Financial Distress of Goodyear Corporation

Company
First Calendar Year of Data
Goodyear
1980
Information Metric
Income Statement
1980
1981
1982
Sales
Cost of Goods Sold
Gross Profit
8,444
6,637
1,807
9,153
7,160
1,993
8,689
6,756
1,933
Operating Profit
1264
0
0
0
0
543
1295.4
0
0
0
0
698
1300.3
0
0
0
0
633
36
11
19
578
709
651
Earnings Before Taxes (EBT)
227
352
230
480
191
460
Income Before Extraordinary Items
145
207
236
244
213
248
Net Income
24
231
16
260
17
265
Preferred Dividends
Net Income available to Common Equityholders
231
260
265
1,582
1,144
1,514
1,204
1,270
1,312
68
62
72
67
83
85
Operating Expenses
S, G & A Expenses
R & D Expenses
Lease Expenses
Depreciation and Amortization
Other Operating Expenses
Non-Operating Items
Other Non-operating Income (Expense)
Interest Income
Earnings Before Interest and Taxes (EBIT)
Interest Expense
Income Taxes
Income from Extraordinary Items
Balance Sheet
Assets
Current Assets
Inventories
Accounts Receivable
Advance, Deposits, and Prepayments
Marketable Securities
Cash and Equivalents
Other Current Assets
Total Current Assets
2,856
2,857
2,750
2,278
2,264
2,230
2,278
2,264
2,230
0
0
0
0
0
0
Other Non-Current Assets
215
19
234
217
16
233
203
11
213
Total Assets
5,368
5,354
5,194
524
147
36
234
284
481
112
14
257
298
437
5
156
1,380
169
1,330
164
1,174
1,241
1,158
1,037
203
177
1,620
204
221
1,583
203
256
1,496
1,620
1,583
1,496
2,303
2,375
2,457
Fixed Assets (PPE)

Gross Fixed Assets
Accumulated Depreciation
Net Fixed Assets
Gross Intangible Assets
Accumulated Amortization
Net Intangible Assets
Preliminary Expenses
Investments
Others
Liabilities and Stockholders' Equity

Current Liabilities
Accounts Payable
Notes Payable
Short-term Loan
Accrued Expenses
Taxes Payable
Provision for Taxes
Proposed Dividend
Current Portion of Long-Term Loan
Other Current Liabilities
Total Current Liabilities
Long-Term Liabilities
Term Loan
Capital Leases
Deferred Taxes
Other Long-term Liabilities
Total Long-Term Liabilities
Preferred Stockholders' Equity
Preferred Stock and Others
Total Non-Current Liabilities
Commons Stockholders' Equity
Share Capital
Share Premium
Reserve and Surplus
257
312
Retained Earnings
Share Money Deposit
Directors' Loan
Others
Total Common Stockholders' Equity
66
2,369
66
2,441
66
2,523
Total Liabilities and Stockholders' Equity
5,369
5,354
5,193
Difference
-0.60
0.00
0.50
73
73
74
16.00
19.00
35.00
Market Value of Equity

Market Value of Debt
Market Value of Preferred Stock
1,160
1,378
2,583
Enterprise Value
4,092
4,219
5,170
Common Stockholders' Equity

Adjusted Common Stockholders' Equity
2,369
2,369
2,441
2,441
2,523
2,523
NWC
NWC
Adjusted NWC
Adjusted NWC
1,476
1,527
51
1,581
-11
1,576
49
1,498
-83
Long-Term Debt
Short-Term Interest Bearing Debt
Current Portion of Long-Term Debt
Total Debt/Borrowed Fund
1,620
183
0
1,803
1,583
126
0
1,709
1,496
5
0
1,501
249
22
303
23
302
22
7.38
4.19
12.67
49
7.60
4.73
14.89
48
6.62
5.32
15.46
55
Indicators and Adjustments

Number of Common Shares
MV/BV
Year-end Stock Price
Capital Expenditure
Average Daily Expenditure
1,591
Ratio Analysis
Activity Ratios
Receivables Turnover (Times)
Inventory Turnover (Times)
Accounts Payable Turnover (Times)
Days Sales Outstanding
Days of Inventory on Hand

Operating Cycle
Payment Deferral Period
Cash Conversion Cycle
Working Capital Turnover
Fixed Assets Turnover
Total Assets Turnover
87
136
29
108
5.72
3.71
1.57
77
125
25
101
6.09
4.03
1.71
69
124
24
100
5.60
3.87
1.65
Liquidity Ratios
Current Ratio
Quick Ratio
Cash Ratio
Defensive Interval Ratio (Days)
2.07
0.88
0.05
56
2.15
0.96
0.05
55
2.34
1.19
0.07
63
Solvency (Debt) Ratios

