Frank Voisin writes about value investing topics at http://www.frankvoisin.com
According to Google Finance and Gurufocus, ADDvantage Technologies (NASDAQ: AEY) has a debt to equity ratio of around 27%. Indeed, according to the company’s most recent 10-Q, the company has $9,790,618 of non-current notes payable and $1,814,008 million of current notes payable. But this is no longer the case. In fact, the company now has only the $1.8 million note payable remaining, which itself has been reduced over the last three months due to debt servicing.
Today the company released an 8-K ostensibly discussing the results of its recent vote at the annual meeting in which a number of directors were elected. Tucked into that 8-K is this little nugget:
Item 8.01 Other Events
On March 12, 2012, the Company paid off the outstanding amount owed of $9.4 million under the second term loan pursuant to the Amended and Restated Revolving Credit and Term Loan Agreement (the “Credit Agreement”). In connection with the loan payoff, the Company also terminated the associated interest rate swap agreement for $0.8 million. The Company’s $7.0 million Revolving Line of Credit remains available under the Credit Agreement.
So over the course of the last few months (subsequent to the recent 10-Q, which is the data source for Google Finance, Gurufocus and a number of other websites), the company repaid 85% of its outstanding debt!
This is a big thing for shareholders, as the company now has vastly improved financial flexibility and the after-tax value of those interest payments will now be added to free cash flow in the future. Also, there is little reason to worry about the company’s liquidity in the event that a great opportunity comes along; the company still has $7 million in an unused revolver.
The benefits of this won’t appear in full until another quarter has gone by, as we are just a few weeks from the end of the company’s second quarter.
Author Disclosure: Long AEY