There are convertibles that will come on the market in July...the series A convertibles. The series B are converting right now. This is keeping a lid on things but I suspect when Q2 and Q3 results are reported a good chunk of those people converting their notes won't be selling.
Last year they showed $151 million in interest expense, but $11 million of that was related to the interest on the convertible notes. Per the 10-k: "Upon conversion, during the year ended December 31, 2012, we recorded $10.6 million of additional interest expense representing the $5.1 million make whole premium and $5.5 million of accelerated amortization of the discount on Series B Notes converted."
So total interest is $140 million. Again, $24 million of that is related to the convertible notes. So $116 million after they convert or $29 million per quarter. In Q3 they did $30 million in operating income. So they were basically break even.
Now look at what just 4% higher revenues do:
$50 million increase on top line
$33 million gross profit (using 67% margins...same as PY)
$31 million in expense
$2 million in profit (or $0.10 EPS, fully diluted)
Now consider the network changes they proposed, if they get approved:
$25 to $30 million or $6 to $7 million per quarter
Add these up:
$2 + ($6 to $7) = $8 to $9 million for Q3.
BOTTOM LINE:
Use 21 million diluted shares and you get $0.40 to $0.45 EPS
(keep in mind they're still cutting costs and improving margins so there is upside potential there over time. and analysts are expecting 10% growth in 2014...if those happen it could translate into much better numbers in 2014).
