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Helmerich & Payne Inc (NYSE:HP)
Interest Coverage
189.49 (As of Jun. 2014)

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense. Helmerich & Payne Inc's Operating Income for the three months ended in Jun. 2014 was $272 Mil. Helmerich & Payne Inc's Interest Expense for the three months ended in Jun. 2014 was $-1 Mil. Helmerich & Payne Inc's interest coverage for the quarter that ended in Jun. 2014 was 189.49. The higher the ratio, the stronger the company’s financial strength is.

Good Sign:

Ben Graham prefers companies interest coverage is at least 5. Helmerich & Payne Inc has enough cash to cover all of its debt. Its financial situation is stable.

HP' s 10-Year Interest Coverage Range
Min: 2.8   Max: 170
Current: 156.09

2.8
170

During the past 13 years, the highest interest coverage of Helmerich & Payne Inc was 170.00. The lowest was 2.80. And the median was 44.80.

HP's Interest Coverageis ranked higher than
82% of the 148 Companies
in the Global Oil & Gas Drilling industry.

( Industry Median: 6.84 vs. HP: 156.09 )

Definition

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage=-1*Operating Income/Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

Helmerich & Payne Inc did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, or Interest Expense is positive, then

Helmerich & Payne Inc had no debt.

Helmerich & Payne Inc's Interest Coverage for the fiscal year that ended in Sep. 2013 is calculated as

Here, for the fiscal year that ended in Sep. 2013, Helmerich & Payne Inc's Interest Expense was $-6 Mil. Its Operating Income was $957 Mil. And its Long-Term Debt was $80 Mil.

Interest Coverage=-1*Operating Income (A: Sep. 2013 )/Interest Expense (A: Sep. 2013 )
=-1*956.661/-6.129
=156.09

Helmerich & Payne Inc's Interest Coverage for the quarter that ended in Jun. 2014 is calculated as

Here, for the three months ended in Jun. 2014, Helmerich & Payne Inc's Interest Expense was $-1 Mil. Its Operating Income was $272 Mil. And its Long-Term Debt was $80 Mil.

Interest Coverage=-1*Operating Income (Q: Jun. 2014 )/Interest Expense (Q: Jun. 2014 )
=-1*271.912/-1.435
=189.49

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

The higher the ratio, the stronger the company’s financial strength is.


Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company’s overage financial strength.


Related Terms

Operating Income, Interest Expense, Financial Strength


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Helmerich & Payne Inc Annual Data

Sep04Sep05Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13
interest_coverage At Loss15.2562.8162.4537.0744.8026.3340.48105.12156.09

Helmerich & Payne Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
interest_coverage 85.5196.50176.01183.90196.39114.76157.53221.13148.02189.49
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