value.

CACH's cash position will deteriorate due to operating losses and any additional store closures that occurred in the fourth quarter (ending with the end of December 2008). The company's latest estimate of a loss of about 50 cents per share confirms this. (http://www.cache.com/cache/images/pdf/press-releases/Decembe...) In the first three quarters of the year, losses came in around 12 cents per share. For the last quarter, the expected loss is 36-38 cents a share, per company guidance. As a rough estimate, this gives a loss of $4.8-5 million. This would will lower the total shown above to about $20.6-20.8 million. Likewise, cash per share will fall to about $1.55-1.57. While a loss is never welcome, the company does have cash and equivalents on hand to cover the expected fourth quarter losses.

Let's see how the street reacts to all this.
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