So 3 minutes into the CC the Boss talks about the AMCo transaction that will create " cash flow business with about 600 to 650 EBITDA, with free cash coming out of that of about 500 million".
How can one believe that when he is describing the EBITDA, he is talking in USD and yet the Cash-flow out of that .....he is suddenly switching to CAD. Something is not adding up and It has me thinking! So let's dig deeper and break it down.
CXR has 3.5B debt, of which 45M was paid in December, leaving aprox. 3.45B with a blended rate of 7%.
From the 3.45B remaining debt, CXR assumed US 1.4B of AMCo's debt ....calculated in British pounds leaving 2.05B of USD debt.
With the British pound falling against the USD, that part of the debt is shrinking in USD terms. Yet because of organic growth in the upper single digits the revenue stream is increasing and more than offsetting the Fx currency drop against the USD.
So if we calculate by using the top of 650M EBITDA and we subtract the interest debt payment we will end up with FCF.
US denominated debt of 2.05B x 7% = 143.5M debt payment
£ denominated debts of 1.33B x 7% = 93M debt payment
TOTAL debt payment in USD is now 236M
Finally if we subtract 236M debt payment from 650M EBITDA we are left with 414M FCF. This is a lot more than 350M discussed in the past, but still leaves us short of about 85M from the 500M FCF he mentioned.
Reading between the lines he talked about Donnatal growing. He mentioned that this product is all about name recognition, so he has increased the sales force from 75 to 175 in US alone. As Sunshine7 points out "They wouldn't do that if they did not see opportunity for growth. Each sales person should sell around 10x their cost, so I see incremental sales of about $2M x 100 = $200M on that basis alone."
Optimism aside let's count only on $ 85M increase from this , but don't forget that all of CXR's portfolio is now being integrated int AMCo. So Donnatal alone could very well achieve beyond this expectation. Then he mentioned the possibility of Photofrin being a $100M product. He stated that they are not getting any credit for it and yet it is the "standard of care in Germany" right now. So it is entirely plausible that CXR could have a 500M FCF in 2016.
From this CC, I get the feeling that there is a lot of hidden surprises that could come out and substantiate the numbers he mentioned here and positively influence the Q4 2015 as well as 2016 numbers. As I said in the past, Mark is always under promising and over delivering.
This will all be all clear in due time.