Mattel Inc (MAT)
Interest coverage
| 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 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 607,514 | 510,797 | 428,214 | 481,836 | 662,582 | 862,511 | 849,143 | 776,543 | 736,537 | 679,155 | 672,624 | 570,679 | 387,452 | 262,774 | 28,606 | 27,710 | 45,897 | 76,871 | 47,920 | -89,087 |
| Interest expense (ttm) | US$ in thousands | 123,786 | 125,574 | 128,728 | 130,897 | 132,818 | 132,978 | 151,170 | 156,503 | 253,936 | 270,010 | 268,363 | 279,834 | 198,332 | 209,173 | 206,447 | 203,066 | 201,044 | 190,065 | 190,532 | 187,765 |
| Interest coverage | 4.91 | 4.07 | 3.33 | 3.68 | 4.99 | 6.49 | 5.62 | 4.96 | 2.90 | 2.52 | 2.51 | 2.04 | 1.95 | 1.26 | 0.14 | 0.14 | 0.23 | 0.40 | 0.25 | -0.47 |
December 31, 2023 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $607,514K ÷ $123,786K
= 4.91
Interest coverage is a key financial ratio that indicates a company's ability to meet its interest obligations on outstanding debt. A higher interest coverage ratio suggests the company is more capable of servicing its debt, while a lower ratio may indicate potential financial distress.
Analyzing the interest coverage ratio of Mattel Inc over the past few quarters reveals fluctuations in the company's ability to cover its interest expenses. From December 2019 to June 2021, the interest coverage ratio ranged from 1.26 to 6.49, indicating varying levels of debt-servicing capability during this period.
However, a concerning trend is observed in the latter half of 2021 and into 2023, where the interest coverage ratio dropped significantly to below 1 in some quarters, reaching as low as -0.47 at the end of September 2020. A negative interest coverage ratio suggests the company's earnings are insufficient to cover its interest expenses, raising red flags about its financial health and ability to meet debt obligations.
This downward trend in the interest coverage ratio of Mattel Inc signifies potential challenges in meeting interest payments and may warrant further investigation into the company's financial strategy, profitability, and debt management practices. It is crucial for investors and stakeholders to closely monitor these ratios to assess the company's financial stability and risk levels.