Debt-to-assets Ratio
Debt-to-capital Ratio
Debt-to-equity Ratio
Financial Leverage
0.34
0.43
0.76
2.27
0.32
0.41
0.70
2.19
0.29
0.37
0.59
2.06
Solvency (Coverage) Ratios

Interest Coverage Ratio
Debt Service Coverage Ratio
2.55
2.55
3.09
3.09
3.42
3.42
21.4%
6.8%
6.8%
4.2%
2.7%
21.8%
7.7%
7.7%
5.2%
2.8%
22.2%
7.5%
7.5%
5.3%
3.0%
10.8%
4.3%
10.1%
#DIV/0!
9.7%
9.7%
#VALUE!
13.2%
4.9%
11.5%
#DIV/0!
10.8%
10.8%
17.0%
12.3%
5.0%
11.8%
#DIV/0!
10.7%
10.7%
15.9%
7.07
5.03
0.48
0.14
0.28
0.49
5.95
5.29
0.46
0.15
0.33
0.56
7.94
9.75
0.59
0.30
0.50
1.02
Profitability Ratios (Return on Sales)

Gross Profit Margin
EBITDA Margin
Operating Profit Margin
Pre-tax Margin
Net Profit Margin
Profitability Ratios (Return on Investments)
Operating ROA
ROA
ROFA
ROIntA
ROE
ROComE
ROIC
Multiples
EV/EBITDA
Price/Earnings
EV/Sales
Price/Sales
Price/EV
Price/BVPS
Widely Monitored Ratios
Current Ratio
Quick Ratio
Inventory Turnover
Average Collection Period
Fixed Asset Turnover
Total Asset Turnover
Debt Ratio
Debt-to-Equity
Times Interest Earned
Gross Profit Margin
Net Profit Margin
Return on Total Assets (ROA)
Return on Equity (ROE)
EPS
P/E
EV/EBITDA
2.07
0.88
4.19
49
3.71
1.57
0.34
0.76
2.55
21.4%
6.8%
2.7%
4.3%
9.7%
3.18
5.03
7.07
2.15
0.96
4.73
48
4.03
1.71
0.32
0.70
3.09
21.8%
7.7%
2.8%
4.9%
10.8%
3.59
5.29
5.95
2.34
1.19
5.32
55
3.87
1.65
0.29
0.59
3.42
22.2%
7.5%
3.0%
5.0%
10.7%
3.59
9.75
7.94

Financial Leverage
Return on Assets (ROA)
Net Profit Margin
Tax Burden
Interest Burden
Effect of Non-operating Items
Effect of Operating Items
Gross Profit Margin
9.74%
2.27
4.3%
1.57
2.7%
0.66
0.61
0.06
1.07
0.30
0.21
10.65%
2.19
4.9%
1.71
2.8%
0.54
0.68
0.08
1.02
0.35
0.22
10.34%
2.06
5.0%
1.65
3.0%
0.58
0.71
0.07
1.03
0.33
0.22
Sensitivity to Profit Margin

Net Profit Margin
Financial Leverage
% Return on Equity (ROE)
2.7%
1.71
4.7%
2.19
10.2%
2.8%
1.71
4.9%
2.19
10.6%
4.1%
3.0%
1.71
5.2%
2.19
11.4%
7.2%
2.8%
2.8%
DuPont Sensitivity Analysis

ROE Decomposition (7-Factor)
Base Case
Mean
Dispersion
Sensitivity to Asset Turnover
Net Profit Margin
9.77%
9.11%
2.8%

Financial Leverage
1.57
4.5%
2.19
9.8%
Mean
Dispersion
Sensitivity to Financial Leverage

Net Profit Margin
Financial Leverage
Most Sensitive Factor of ROE
1.65
4.7%
2.19
10.3%
-3.5%
2.8%
1.71
4.9%
2.19
10.6%
-3.2%
2.8%
1.71
4.9%
2.06
10.0%
-6.2%
-1.20%
8.65%
2.8%
1.71
4.9%
2.27
11.0%
Mean
Dispersion
1.71
4.9%
2.19
10.6%
8.5%
-2.95%
3.19%
Net Profit Margin
Risk Analysis
Sales, Operating Profit and Earnings Volatility
Standard Deviation of Sales
Mean of Sales
Coefficient of Variation of Sales
Level of Sales Volatility
Standard Deviation of Operating Income
Mean of Operating Income
Coefficient of Variation of Operating Income
Level of Operating Income Volatility
Standard Deviation of Earnings
Mean of Earnings
Coefficient of Variation of Earnings
Level of Earnings Volatility
Leverage
% Sales
% EBIT
% Net Income
Degree of Operating Leverage (DOL)
Degree of Financial Leverage (DFL)
Degree of Total Leverage (DTL)
675.87
9307.88
7.3%
Very Low
92.97
622.52
14.9%
Low
77.20
312.65
24.7%
Moderate
8%
23%
13%
2.69
0.57
1.53
-5%
-8%
2%
1.62
-0.21
-0.34
Average DOL
Average DFL
Average DTL
2.70
-3.82
-10.31
Altman Z-Score Model

