03-03-2015, 11:22 AM
(03-03-2015, 10:01 AM)Dividend Watcher Wrote: I understand both your concerns about debt. I'm leery too but management seems to have handled it well.
To answer Benjamin first. When interest rates change, their interest costs will be unaffected. They've only have 2 secured senior notes outstanding: a term loan due in 2017 ($380M) and the note I mentioned due in 2024. They also have a revolver which, in total, is less than $100M. As best as I can tell, they are all at fixed rates.
I graphed cash & equivalents vs. LT debt:
I was going to add debt/equity but for the first 4 years, they had a huge negative equity due to no retained earnings and commitments to IMG Global (the original company) and Mosaic which was part of the recapitalization program. I don't have the details on that whole affair so can't speak further about it. The graph was unreadable because of those large swings.
Also, for the last 5 years, interest coverage averaged around 7-10x. I don't have all the details about 2014 because the full financials aren't out yet.
They due have some currency risk with the Canadian dollar and the British pound. Other countries they market to are a very small percentage. Currency hasn't seemed to affect them much over the last 10 years.
The 2017 note of $380M is the one that concerns me. If interest rates go up significantly between now and then, the refinance of that term loan will be at the higher rate. The company could pay off the loan partially or in full (net income of the last three years: 89M, 104M, and 218M) since they have 267M in cash on hand. They should be able to handle their debt, but it would be something to watch
http://finance.yahoo.com/q/is?s=CMP&annual
http://finance.yahoo.com/q/bs?s=CMP+Bala...eet&annual