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Spartech Corporation (NYSE:SEH)
Interest Coverage
0.89 (As of Oct. 2012)

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. Spartech Corporation's Operating Income for the three months ended in Oct. 2012 was $2 Mil. Spartech Corporation's Interest Expense for the three months ended in Oct. 2012 was $-3 Mil. Spartech Corporation's interest coverage for the quarter that ended in Oct. 2012 was 0.89. The higher the ratio, the stronger the company’s financial strength is.

SEH' s 10-Year Interest Coverage Range
Min: 0   Max: 0
Current: 0

SEH's Interest Coverageis ranked lower than
127% of the 730 Companies
in the Global Rubber & Plastics industry.

( Industry Median: 17.38 vs. SEH: 0.00 )

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

Spartech Corporation 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

Spartech Corporation had no debt.

Spartech Corporation's Interest Coverage for the fiscal year that ended in Oct. 2012 is calculated as

Here, for the fiscal year that ended in Oct. 2012, Spartech Corporation's Interest Expense was $-12 Mil. Its Operating Income was $16 Mil. And its Long-Term Debt was $112 Mil.

Interest Coverage=-1*Operating Income (A: Oct. 2012 )/Interest Expense (A: Oct. 2012 )
=-1*15.613/-11.875
=1.31

Spartech Corporation's Interest Coverage for the quarter that ended in Oct. 2012 is calculated as

Here, for the three months ended in Oct. 2012, Spartech Corporation's Interest Expense was $-3 Mil. Its Operating Income was $2 Mil. And its Long-Term Debt was $112 Mil.

Interest Coverage=-1*Operating Income (Q: Oct. 2012 )/Interest Expense (Q: Oct. 2012 )
=-1*2.452/-2.745
=0.89

* 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.

Spartech Corporation Annual Data

Oct03Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12
interest_coverage 5.323.651.914.234.00At Loss1.70At LossAt Loss1.31

Spartech Corporation Quarterly Data

Jul10Oct10Jan11Apr11Jul11Oct11Jan12Apr12Jul12Oct12
interest_coverage At LossAt LossAt Loss2.642.99At LossAt LossAt LossAt Loss0.89
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