Company Type
Publicly Traded Manufacturer
Current Assets/Total Assets
Retained Earnings/Total Assets
EBIT/Total Assets
Market Value of Equity/Book Value of Debt
Sales/Total Assets
Z-Score
Zone
0.53
0.00
0.11
0.64
1.57
2.95
Grey
0.53
0.00
0.13
0.81
1.71
3.27
Safe
0.53
0.00
0.13
1.72
1.67
3.75
Safe
% Gap between Z-Score and Distress Zone

Probability of Default (5% P 90%)
63.1%
36.9%
80.6%
19.4%
107.4%
5.0%
DISTRESS ZONE Z<

GREY ZONE Z<
1.81
2.99
1.81
2.99
1.81
2.99
Strategic Indicators
16%
1983
1984
1985
1983
1984
9,736
7,684
2,052
10,241
8,099
2,142
9,585
7,635
1,950
100.0%
78.6%
21.4%
100.0%
78.2%
21.8%
100.0%
77.8%
22.2%
100.0%
78.9%
21.1%
100.0%
79.1%
20.9%
1333
0
0
0
0
719
1478.5
0
0
0
0
663
1469.6
0
0
0
0
480
15.0%
0.0%
0.0%
0.0%
0.0%
6.4%
14.2%
0.0%
0.0%
0.0%
0.0%
7.6%
15.0%
0.0%
0.0%
0.0%
0.0%
7.3%
13.7%
0.0%
0.0%
0.0%
0.0%
7.4%
14.4%
0.0%
0.0%
0.0%
0.0%
6.5%
-73
137
81
561
0.4%
0.0%
6.8%
0.1%
0.0%
7.7%
0.2%
0.0%
7.5%
-0.7%
0.0%
6.6%
1.3%
0.0%
7.8%
646
800
117
529
127
672
105
456
2.7%
4.2%
2.5%
5.2%
2.2%
5.3%
1.2%
5.4%
1.2%
6.6%
259
270
270
403
155
301
1.7%
2.4%
2.6%
2.7%
2.4%
2.8%
2.7%
2.8%
2.6%
3.9%
35
305
403
111
412
0.3%
2.7%
0.2%
2.8%
0.2%
3.0%
0.4%
3.1%
0.0%
3.9%
412
0.0%
2.7%
0.0%
2.8%
0.0%
3.0%
0.0%
3.1%
0.0%
3.9%
20.4%
25.5%
0.0%
0.0%
1.9%
1.1%
21.5%
22.1%
0.0%
0.0%
2.3%
0.9%
305
403
1980
1981
1982
Common-Size Income Statement
Common-Size Balance Sheet
1,219
1,527
1,333
1,370
1,379
957
111
63
143
54
139
83
29.5%
21.3%
0.0%
0.0%
1.3%
1.2%
28.3%
22.5%
0.0%
0.0%
1.3%
1.2%
24.5%
25.3%
0.0%
0.0%
1.6%
1.6%
2,920
2,901
2,558
53.2%
53.4%
53.0%
48.8%
46.8%
2,819
3,037
4,025
2,819
3,037
4,025
42.4%
0.0%
42.4%
42.3%
0.0%
42.3%
42.9%
0.0%
42.9%
47.1%
0.0%
47.1%
49.0%
0.0%
49.0%
0
0
0
0
0
0
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
227
20
247
223
34
257
339
32
370
0.0%
4.0%
0.4%
4.4%
0.0%
4.0%
0.3%
4.3%
0.0%
3.9%
0.2%
4.1%
0.0%
3.8%
0.3%
4.1%
0.0%
3.6%
0.5%
4.2%
5,986
6,194
6,954
100.0%
100.0%
100.0%
100.0%
100.0%
593
155
42
281
257
583
157
39
298
289
657
116
35
347
232
204
1,532
192
1,558
219
1,607
9.8%
2.7%
0.7%
4.4%
5.3%
0.0%
0.0%
0.0%
2.9%
25.7%
9.0%
2.1%
0.3%
4.8%
5.6%
0.0%
0.0%
0.0%
3.1%
24.8%
8.4%
0.1%
0.0%
4.9%
6.0%
0.0%
0.0%
0.0%
3.2%
22.6%
9.9%
2.6%
0.7%
4.7%
4.3%
0.0%
0.0%
0.0%
3.4%
25.6%
9.4%
2.5%
0.6%
4.8%
4.7%
0.0%
0.0%
0.0%
3.1%
25.2%
0.0%
23.1%
0.0%
3.8%
3.3%
30.2%
0.0%
21.6%
0.0%
3.8%
4.1%
29.6%
0.0%
20.0%
0.0%
3.9%
4.9%
28.8%
0.0%
11.1%
0.0%
6.9%
5.0%
23.0%
