Using GryCrayon's figure of $31.5 million in debt payments, 8% interest, and 30% tax rate one can calculate a bottom line impact of $1.76 million on net income. Assuming roughly $6.1 million/year in net income at present and a 30% internal growth rate, we should expect net income of about $7.9 million from continuing operations over the next 4 quarters. Adding these together gives $9.66 million in net income over the next 4 quarters. After the sale of the new shares there should be roughly 8 million shares, so EPS over the next 4 quarters would be about $1.20. In the absence of the debt payoff, we would have EPS of 7.9/6.25 = $1.26.
This simplistic analysis suggests that the impact of the stock issue on EPS assuming no further acquisitions would be slightly negative (~5%).
This negative impact amounts to about $375,000, or $535,000 before taxes. This earnings shortfall could be made up by an investment of $10 million in T-bills. Provided ANLT can raise at least $41.5 million by the stock issue, use 31.5 million to pay down debt and invest the rest in T-bills, the impact on EPS of the stock issue would be nil.
Thus, assuming a 10% cost (I should expect it's less than this), if ANLT can sell the 1.75 million shares at an average price of 26 or more, there should be no EPS dilution at all. Of course, ANLT will eventually put the extra assets to work at something more profitable than T-bills (e.g.. more acquisitions), but it is nice to know that even in the short term the impact of these extra shares should be neutral, or even slightly positive on EPS.
Stock should end the year somewhere between 35-40 and next year end between 45-50, if that's not high enough or fast enough for some of you, then please reconsider. This is a 3-5 year hold and a very rewarding hold based on past performance, there is no guarantee to any of this, and the fluctuations over a 3-5 year period would probably drive non-investors crazy, this has proven to be the strongest co., in an emerging industry, whether or not it continues to be so, is where the investing comes in.
Is ANLT going out of business? I seriously doubt it. Were they really going to report blow out earnings for the quarter? I seriously doubt it. Do they still have a very favorable outlook for the longer term? I seriously believe they do. Is it possible that the stock offering needs to priced more attractively than the wild numbers that were being thrown around here a short while ago? I seriously believe that too. Are too many of you in this stock to try and capitalize on every wiggle and squiggle based on hope, hype and enthusiasm? It sure looks like that. Can I be expected to apply that technique to my investment philosophy and expect to enjoy real capital appreciation? No way Jose.
It's about time that many of you make a real effort to understand what this company and its industry are really about and either aclimate yourself to the fact that it makes very volatile price swings based either on perceived or real changes in near term fundemental performance. A company such as ANLT which reports on a "percentage of completion" accounting basis is subject to wide swings in quarter to quarter reporting and trying to use past performance as a basis for comparison can lead to severe frustration.
An educated guess on my part leads me to feel that the sequential quarterly and year to year comparisons will fall short of what some may have taken as a shoo-in for dynamic sales and net income growth. This of course tends to drive the momentum player of the track very quickly. Time for the release of real news is at hand and that's when I may make any change in my current thinking about calling it a day in this stock.
I wanted to respond to your comment about 'percentage of completion accounting'. In a service industry when a large number of employees are working on projects such as consulting or data conversion and when a large backlog is present then the percentage of completion accounting model should provide consistent growth in revenues as well as earnings. If revenues as well as earnings are not growing in a smooth consistent manner then it is likely that management is doing a poor job of estimating the overall expected margins on the projects. If the management cannot do an effective job of estimating these margins then it is impossible for the company to reliable report earnings and hence for the analysts to value the company. It is too early to tell what is really going on with this company because the company is growing so rapidly (that is not in dispute) and during a growth phase in this type of industry it is easy to hide a lot of 'sins'. I would say that if the management team at this company is experienced, realiable and trustworthy then we shouldn't have much of a problem, but if this is their first venture into the public arena, then these guys may be tempted by the short term and be a little too optimistic about margins and aggressive about revenues. They can afford to be pretty aggressive for a pretty long time but the longer it continues the harder they will fall when the growth levels off. Hopefully they haven't been too optimistic in which case I think this company is a can't miss investment. But if their revenues and earnings are not consistent from quarter to quarter I would bet that this company doesn't have its house in order and its going to be a painful fall at some point in the future.