Leggett & Platt Incorporated (LEG)
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 | -423,300 | -84,700 | 486,800 | 594,100 | 406,100 |
| Interest expense | US$ in thousands | 85,900 | 88,400 | 81,400 | 73,900 | 79,600 |
| Interest coverage | -4.93 | -0.96 | 5.98 | 8.04 | 5.10 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $-423,300K ÷ $85,900K
= -4.93
Interest coverage ratio measures the company's ability to meet its interest payments on outstanding debt. A higher ratio indicates that the company is more capable of servicing its debt obligations.
For Leggett & Platt Incorporated, the interest coverage ratio has shown some fluctuations over the period. In December 31, 2020, the ratio was 5.10, indicating the company generated sufficient operating income to cover its interest expenses. This ratio improved significantly to 8.04 by December 31, 2021, reflecting a stronger ability to cover interest payments.
However, the interest coverage ratio dropped to 5.98 by December 31, 2022, although it still remained at a reasonable level. The year-end ratios of -0.96 in 2023 and -4.93 in 2024 are concerning as they indicate that the company's operating income is insufficient to cover its interest expenses. A negative ratio suggests that the company is not generating enough profit to cover interest payments, raising solvency issues and the risk of default.
Monitoring the trend of the interest coverage ratio is crucial for evaluating the company's financial health and ability to meet its debt obligations in the long term. It is important for Leggett & Platt to improve its profitability and cash flow generation to ensure sustainable interest coverage and mitigate financial risks.
Peer comparison
Dec 31, 2024