At first glance that would in theory be what you would think, but it is incorrect, as part of the gain was offset by a $500K tax provision (see the conference call notes and the income statement for the full amount of the allowance) .
The correct way to look at this actually is simply to look at their operating income, minus interest, plus apply some normalized tax rate to get the pro forma earnings. When I do that I get around $0.10 to $0.12 in earnings for the quarter. This is something management should have calculated in the release, but they didn't. They don't care much about shareholders at this company, which is why the valuation is so low. Actually the valuation is kind of ridiculous. For the year, I calculate nearly $0.50 per share in earnings. The stock should be trading at around $5. Problem is that management is very poor and they are clueless on how to create shareholder value.
It really does not matter where the cash comes from. It's just semantics, really. According to the release they have proforma $391 million in liquidity. If they redeem $150 million in notes and $45 million in converts, then they have $196 million in liquidity. Clearly, some of that is restricted and I really don't know how much. Anyway, they surely have $130 million in unrestricted cash pro forma, which is a very big cushion. They could pay maintain dividends from cash for a few years at that rate with no problem, assuming FCF averages $12 million (which I think is a worst case).
$45m convertible debenture are not being redeemed with the unrestricted cash. They are being paid with excess proceeds from the refinancing as per the release and prior filings. There is about $200 million in excess proceeds which is used to pay convert and redeem $150 million in 9% notes.
Plus they have $9 million coming in from asset sale. So I really think paying out $30 million this year from unrestricted cash is not a big deal. Of course, you can't do this forever. But I don't see any risk in the short-term to the dividend.
Also, they have already booked an asset sale that will bring in $9 million in 2014. Assuming an average $12 million in FCF in 2014, plus $9 million cash, I guess they can pay out $15 million easy in dividends this year. Then they go into cash to pay out a bit more. Situation really does not seem dire. If this was a non-dividend paying stock, the stock price would be much higher, as they do have substantial EBITDA, and very little maintance cap-ex.. Some private equity company should take over AT, restructure the debt (why on earth did they agree to a 50% sweep?), and take it public again. Stock would be worth $10+.
It looks to me that they have around $159 million in cash on the balance sheet that is completely unrestricted. So why wouldn't they just pay the dividend out of cash this year? Would seem that with some JV and additional cash, the dividend is safe for now. Of course, next year is a different story, but by then they will surely sell some assets.
As for FCF, you need to remember that there is around $20 million in growth cap-ex there, so the free cash flow is somewhat depressed by needed investments. Usually the Market will look past this and adjust the numbers to reflect a more stabilized FCF ex-growth cap-ex. So it's a bitter better than you project.
It's really not clear to me how the market will take the news. In a certain sense, it's positive the balance sheet is getting restructured with lower interest rate debt and later maturities. On the other hand, shareholders are asked to suffer in the interim with the 50% cash flow sweep, asset sales etc. and the drama for the equity is still not over.
I am not brushing off Japan, I just think the potential is much more limited than the hype. They are using distribution model in Japan which lowers margins, and if you use the US as a model for Japan, it's clear the sales potential of this product is limited. What are the sales in the US after 10 years? A tiny $38 million and dropping fast (not just sales, but usage). Japan will likely be half of US Sales, and at much lower margins. There is no way Japan will provide a boost to this company as people expect.
As for VSono and Vdrive, I fail to understand why they will provide a boost and evidence to date suggests they won't provide any meaningful boost. Doctors just don't use the machine. It has little value to them, even if it's a cool technology.
If nobody uses the machines, you can't sell supplies. If you buy a printer, but never use it, will you ever need to buy more ink? Procedure volume on STXS's machines keeps going down, so the demand for supplies keeps falling. That's the reality. Their only hope is to try to get doctors to use the current equipment for, but there is a reason why docs don't use it, and simply sending salespeople in to cajole doctors to use it more, won't work.
The only thing supporting this stock is the agreement with Japan which provides renewed fairy tale hopes for the long thesis. Without Japan this stock would be down 50% today and headed back to $1. The numbers are simply terrible for the company in the US and keep getting worse. The only hope now is that somehow Japan will revive the company. So you should be quite grateful that management announced the agreement when they did.