0.0%
10.6%
0.0%
7.2%
4.7%
22.6%
0.0%
0.0%
0.0%
0.0%
0.0%
665
657
998
414
297
1,376
449
294
1,400
475
302
1,775
1,376
1,400
1,775
30.2%
29.6%
28.8%
23.0%
22.6%
3,016
3,171
3,507
42.9%
0.0%
0.0%
44.4%
0.0%
0.0%
47.3%
0.0%
0.0%
50.4%
0.0%
0.0%
51.2%
0.0%
0.0%
62
3,078
65
3,236
64
3,571
0.0%
0.0%
0.0%
1.2%
44.1%
5,986
6,194
6,953
100.0%
0.30
0.10
0.30
100
106
107
30.38
26.00
31.25
3,034
2,761
3,356
5,831
5,576
6,599
3,078
3,078
3,236
3,236
3,571
3,571
1,388
-188
1,473
-24
1,342
-46
1,395
-79
951
-391
963
-432
1,376
196
0
1,572
1,400
196
0
1,596
1,775
152
0
1,926
500
25
629
26
1,668
25
6.37
6.30
12.95
57
7.47
6.07
13.90
49
10.01
5.54
11.61
36
0.0%
0.0%
0.0%
1.2%
45.6%
0.0%
0.0%
0.0%
1.3%
48.6%
0.0%
0.0%
0.0%
1.0%
51.4%
0.0%
0.0%
0.0%
1.0%
52.2%
100.0%
100.0%
100.0%
100.0%
58
115
28
87
6.57
3.86
1.74
60
109
26
83
7.50
3.50
1.68
66
102
31
71
8.36
2.71
1.46
1.91
1.07
0.07
66
1.86
0.97
0.09
58
1.59
0.68
0.09
44
0.26
0.34
0.51
1.94
0.26
0.33
0.49
1.91
0.28
0.35
0.54
1.95
5.51
5.51
6.28
6.28
5.34
5.34
21.1%
6.6%
6.6%
5.4%
3.1%
20.9%
7.8%
7.8%
6.6%
3.9%
20.3%
5.9%
5.9%
4.8%
4.3%
11.6%
5.5%
12.1%
#DIV/0!
10.9%
10.9%
14.9%
13.1%
6.6%
13.8%
#DIV/0!
12.8%
12.8%
16.9%
8.5%
6.3%
11.7%
#DIV/0!
12.1%
12.1%
10.9%
9.02
9.94
0.60
0.31
0.52
0.99
6.97
6.86
0.54
0.27
0.50
0.85
11.76
8.15
0.69
0.35
0.51
0.94
1.91
1.07
6.30
57
3.86
1.74
0.26
0.51
5.51
21.1%
6.6%
3.1%
5.5%
10.9%
3.06
9.94
9.02
1.86
0.97
6.07
49
3.50
1.68
0.26
0.49
6.28
20.9%
7.8%
3.9%
6.6%
12.8%
3.79
6.86
6.97
1.59
0.68
5.54
36
2.71
1.46
0.28
0.54
5.34
20.3%
5.9%
4.3%
6.3%
12.1%
3.84
8.15
11.76
10.62%
1.94
5.5%
1.74
3.1%
0.58
0.82
0.07
0.90
0.35
0.21
12.66%
1.91
6.6%
1.68
3.9%
0.60
0.84
0.06
1.21
0.31
0.21
12.20%
1.95
6.3%
1.46
4.3%
0.90
0.81
0.05
1.17
0.25
0.20
3.1%
1.71
5.4%
2.19
11.7%
2.9%
3.9%
1.71
6.7%
2.19
14.7%
25.4%
4.3%
1.71
7.3%
2.19
16.1%
9.3%
2.8%
2.8%
2.8%
1.74
5.0%
2.19
10.9%
5.7%
1.68
4.8%
2.19
10.5%
-3.5%
1.46
4.1%
2.19
9.1%
-13.3%
2.8%
1.71
4.9%
1.94
9.4%
-5.5%
2.8%
1.71
4.9%
1.91
9.3%
-1.6%
2.8%
1.71
4.9%
1.95
9.5%
1.7%
12%
-1%
15%
-0.06
-20.74
1.27
5%
24%
32%
4.58
1.34
6.16
-6%
-30%
2%
4.66
-0.08
-0.36
0.49
0.00
0.11
1.93
1.63
3.72
Safe
0.47
0.00
0.13
1.73
1.65
3.68
Safe
0.37
0.00
0.08
1.74
1.38
3.13
Safe
105.8%
5.0%
103.2%
5.0%
73.0%
27.0%
1.81
2.99
1.81
2.99
1.81
2.99
1981
1982
Growth Rate
1983
1984
8.4%
7.9%
10.3%
-5.1%
-5.6%
-3.0%
12.1%
13.7%
6.2%
5.2%
5.4%
4.4%
2.5%
0.0%
0.0%
0.0%
0.0%
28.6%
0.4%
0.0%
0.0%
0.0%
0.0%
-9.3%
2.5%
