Brinker International Inc (EAT)

Interest coverage

Jun 30, 2025 Mar 31, 2025 Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Dec 23, 2020
Earnings before interest and tax (EBIT) (ttm) US$ in thousands 513,100 466,800 379,900 286,000 253,600 216,100 210,800 189,300 145,700 142,500 127,500 126,800 172,100 217,500 220,200 202,500 199,200 122,500 94,800 19,500
Interest expense (ttm) US$ in thousands 53,100 57,300 60,300 62,300 65,000 64,400 62,400 59,600 54,900 51,700 48,600 45,900 46,100 47,900 50,900 54,100 56,000 57,500 58,000 59,000
Interest coverage 9.66 8.15 6.30 4.59 3.90 3.36 3.38 3.18 2.65 2.76 2.62 2.76 3.73 4.54 4.33 3.74 3.56 2.13 1.63 0.33

June 30, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $513,100K ÷ $53,100K
= 9.66

The interest coverage ratio for Brinker International Inc. exhibits significant variability from December 2020 through June 2025. At the end of 2020, the ratio was notably low, with a value of 0.33 as of December 23, 2020, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses, signaling potential financial distress or high leverage.

Subsequently, there was a substantial improvement by December 31, 2020, where the ratio increased to 1.63, suggesting an improved capacity to meet interest obligations, though still close to a critical threshold. The upward trend continued through 2021, with ratios reaching 2.13 in March, 3.56 in June, and stabilizing further at 3.74 and 4.33 toward the end of the year. This sustained improvement indicates that the company's earnings increasingly covered its interest expenses, thus reflecting a strengthening financial position.

From 2022 onward, the ratio experienced some fluctuations but generally maintained a positive trend. It decreased to 2.62 at the close of 2022 but rebounded to 2.76 in March 2023, and slightly declined to 2.65 in June 2023, before rising again to 3.18 in September 2023 and 3.38 at the end of 2023. These figures suggest that while earnings remain sufficient to cover interest expenses, the margin of safety is moderate and has experienced some compression during this period.

Forecasts into 2024 and 2025 depict a notable trend of increasing interest coverage ratios: projected to rise from 3.36 in March 2024 to 6.30 in December 2024, and further to 8.15 and 9.66 for June and September 2025, respectively. This trajectory indicates expectations of both higher earnings and improved ability to meet interest obligations, reflecting a potentially healthier leverage position.

In summary, Brinker International Inc.'s interest coverage ratio improved markedly from a low of 0.33 in late 2020 to more stable and increasingly robust levels approaching and exceeding 3, suggesting improved financial health and reduced insolvency risk. The substantial projected increases through 2025 imply an optimistic outlook for earnings capacity relative to interest expenses, further enhancing the company's creditworthiness over this period.