Post by
TheCount11 on Sep 12, 2022 3:17pm
Interest rates are a big deal for Peller. Lets see why.
Lets assume the company does $400M in Revenues with a 39% Gross margin and 11% Operating margin.
That means that there is $44M to be split between debt holders in interest, government with taxes and shareholders with profit.
Long-term debt $193M so every 1% increase in interest rates is an additional $1.93M in interest. So far this year rates have increased by 3% which means an additional $5.8M in interest expense however the Company has entered into interest rate swap agreements to fix the interest rate on a portion of the balance outstanding on the investment facility. Until September 29, 2022, the interest rate is fixed at 2.25%, plus the applicable margin. As at March 31, 2022, the applicable margin was 4.00% (2021 – 1.90%). Interest expense on long term debt during the year was $7,750 (2021 – $5,925).
Comment by
johnathamilton on Sep 15, 2022 9:27pm
SG&A still represents a big pool of potential savings. I'm surprised they didn't lock in long term debt a lower rates. Silly me, but I assumed that LTD was like a mortgage which is issued for 5-10years - unless of course they decided to go with variable.....