0.0%
0.0%
0.0%
0.0%
13.6%
10.9%
0.0%
0.0%
0.0%
0.0%
-7.7%
-68.1%
62.3%
-491.9%
-288.4%
22.6%
-8.2%
-0.7%
23.8%
1.1%
36.4%
-16.9%
-4.0%
-38.5%
14.9%
8.5%
27.1%
62.8%
18.0%
-9.7%
1.5%
21.6%
9.1%
4.2%
49.1%
-31.7%
12.8%
4.9%
1.7%
104.1%
15.3%
-100.0%
31.9%
12.8%
1.7%
15.3%
31.9%
-4.3%
5.3%
-16.1%
8.9%
-4.1%
16.4%
9.4%
-10.3%
6.0%
7.4%
15.9%
27.0%
33.4%
-25.6%
29.1%
-14.9%
0.0%
-3.7%
6.2%
-0.7%
-0.6%
-1.5%
26.4%
7.7%
-0.6%
-1.5%
26.4%
7.7%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.8%
-16.6%
-0.6%
-6.6%
-34.2%
-8.5%
12.1%
84.0%
15.7%
-1.7%
73.3%
4.3%
-0.3%
-3.0%
15.3%
3.5%
-9.1%
35.8%
-95.7% 3120.8%
-100.0%
0.0%
9.4%
4.6%
-17.4%
-1.8%
1.8%
-7.0%
6.2%
12.2%
-8.2%
-24.1%
-61.2%
9.9%
5.1%
8.4%
-3.6%
-2.9%
-11.7%
24.7%
30.5%
-5.7%
1.7%
-6.7%
-10.4%
-35.9%
-1.3%
0.5%
25.4%
-2.3%
-0.5%
15.5%
-5.5%
103.9%
15.9%
-8.0%
8.5%
-0.8%
1.8%
0.0%
0.0%
0.0%
-2.3%
-5.5%
-8.0%
1.8%
3.1%
3.5%
22.8%
5.1%
0.0%
3.0%
0.0%
3.4%
-6.1%
22.0%
4.8%
5.1%
-0.3%
-3.0%
15.3%
3.5%
Company
Goodyear
Sales Growth (Tire)
5
Sales Growth (Rubber)
6
Sales Growth (Oil & Gas)
15
Sales Growth (Other Products)
7
EBIT % of Sales (Tire)
14
EBIT % of Sales (Rubber)
15
EBIT % of Sales (Oil & Gas)
18
EBIT % of Sales (Others Products)
25
Depreciation % of Sales (Tire)
5
Depreciation % of Sales (Rubber)
3
Depreciation % of Sales (Oil & Gas)
5
Depreciation % of Sales (Other Products)
5
FCInv % of Sales (Tire)
4
FCInv % of Sales (Rubber)
2.5
FCInv % of Sales (Oil & Gas)
8
FCInv % of Sales (Other Products)
3
WCInv % of Sales (Tire)
2
WCInv % of Sales (Rubber)
1.5
WCInv % of Sales (Oil & Gas)
10
WCInv % of Sales (Other Products)
3
Tax Rate
40
Market Return
15
Risk Free Return
8.04
Beta
1.1
Required Return
15.70
Risk Premium
0.8
Required Rate of Return
16.5
Terminal Growth Rate
4
Shares Outstanding
107
Information Metric
Income Statement
42.20
1986
1987
1988
1989
1990
Sales
Tires & Related
Rubber, Chemical and Plastic
Oil & Gas
Others
Total Sales
7,700
1,150
400
70
9,320
8,085
1,219
460
75
9,839
8,489
1,292
529
80
10,391
8,914
1,370
608
86
10,977
9,359
1,452
700
92
11,603
EBIT
Tires & Related
Oil & Gas
1,078
173
72
1,132
183
83
1,188
194
95
1,248
205
110
1,310
218
126
Others
Total EBIT
18
1,340
19
1,416
20
1,498
21
1,584
23
1,677
EBIT (1 - Tax Rate)
804
850
899
951
1,006
Depreciation
Tires & Related
Oil & Gas
Others
Total Depreciation
385
35
20
4
443
404
37
23
4
468
424
39
26
4
494
446
41
30
4
521
468
44
35
5
551
Fixed Capital Investment

