AAR Corp (AIR)
Interest coverage
| May 31, 2025 | Feb 28, 2025 | Nov 30, 2024 | Aug 31, 2024 | 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 47,900 | 92,300 | 118,100 | 159,000 | 113,600 | 104,600 | 107,100 | 102,500 | 135,700 | 134,400 | 130,100 | 125,100 | 109,400 | 96,300 | 80,500 | 56,000 | 24,200 | -13,000 | -23,300 | 1,200 |
| Interest expense (ttm) | US$ in thousands | 75,000 | 75,900 | 69,300 | 56,200 | 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 |
| Interest coverage | 0.64 | 1.22 | 1.70 | 2.83 | 2.63 | 3.59 | 5.10 | 6.07 | 11.12 | 17.68 | 29.57 | 44.68 | 45.58 | 35.67 | 25.16 | 14.00 | 4.84 | -1.88 | -2.84 | 0.14 |
May 31, 2025 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $47,900K ÷ $75,000K
= 0.64
The interest coverage ratios for AAR Corp across various reporting periods reveal significant fluctuations over the analyzed timeframe. At the outset, on August 31, 2020, the ratio stood at a low 0.14, indicating minimal ability to cover interest expenses from earnings, and subsequently declined sharply to -2.84 by November 30, 2020, and -1.88 by February 28, 2021. These negative figures suggest that the company's earnings before interest and taxes (EBIT) were insufficient to service interest obligations during this period, reflecting a period of financial stress or operational challenges.
Starting in May 2021, a notable turnaround is observed, with the ratio rising to 4.84, signifying improved earnings capable of comfortably covering interest costs. This upward trend continued through 2021 and into 2022, with ratios reaching an impressive 44.68 by August 31, 2022, indicating a robust capacity to meet interest obligations.
However, from late 2022 onward, the ratios demonstrate a declining trend. By November 30, 2022, the ratio decreased to 29.57, and subsequent periods show a continued erosion of coverage, with the ratio dropping to 17.68 by February 28, 2023, and further down to 11.12 by May 31, 2023. The subsequent periods exhibit a gradual decline toward levels approaching 1, with August 31, 2024, at 2.83, and continuing downward to 0.64 as of May 31, 2025.
This overall pattern indicates that while AAR Corp experienced a period of strong interest coverage in late 2021 and early 2022, subsequent periods have seen a deterioration in its ability to generate earnings sufficient to cover interest expenses. The declining ratios suggest increasing stress on earnings relative to interest obligations, a scenario that may warrant cautious assessment regarding the company's financial stability and debt management moving forward.
Peer comparison
May 31, 2025