I’ve got a teaser solution writeup for you this week too, a little stock, but I’m still working on that and I’ve got some other Friday thoughts available for you now, so we’re going to split your Friday File into two pieces today. I’ll send out part two after the market close, since it’s about a tiny stock…. but for now, updates!

Iconix (ICON) — I noted last week that although I have a liability with ICON, thanks to some puts I sold, I was waiting to see how the stock reacted to the conference call on Monday. I listened to the call, and free cash flow generation is what keeps me willing to have my small exposure to this stock — possibly up to having my position exercised and being put some shares (it would be a very small position) at option expiration next week.

2016 is going to be a “cleansing” year as they reset expectations after accounting misstatements and overly optimistic forecasts let them drift away from the core business, which is maintaining and growing their brands and licensing those brands to effective operators. Now, with free cash flow expected to be in the range of 170-185 million next year, similar to this year’s level, the EV/Free Cash Flow ratio is about 10 — pretty good considering the massive size of the debt portion of the EV. They could, if necessary and if free cash flow continues at the current pace, pay off a good portion, more than half, of their convertible bond due next year with cash. They probably won’t, but they could.

Interest expense will rise next year because the convertible bond that they have to refinance or otherwise re-fund has a very low coupon, 2.5%, but they are willing to securitize their brands (and some are already securitized) so they do have the expectation of finding some willing lenders and they hope to have the financing plan in place for next Summer’s maturity of that bond before the end of this year. I was clearly wrong about the value of the company in the Spring, after the first collapse when I thought it looked appealing near $30, so you’re probably wise not to assume I’m correct here… but $7 looks way too low to me unless there’s another monster hiding behind the curtain and the SEC actually ends up thinking they did ...