Tires & Related
Oil & Gas
Others
Total FCInv
308
29
32
2
371
323
30
37
2
393
340
32
42
2
417
357
34
49
3
442
374
36
56
3
469
Working Capital Investment

Tires & Related
Oil & Gas
Others
Total WCInv
154
17
40
2
213
162
18
46
2
228
170
19
53
2
244
178
21
61
3
262
187
22
70
3
282
806
6,708
3,501
FCFF
Terminal Value
PV FCFF
PV FCFF
Less: Market Value of Debt
Less: Bankruptcy Cost
Add: Sale of Aerospace
Intrinsic Value
663
696
731
768
569
5,462
998
109
177
4,533
513
462
417
Intrinsic Value Per Share (FCFF)
42.20
Book Value Beginning

ROE
Net Income
Dividends
Book Value Ending
1626
20
325
65
1886
1886
19
358
72
2173
2173
18
391
78
2485
2485
17
423
85
2823
358
282
76
391
323
68
423
367
55
Net Income
Equity Charge 13%
Economic Income
Company
Goodyear
Sales Growth (Tire)
6
7
16
8
15
16
18
25
6
4
6
6
4
2.5
8
3
2
1.5
10
3
Tax Rate
40
Market Return
15
Risk Free Return
8.04
Beta
1.1
Required Return
15.70
Risk Premium
0.3
16
4
Shares Outstanding
107
Information Metric
Income Statement
57.80
1986
1987
1988
1989
1990
Sales
Tires & Related
Oil & Gas
Others
Total Sales
7,700
1,150
400
70
9,320
8,162
1,231
464
76
9,932
8,652
1,317
538
82
10,588
9,171
1,409
624
88
11,292
9,721
1,507
724
95
12,048
EBIT
Tires & Related
Oil & Gas
1,155
184
72
1,224
197
84
1,298
211
97
1,376
225
112
1,458
241
130
Others
Total EBIT
18
1,429
19
1,524
20
1,626
22
1,735
24
1,854
EBIT (1 - Tax Rate)
857
914
975
1,041
1,112
Depreciation
Tires & Related
Oil & Gas
Others
Total Depreciation
462
46
24
4
536
490
49
28
5
571
519
53
32
5
609
550
56
37
5
649
583
60
43
6
693

Tires & Related
Oil & Gas
Others
Total FCInv
308
29
32
2
371
326
31
37
2
397
346
33
43
2
424
367
35
50
3
455
389
38
58
3
487

Tires & Related
Oil & Gas
Others
Total WCInv
154
17
40
2
213
163
18
46
2
230
173
20
54
2
249
183
21
62
3
270
194
23
72
3
292
1,025
8,885
4,718
FCFF
Terminal Value
PV FCFF
PV FCFF
Intrinsic Value
809
858
911
966
698
7,171
998
143
177
6,207
638
584
534
57.80

ROE
Net Income
Dividends
Book Value Ending
1626
20
325
65
1886
1886
19
358
72
2173
2173
18
391
78
2485
2485
17
423
85
2823
358
282
76
391
323
68
423
367
55
Net Income
Equity Charge 13%
Economic Income
Company
Sales Growth
EBIT % of Sales
Tax Rate
Market Return
Risk Free Return
Beta
Required Return
Risk Premium
Shares Outstanding
Information Metric
Income Statement
Sales
EBIT
EBIT (1 - Tax Rate)
Depreciation
FCInv
WCInv
FCFF
Terminal Value
PV FCFF
Fundamental Value of Segment

ROE
Net Income
Dividends
Book Value Ending
Net Income
Equity Charge 13%
Economic Income
Goodyear
7
12
2
3.5
3
40
15
8.04
1.1
15.70
0.3
16
3
107
#REF!
1986
1987
1988
1989
1990
760
91
55
15
27
23
21
813
98
59
16
28
24
22
870
104
63
17
30
26
23
931
112
67
19
33
28
25
18
177
16
15
14
996
120
72
20
35
30
27
213
114
1626
20
325
65
1886
1886
19
358
72
2173
2173
18
391
78
2485
2485
17
423
85
2823
358
282
76
391
323
68
423
367
55
Company
Goodyear
Sales Growth (Tire)
6
7
16
8
15
16
18
25
6
4
6
6
4
2.5
8
3
2
1.5
10
3
Tax Rate
40
Market Return
15
Risk Free Return
8.04
Beta
1.1
Required Return (CAPM)
15.70
Risk Premium
0.3
16
4
Shares Outstanding
107
Information Metric
Income Statement
47.78
1986
1987
1988
1989
1990
Sales
Tires & Related
Oil & Gas
Others
Total Sales
7,700
1,150
400
70
9,320
8,162
1,231
464
76
9,932
8,652
1,317
538
82
10,588
9,171
1,409
624
88
11,292
9,721
1,507
724
95
12,048
EBIT
Tires & Related
Oil & Gas
1,155
184
72
1,224
197
84
1,298
211
97
1,376
225
112
1,458
241
130
Others
Total EBIT
18
1,429
19
1,524
20
1,626
22
1,735
24
1,854
EBIT (1 - Tax Rate)
857
914
975
1,041
1,112
Depreciation
Tires & Related
Oil & Gas
Others
Total Depreciation
462
46
24
4
536
490
49
28
5
571
519
53
32
5
609
550
56
37
5
649
583
60
43
6
693

