AAR Corp (AIR)
Interest coverage
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | — | 101,500 | 133,400 | 111,100 | 36,800 |
| Interest expense | US$ in thousands | 73,600 | 43,200 | 12,200 | 2,400 | 5,000 |
| Interest coverage | 0.00 | 2.35 | 10.93 | 46.29 | 7.36 |
May 31, 2025 calculation
Interest coverage = EBIT ÷ Interest expense
= $—K ÷ $73,600K
= 0.00
The interest coverage ratio for AAR Corp, as provided for the fiscal years ending on May 31, 2021 through May 31, 2025, demonstrates significant variability over this period.
In the fiscal year ending May 31, 2021, the interest coverage ratio was 7.36, indicating that the company's earnings before interest and taxes (EBIT) were more than sufficient to cover its interest expenses, with a comfortable buffer. This suggests a relatively strong ability to meet interest obligations during this period.
The ratio experienced a substantial increase in the subsequent year, reaching a peak of 46.29 in May 31, 2022. This exceptionally high ratio indicates that the company's EBIT significantly exceeded its interest obligations, reflecting a period of strong earnings relative to interest expenses and suggesting an improved financial position or reduced interest costs.
However, by May 31, 2023, the interest coverage ratio declined to 10.93. Although this is lower than the previous year's peak, it still reflects a robust capacity to meet interest obligations, albeit with a narrower margin compared to the prior year.
The trend continued into the fiscal year ending May 31, 2024, with the ratio dropping sharply to 2.35. This represents a substantial decrease in the company's ability to cover interest expenses from its EBIT, indicating increased financial strain and a reduced safety margin for interest payments. Such a decline warrants closer scrutiny of operating performance and potential challenges faced during this period.
By May 31, 2025, the interest coverage ratio reaches zero, implying that the company either did not generate earnings before interest and taxes or was experiencing a significant disruption that rendered it unable to cover its interest obligations. This scenario may signal financial distress or the occurrence of extraordinary events impacting earnings.
Overall, the trend illustrates fluctuations in AAR Corp's ability to service its interest obligations, with a notable peak in 2022 followed by a marked decline, culminating in an inability to cover interest expenses in 2025. This pattern underscores the importance of further analysis into the company's operational performance, debt structure, and external factors influencing its earnings over this period.
Peer comparison
May 31, 2025