KAR Auction Services Inc (KAR)

Interest coverage

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	179,700	9,300	157,800	127,500	134,300
Interest expense	US$ in thousands	21,800	155,800	119,200	126,600	128,900
Interest coverage		8.24	0.06	1.32	1.01	1.04

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $179,700K ÷ $21,800K
= 8.24

The interest coverage ratio of KAR Auction Services Inc has varied significantly over the years based on the provided data.

As of December 31, 2020, the interest coverage ratio was 1.04, indicating that the company's earnings before interest and taxes (EBIT) were only able to cover its interest expense slightly over 1 time. This suggests a relatively weak ability to meet interest obligations with operating income.

By December 31, 2021, the interest coverage ratio decreased further to 1.01, indicating a slight deterioration in the company's ability to cover its interest expenses. This could raise concerns about the company's financial health and its ability to service its debt.

However, there was a significant improvement in the interest coverage ratio by December 31, 2022, reaching 1.32. This increase suggests that KAR Auction Services Inc's earnings improved compared to its interest expenses, indicating a better ability to pay off its interest obligations from operating income.

The interest coverage ratio took a sharp decline by December 31, 2023, falling to 0.06. This low ratio indicates that the company's EBIT was significantly insufficient to cover its interest expenses, highlighting potential financial distress and an increased risk of default on debt obligations.

Finally, by December 31, 2024, there was a substantial improvement in the interest coverage ratio to 8.24. This high ratio signifies that the company's earnings are more than sufficient to cover its interest expenses, reflecting a strong ability to meet its debt obligations from operating income.

Overall, the analysis shows fluctuations in KAR Auction Services Inc's interest coverage ratio over the years, with periods of weakness and strength. This highlights the importance of monitoring the company's financial performance and debt servicing capabilities.