Freshpet Inc (FRPT)

Interest coverage

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 Sep 30, 2020 Jun 30, 2020
Earnings before interest and tax (EBIT) (ttm) US$ in thousands 21,413 46,027 50,027 32,312 21,314 -7,843 -26,927 -39,627 -45,482 -40,847 -57,698 -42,888 -30,857 -24,650 -20,114 -13,669 -5,328 1,530 9,637 7,565
Interest expense (ttm) US$ in thousands 12,661 12,262 12,183 13,408 13,986 14,097 11,796 9,465 7,829 5,229 4,731 3,591 2,552 2,882 2,444 1,983 1,409 1,212 1,302 1,396
Interest coverage 1.69 3.75 4.11 2.41 1.52 -0.56 -2.28 -4.19 -5.81 -7.81 -12.20 -11.94 -12.09 -8.55 -8.23 -6.89 -3.78 1.26 7.40 5.42

March 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $21,413K ÷ $12,661K
= 1.69

The analysis of Freshpet Inc.'s interest coverage ratio over the observed period reveals significant fluctuations, highlighting evolving financial stress and recovery phases.

Initially, during the fiscal year ending June 30, 2020, the company's interest coverage ratio stood at 5.42, indicating a comfortable ability to meet interest obligations. This ratio increased substantially to 7.40 by September 30, 2020, suggesting enhanced earnings relative to interest expenses.

However, a sharp decline commenced toward the end of 2020, with the ratio dropping to 1.26 as of December 31, 2020. Subsequently, the ratio turned negative in March 2021 (-3.78) and continued to stay well below zero through March 2022, with the most adverse point recorded at -12.09 in March 2022. Negative ratios imply that operating earnings were insufficient to cover interest expenses, reflecting significant financial distress during this period.

From mid-2022 onward, a gradual improvement is observed. The interest coverage ratio moves from a low of -7.81 at the end of 2022 to -0.56 by December 2023, indicating a stabilization but still insufficient coverage. The most notable positive shift appears in the first quarter of 2024, with the ratio reaching 1.52, signaling that earnings began to sufficiently cover interest obligations again. This positive trend continues into subsequent quarters, with ratios of 2.41, 4.11, and reaching 3.75 by the end of 2024.

In the most recent quarter available (March 31, 2025), the ratio declines slightly to 1.69 but remains above 1, suggesting continued, albeit cautious, capacity to meet interest payments.

Overall, the company's interest coverage history demonstrates a period of severe financial difficulty during 2021 and early 2022, marked by negative ratios that imply earnings were insufficient to cover interest costs. The subsequent recovery indicates improvement in operational profitability, allowing interest obligations to be met more comfortably as of late 2023 and into 2024, though the ratios still oscillate around the breakeven point.