Analysis of Debt
Total Debt (Carrying Amount)
Air Products & Chemicals Inc., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
The total debt carrying amount exhibited significant volatility between 2015 and 2020, characterized by a multi-year period of deleveraging followed by a substantial increase in the final year of the analysis.
- Total Debt Trajectory
- Total debt rose slightly from $5.88 billion in 2015 to $6.23 billion in 2016, before entering a period of consistent decline. By September 30, 2019, total debt reached a period low of $3.33 billion. This trend reversed sharply in 2020, with total debt surging to $7.91 billion, representing the highest debt level across the observed six-year timeframe.
- Short-Term Borrowing Trends
- A pronounced downward trend is observed in short-term borrowings, which fell from $1.49 billion in 2015 to $7.7 million in 2020. This indicates a systematic reduction in reliance on short-term credit facilities to fund operations or liquidity needs.
- Long-Term Debt Composition
- Long-term debt, excluding the current portion, served as the primary driver of the total debt balance. This component decreased from a 2016 peak of $4.92 billion to $2.91 billion in 2019, followed by a significant expansion to $7.13 billion in 2020. Furthermore, long-term debt related to related parties was introduced into the capital structure in 2018 at $384.3 million and remained relatively stable through 2020 at $297.2 million.
- Current Portion of Long-Term Debt
- The current portion of long-term debt remained largely stable between $371.3 million and $470 million for most of the period. A notable exception occurred in 2019, where the amount dropped significantly to $40.4 million before recovering to $470 million in 2020.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Total Debt (Fair Value)
| Sep 30, 2020 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Short-term borrowings | 7,700) |
| Long-term debt, including current portion and related party | 8,278,400) |
| Total debt (fair value) | 8,286,100) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.05 |
Based on: 10-K (reporting date: 2020-09-30).
Weighted-average Interest Rate on Debt
Weighted average interest rate of debt: 1.98%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 8.75% | 18,400) | 1,610) | |
| 7.60% | 17,200) | 1,307) | |
| 3.00% | 400,000) | 12,000) | |
| 2.75% | 400,000) | 11,000) | |
| 3.35% | 400,000) | 13,400) | |
| 1.50% | 550,000) | 8,250) | |
| 1.85% | 650,000) | 12,025) | |
| 2.05% | 900,000) | 18,450) | |
| 2.70% | 750,000) | 20,250) | |
| 2.80% | 950,000) | 26,600) | |
| 0.10% | 631,900) | 632) | |
| 0.38% | 410,300) | 1,539) | |
| 1.00% | 351,700) | 3,517) | |
| 0.50% | 586,200) | 2,931) | |
| 0.80% | 586,200) | 4,690) | |
| 5.50% | 338,500) | 18,618) | |
| 10.90% | 9,200) | 1,003) | |
| 1.60% | 7,700) | 123) | |
| Total | 7,957,300) | 157,944) | |
| 1.98% | |||
Based on: 10-K (reporting date: 2020-09-30).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 157,944 ÷ 7,957,300 = 1.98%
Interest Costs Incurred
Air Products & Chemicals Inc., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
Analysis of the interest cost structure from 2015 to 2020 reveals a shifting balance between expensed and capitalized interest, culminating in a general reduction of total interest costs by the end of the period.
- Total Interest Costs Incurred
- Total interest costs remained relatively stable between 2015 and 2019, fluctuating within a range of $139.6 million to $152.6 million. A notable contraction occurred in 2020, with costs decreasing to $125.2 million, marking the lowest point in the observed six-year period.
- Interest Expense Trends
- Interest expensed on the income statement demonstrated a consistent upward trajectory from 2015, increasing from $103.5 million to a peak of $137.0 million in 2019. This trend reversed in 2020, as the expense fell to $109.3 million.
- Capitalized Interest Trends
- Capitalized interest followed a general downward trend for most of the period. After starting at $49.1 million in 2015, the amount declined steadily to $13.5 million by 2019. A slight recovery to $15.9 million was observed in 2020.
- Compositional Shift
- A significant reallocation is observed in how interest costs were accounted for. In 2015, capitalized interest represented approximately 32% of total interest costs. By 2019, this proportion dropped to approximately 9%, indicating a transition from financing long-term capital projects to carrying costs as period expenses.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
2020 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 2,533,100 ÷ 109,300 = 23.18
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 2,533,100 ÷ 125,200 = 20.23
An analysis of the interest coverage metrics from 2015 to 2020 reveals a period of volatility followed by a strong upward trajectory in the company's ability to service its debt obligations. Both the standard and adjusted ratios indicate a robust capacity to cover interest expenses, though a notable decline occurred across both metrics in 2017 before a sustained recovery.
- Interest Coverage Ratio (Without Capitalized Interest)
- This metric exhibited a peak of 19.46 in 2016, followed by a significant contraction to 12.74 in 2017. However, a consistent recovery trend was established thereafter, with the ratio climbing steadily to reach its period high of 23.18 by September 30, 2020. This progression suggests a strengthening of operating earnings relative to non-capitalized interest costs.
- Adjusted Interest Coverage Ratio (With Capitalized Interest)
- The adjusted ratio reflects a similar pattern of fluctuation, starting at 12.04 in 2015 and reaching a trough of 11.01 in 2017. From 2018 onward, the ratio improved annually, moving from 14.30 to a peak of 20.23 in 2020. The consistent gap between this ratio and the non-capitalized version highlights the ongoing impact of capitalized interest on the overall debt service burden.
- Comparative Solvency Analysis
- The parallel movement between the two ratios indicates that the factors influencing the 2017 dip and the subsequent recovery affected both metrics uniformly. Despite the volatility, both ratios remained well above critical thresholds throughout the six-year period, suggesting a low risk of default and a high margin of safety regarding interest payments.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?