Soomuchfun, I'm not a CPA, just a layman concerning these matters, but:
<<Not to burst anyone's bubble, but I think Munch was a little
aggressive on the back of the envelope. First, per Ira Monas,
their margins on business is 15-18% not 25%. Second, the IRS
and state taxing authorities require taxes to be paid on earnings.
This will generally run 40% of pre-tax income. Third, when you buy
a company you usually end up with some intangible assets that
must be amortized. Fourth, the settlement with the IRS will impact
EPS by $.025. >>
If I'm not mistaken, my own memory of a CC call specifically recalls Ira saying that their gross margins were in the high 20's or low 30's.
If you are talking about their net margin, then maybe.
Second, you are right about the 40 percent tax, but that is ameliorated by several factors that will help in the eps calculations.
Third, how are assets amortized? I thought that amortization was basically putting money aside for the repayment of a debt. If Myriad is doing 80MM annually, which I think they are, and according to the release, FAMH will only have to pay 500k a year to the IRS. What if the business even grows? This amortization is more than easily handled by the continuing ops and the profits of Myriad. EVEN SO, the debt repayment is figured in as part of the SGA is it not?, and doesn't that ameliorate the tax figures? If Myriad makes a pre-tax NET of 4MM, straight 40 percent would leave only 2.4MM in net. Take out the $500k servicing the debt, then you have, after taxes, 60 percent of 3.5MM, which comes out to 2.1MM. The difference being only 300K as opposed to the original debt service of 500k.
Jin. |
