KAR Auction Services Inc (KAR)

Interest coverage

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 Mar 31, 2020
Earnings before interest and tax (EBIT) (ttm) US$ in thousands 299,100 259,200 247,200 17,300 6,200 2,600 -12,200 184,400 139,800 126,900 106,900 136,400 228,100 197,200 254,700 196,900 134,300 188,400 186,400 284,100
Interest expense (ttm) US$ in thousands 203,000 151,700 155,800 157,200 155,800 151,900 144,800 131,900 119,200 116,100 116,000 121,300 126,600 124,800 122,100 121,800 128,900 137,900 146,300 171,000
Interest coverage 1.47 1.71 1.59 0.11 0.04 0.02 -0.08 1.40 1.17 1.09 0.92 1.12 1.80 1.58 2.09 1.62 1.04 1.37 1.27 1.66

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $299,100K ÷ $203,000K
= 1.47

Interest coverage ratio is a financial metric used to evaluate a company's ability to cover its interest expenses with its operating income.

Analyzing the interest coverage ratio of KAR Auction Services Inc over the period from March 31, 2020, to December 31, 2024, reveals fluctuations in the company's ability to meet its interest payment obligations.

Initially, the interest coverage ratio was 1.66 on March 31, 2020, indicating that KAR Auction Services Inc was generating enough operating income to cover its interest expenses. However, there was a decline in the ratio to 1.04 by December 31, 2020, suggesting a potential strain on the company's ability to meet its interest payments.

The trend continued as the ratio fluctuated over the subsequent quarters, with some improvements seen periodically. Notably, there was a significant improvement in the interest coverage ratio to 2.09 on June 30, 2021, indicating better earnings relative to interest expenses.

However, by June 30, 2022, the interest coverage ratio dropped to 0.92, falling below 1 which may indicate potential financial distress and difficulty in meeting interest obligations with operating income.

There were further fluctuations in the interest coverage ratio over the following quarters, with some periods showing improvements and others indicating challenges.

By December 31, 2024, the interest coverage ratio stood at 1.47, suggesting a moderate improvement compared to previous periods but still a level of risk as it is below the ideal ratio of 2 or higher.

Overall, the analysis of KAR Auction Services Inc's interest coverage ratio indicates variability in the company's ability to cover its interest expenses with operating income over the period under consideration, highlighting the importance of monitoring this metric for financial health assessment.