AAR Corp (AIR)
Interest coverage
| May 31, 2024 | Feb 29, 2024 | Nov 30, 2023 | Aug 31, 2023 | May 31, 2023 | Feb 28, 2023 | Nov 30, 2022 | Aug 31, 2022 | May 31, 2022 | Feb 28, 2022 | Nov 30, 2021 | Aug 31, 2021 | May 31, 2021 | Feb 28, 2021 | Nov 30, 2020 | Aug 31, 2020 | May 31, 2020 | Feb 29, 2020 | Nov 30, 2019 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 101,500 | 104,000 | 105,200 | 100,200 | 133,800 | 129,500 | 127,200 | 123,500 | 107,700 | 96,300 | 106,200 | 91,700 | 59,000 | 21,600 | -14,700 | -7,300 | 19,300 | 62,300 | 22,000 | 12,400 |
| Interest expense (ttm) | US$ in thousands | 43,200 | 29,100 | 21,000 | 16,900 | 12,200 | 7,600 | 4,400 | 2,800 | 2,400 | 2,700 | 3,200 | 4,000 | 5,000 | 6,900 | 8,200 | 8,800 | 9,300 | 8,800 | 9,000 | 9,600 |
| Interest coverage | 2.35 | 3.57 | 5.01 | 5.93 | 10.97 | 17.04 | 28.91 | 44.11 | 44.88 | 35.67 | 33.19 | 22.92 | 11.80 | 3.13 | -1.79 | -0.83 | 2.08 | 7.08 | 2.44 | 1.29 |
May 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $101,500K ÷ $43,200K
= 2.35
The interest coverage ratio for AAR Corp has varied significantly over the past few years. It is calculated as earnings before interest and taxes (EBIT) divided by the interest expenses. A higher ratio indicates that the company is more capable of meeting its interest obligations.
From November 2019 to May 2021, the interest coverage ratio showed a generally increasing trend, peaking at 44.88 in August 2022. This indicates that the company's earnings were significantly higher than its interest expenses during this period, reflecting a strong financial position and ability to cover its interest payments comfortably.
However, there was a notable decline in the interest coverage ratio from August 2022 to August 2023, with the ratio dropping from 44.11 to 5.93. This reduction could be indicative of either a decrease in earnings or an increase in interest expenses, potentially signaling financial challenges or changes in the company's capital structure during this period.
The interest coverage ratio continued to fluctuate in subsequent periods, ranging from 2.35 to 17.04. The ratio of less than 1 in November 2020 and August 2020 indicates that the company's earnings were insufficient to cover its interest expenses during those periods, raising concerns about its ability to meet debt obligations.
Overall, it is essential for investors and stakeholders to closely monitor AAR Corp's interest coverage ratio to assess its ability to service debt and manage financial risks effectively.
Peer comparison
May 31, 2024