Can you please explain how they have stabilized the free fall? Procedure volume keeps falling as does revenue, year after year. The only thing management seems capable of is issuing more shares. Excitement around Japan is way overrated. If uptake of the technology in the US has been painfully slow and seemingly peaked, how much potential is there in Japan? And what are the margins in Japan given the distribution relationships? The reality is that the ultimate business impact from Japan will be small when all is said and done.
With all due respect, your facts about MAKO are wrong. MAKO's sales exploded from $34 million in 2009 to $100 million by 2012. Sales were down for one quarter in 2013, prior to purchase, but procedure volume (the key fact) was way up. Compare those numbers to STXS. STXS sales continue to decline year after year, as does usage. Nobody is going to buy this, because if they wanted to buy it they had 10 years to already buy it. They could have bought it last year at $1. The market for this product has maxed out. Management hope is simply that Japan will make up for lost US sales. I doubt it.
Sorry, Japan is not like the US when it comes to healthcare. It's not just about the money (as it is always here in the US). It's about whether this will help the surgeons. It will take a long time before any system is sold in Japan. Then hospitals will wait for more data before purchasing another one. It will be a very long road in Japan.
They can't sell more equipment because the technology is basically useless to the surgeons they want to sell to. On paper the technology is awesome. Very hot and advanced technology. But, in the real world of surgery it simply isn't worth it.
He now has zero shares, as per today's filings. Good riddance! I am just hoping Geiger is the last of the old board that is going to sell shares. If that's the case, the stock is ready to go up, as there will be no more selling pressure from Board members they kick out.
It's not anything like MAKO. It is a different market. STXS has been pushing this technology for a decade in the US, and nobody is buying the hype anymore as shown by the numbers, which are slowly dwindling every single year. Japanese will look at the US market and say, why should we spend on this when nobody in the US even wants it anymore.
I just wonder who is buying all of Geiger's shares. Should show up soon in some institutional filing.
Geiger is the former CEO of CRMB. Based on what CRMB did the last few years, it's not clear to me that Geiger ever even showed up for work, so it's not big deal he is selling his shares and it's possible he's already sold everything. I can't even understand how Geiger built Aeropostale, given how terribly poor he was at managing CRMB. Anyway, all i can say, is good riddance. Let Geiger sell. That's a bullish sign. The guy was and is clueless.
Gates didn't create value? If you bought MSFT at the IPO and held for a decade you made a fortune. I'd say he create a huge amount of value for shareholders. Same with Bezos. Plenty of billionaires make money for themselves and shareholders. Others don't and only care about themselves or are just downright bumbling idiots. I agree, don't make decisions based on billionaires.
As for why Fischer didn't buy the whole company? He can't right now, or at least not at a price that would satisfy shareholders. There are other shareholders here who won't sell and there are those "pesky" billionaires from Canada in converts who also won't agree. This is a public company with a shareholder base and other creditors. You can't just snap your fingers and take over the company even if you have the cash. Fischer's best bet now, and for everyone else involved, is to for the company to turn around.
Baed on the fact that my small community supports several niche stores that sell cupcakes and ice cream and other sweets, and are run by local entrepreuners, I don't think this is a bad business at all and can be turned around with good management. The problem seems to have been idiot management for the last few years. I think management will be better now and franchising is the way to go. Let entrepreuneurs run the stores.
This is a ludicrous argument unsupported by any facts. Nobody is saying there shouldn't be a profit on these drugs. Just there is no need to create $1 billion companies on these drugs based on price gouging, which ultimately hurts society as a whole. There are plenty of incentive to develop orphan drugs without price gouging. Yes, you may not become a billionaire doing it if prices are lower, but there are plenty of smart, hard working people who are incentivized by less than $1 billion at the end of the rainbow. Many actually care about helping people rather than whether they make $100 million or $5 million.
Why are the market caps so high on these stocks? Simply because there is a ton of money chasing biotechs now. But the prices have no relation whatsoever to any economic reality (and I've been in biotechs for 15 years - actually invested in the one of the first orphan biotech). As for the high prices on orphan drugs, this won't last and is the biggest flaw in all these analyses. Who do you think pays for obscene prices? Everyone with healthcare insurance. So these biotechs expect the rest of us to subsidize their price gouging of patients so Wall Street can justify ridiculous valuations on orphan drug companies? Not going to happen. At some point, insurance companies will be forced to not accept obscene prices. When people realize the ridiculous price of these orphan drugs will not last, the stocks will plummet.