Tires & Related
Oil & Gas
Others
Total FCInv
308
29
32
2
371
326
31
37
2
397
346
33
43
2
424
367
35
50
3
455
389
38
58
3
487

Tires & Related
Oil & Gas
Others
Total WCInv
154
17
40
2
213
163
18
46
2
230
173
20
54
2
249
183
21
62
3
270
194
23
72
3
292
1,025
8,885
4,718
FCFF
Terminal Value
PV FCFF
PV FCFF
Less: Bankruptcy Test
Less: Cash Bonus
Intrinsic Value
809
858
911
966
698
7,171
998
143
177
1,076
5,132
638
584
534
47.78
Goldsmith's Perspective
Cash Outflow from Acquisition
Resell Value of Stock
Acquisition Cost
Gain (Loss)
4823
4609
145
-359
Company
Goodyear
Sales Growth (Tire)
6
7
16
8
15
16
18
25
6
4
6
6
4
2.5
8
3
2
1.5
10
3
Tax Rate
40
Market Return
15
Risk Free Return
8.04
Beta
1.1
15.70
Risk Premium
0.3
16
4
Shares Outstanding
147
Information Metric
Income Statement
47.00
1986
1987
1988
1989
1990
Sales
Tires & Related
Oil & Gas
Others
Total Sales
7,700
1,150
400
70
9,320
8,162
1,231
464
76
9,932
8,652
1,317
538
82
10,588
9,171
1,409
624
88
11,292
9,721
1,507
724
95
12,048
EBIT
Tires & Related
Oil & Gas
1,155
184
72
1,224
197
84
1,298
211
97
1,376
225
112
1,458
241
130
Others
Total EBIT
18
1,429
19
1,524
20
1,626
22
1,735
24
1,854
EBIT (1 - Tax Rate)
857
914
975
1,041
1,112
Depreciation
Tires & Related
Oil & Gas
Others
Total Depreciation
462
46
24
4
536
490
49
28
5
571
519
53
32
5
609
550
56
37
5
649
583
60
43
6
693

Tires & Related
Oil & Gas
Others
Total FCInv
308
29
32
2
371
326
31
37
2
397
346
33
43
2
424
367
35
50
3
455
389
38
58
3
487

Tires & Related
Oil & Gas
Others
Total WCInv
154
17
40
2
213
163
18
46
2
230
173
20
54
2
249
183
21
62
3
270
194
23
72
3
292
1,025
8,885
4,718
FCFF
Terminal Value
PV FCFF
PV FCFF
Add: Cash from New Stocks Issuance
Intrinsic Value
809
858
911
966
698
7,171
998
143
177
720
6,927
638
584
534
47.00
Acquisition Cost
Gain (Loss)
4823
4533
145
-434
Company
Goodyear
Sales Growth (Tire)
6
7
16
8
15
16
18
25
6
4
6
6
4
2.5
8
3
2
1.5
10
3
Tax Rate
40
Market Return
15
Risk Free Return
8.04
Beta
1.1
15.70
Risk Premium
0.3
16
4
Shares Outstanding
107
Information Metric
Income Statement
57.80
1986
1987
1988
1989
1990
Sales
Tires & Related
Oil & Gas
Others
Total Sales
7,700
1,150
400
70
9,320
8,162
1,231
464
76
9,932
8,652
1,317
538
82
10,588
9,171
1,409
624
88
11,292
9,721
1,507
724
95
12,048
EBIT
Tires & Related
Oil & Gas
1,155
184
72
1,224
197
84
1,298
211
97
1,376
225
112
1,458
241
130
Others
Total EBIT
18
1,429
19
1,524
20
1,626
22
1,735
24
1,854
EBIT (1 - Tax Rate)
857
914
975
1,041
1,112
Depreciation
Tires & Related
Oil & Gas
Others
Total Depreciation
462
46
24
4
536
490
49
28
5
571
519
53
32
5
609
550
56
37
5
649
583
60
43
6
693

Tires & Related
Oil & Gas
Others
Total FCInv
308
29
32
2
371
326
31
37
2
397
346
33
43
2
424
367
35
50
3
455
389
38
58
3
487

