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GuruFocus has detected 5 Warning Signs with International Game Technology PLC $IGT.
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International Game Technology PLC (NYSE:IGT)
Interest Coverage
1.04 (As of Mar. 2017)

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. International Game Technology PLC's Operating Income for the three months ended in Mar. 2017 was $119 Mil. International Game Technology PLC's Interest Expense for the three months ended in Mar. 2017 was $-115 Mil. International Game Technology PLC's interest coverage for the quarter that ended in Mar. 2017 was 1.04. The higher the ratio, the stronger the company’s financial strength is.

Warning Sign:

Ben Graham prefers companies interest coverage is at least 5. International Game Technology PLC interest coverage is 1.27, which is low.

IGT' s Interest Coverage Range Over the Past 10 Years
Min: 1.18   Max: 3.75
Current: 1.27

1.18
3.75
IGT's Interest Coverage is ranked lower than
89% of the 726 Companies
in the Global Gambling industry.

( Industry Median: 13.06 vs. IGT: 1.27 )

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.


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

The company did not have earnings to cover the interest expense.

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

The company had no debt.


Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

International Game Technology PLC's Interest Coverage for the fiscal year that ended in Dec. 2016 is calculated as

Here, for the fiscal year that ended in Dec. 2016, International Game Technology PLC's Interest Expense was $-469 Mil. Its Operating Income was $660 Mil. And its Long-Term Debt was $7,925 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2016 )/Interest Expense (A: Dec. 2016 )
=-1*660.436/-469.268
=1.41

International Game Technology PLC's Interest Coverage for the quarter that ended in Mar. 2017 is calculated as

Here, for the three months ended in Mar. 2017, International Game Technology PLC's Interest Expense was $-115 Mil. Its Operating Income was $119 Mil. And its Long-Term Debt was $7,331 Mil.

Interest Coverage=-1*Operating Income (Q: Mar. 2017 )/Interest Expense (Q: Mar. 2017 )
=-1*119.221/-114.799
=1.04

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's 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 local exchange's currency.

International Game Technology PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
interest_coverage 2.041.912.422.243.273.753.152.731.181.41

International Game Technology PLC Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
interest_coverage 1.521.730.941.071.101.591.451.391.191.04
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