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Axion International Holdings, Inc. Message Board

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  • mikebert mikebert Jul 20, 1998 6:48 PM Flag

    What's the Happeings here?

    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 =

    This simplistic analysis suggests that the impact of
    the stock issue on EPS assuming no further
    acquisitions would be slightly negative (~5%).

    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.

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