MRT – WHY IS THIS A GOOD USE OF CAPITAL?

09/29/08 01:24PM EDT
That’s right buy back stock! Apparently the management of MRT thinks it’s a good idea to spend its capital buying back stock. On Friday, MRT filed an 8K stating “The Fourth Amendment to the Credit Agreement includes changes which provide flexibility for the Company to repurchase up to a maximum of $20.0 million of the Company’s capital stock over the term of the Credit Agreement (subject to approval by the Company’s Board of Directors) by increasing the existing $10 million cap on such stock repurchases by an additional $10 million.”

Maybe I’m too negative, but MRT does not need to be buying back stock. Adding additional leverage on the company’s balance sheet will only limit the duration the company has to navigate the current cycle. Increased leverage removes operating flexibility at a time when operating flexibility is a premium. It is important to note that MRT’s EBIT has declined over 25% over the past 12-months.

It’s amazing to think that news like this is still possible!


  • Even with a significant decline in capital spending MRT is not generating any free cash flow.

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