Tires & Related
Oil & Gas
Others
Total WCInv
154
17
40
2
213
163
18
46
2
230
173
20
54
2
249
183
21
62
3
270
194
23
72
3
292
1,025
8,885
4,718
FCFF
Terminal Value
PV FCFF
PV FCFF
Less: Bankruptcy Test
Intrinsic Value
809
858
911
966
698
7,171
998
143
177
6,207
638
584
534
57.80
Redemption of Bonds
Acquisition Cost
Gain (Loss)
4752
5493
816
143
-218
Company
Goodyear
Sales Growth (Tire)
6
7
16
8
15
16
18
25
6
4
6
6
4
2.5
8
3
2
1.5
10
3
Tax Rate
40
Market Return
15
Risk Free Return
8.04
Beta
1.1
15.70
Risk Premium
0.3
16
4
Shares Outstanding
87
Information Metric
Income Statement
56.66
1986
1987
1988
1989
1990
Sales
Tires & Related
Oil & Gas
Others
Total Sales
7,700
1,150
400
70
9,320
8,162
1,231
464
76
9,932
8,652
1,317
538
82
10,588
9,171
1,409
624
88
11,292
9,721
1,507
724
95
12,048
EBIT
Tires & Related
Oil & Gas
1,155
184
72
1,224
197
84
1,298
211
97
1,376
225
112
1,458
241
130
Others
Total EBIT
18
1,429
19
1,524
20
1,626
22
1,735
24
1,854
EBIT (1 - Tax Rate)
857
914
975
1,041
1,112
Depreciation
Tires & Related
Oil & Gas
Others
Total Depreciation
462
46
24
4
536
490
49
28
5
571
519
53
32
5
609
550
56
37
5
649
583
60
43
6
693

Tires & Related
Oil & Gas
Others
Total FCInv
308
29
32
2
371
326
31
37
2
397
346
33
43
2
424
367
35
50
3
455
389
38
58
3
487

Tires & Related
Oil & Gas
Others
Total WCInv
154
17
40
2
213
163
18
46
2
230
173
20
54
2
249
183
21
62
3
270
194
23
72
3
292
1,025
8,885
4,718
FCFF
Terminal Value
PV FCFF
PV FCFF
Less: Repurchase Cost
Intrinsic Value
809
858
911
966
698
7,171
1,538
359
500
177
4,952
638
584
534
56.66
Acquisition Cost
Gain (Loss)
5069
4952
152
-269
0
0
0
0
0
0
Net Income
Equity Charge 13%
Economic Income
1040
540
Golden Parachute
Poison Pill
Poison Put
Share Repurchase
Offer for the Current Holding

Worth of Current Holding
Gain
Outflow Inflow
Gain (Loss)
4968
4609
-359
4968
4533
-434
5711
5493
-218
5221
4952
-269
814.78
601.68
213.10
Market share of Goodyear

Market share of Michelin
sales growth
tax rate
depreciation (% of sales)
FC Inv
WC Inv
Market Return
Risk Free Return
Beta
Risk Premium
terminal Growth rate
32%
0.11
0.06
0.4
0.05
0.03
0.02
0.15
0.0804
1.1
0.15696
0.004
0.16096
0.04
0.1004
1986
1987
1988
1989
1990
Total Sales of Goodyear
7700
8162
8652
9171
9721
Michelin sales
EBIT
EBIT (1-tax)
depreciation
FC inv
WC inv
FCFF
Terminal Value
PV FCFF
PV FCFF
less mkt value of debt
intrinsic value
2647
397
238
385
79
53
491
2806
421
253
408
84
56
520
2974
446
268
433
89
59
552
3152
473
284
459
95
63
585
423
8027
100
7927
520
552
585
3342
501
301
486
100
67
620
5328
5948
385
73
10
26
332
75
23
408
77
10
28
408
87
21
433
80
10
30
433
90
20
459
85
10
32
459
95
18
486
89
10
34
486
99
17
SYNERGY Calculation
Revenue enhancement
savings in selling and admin
savings in R&D
Cap ex savings
pv of RE
pv of S&A savings+R&D
Cap ex savings
2117
446
98
PV of synergy
2661
Company
Goodyear
Sales Growth (Tire)
6
7
16
8
15
16
18
25
6
4
6
6
4
2.5
8
3
2
1.5
10
3
Tax Rate
40
Market Return
15
Risk Free Return
8.04
Beta
1.1
15.70
Risk Premium
0.3
16
4
Shares Outstanding
107
Information Metric
Income Statement
82.86
1986
1987
1988
1989
1990
Sales
Tires & Related
Oil & Gas
Others
Total Sales
7,700
1,150
400
70
9,320
8,162
1,231
464
76
9,932
8,652
1,317
538
82
10,588
9,171
1,409
624
88
11,292
9,721
1,507
724
95
12,048
EBIT
Tires & Related
Oil & Gas
1,155
184
72
1,224
197
84
1,298
211
97
1,376
225
112
1,458
241
130
Others
Total EBIT
18
1,429
19
1,524
20
1,626
22
1,735
24
1,854
EBIT (1 - Tax Rate)
857
914
975
1,041
1,112
Depreciation
Tires & Related
Oil & Gas
Others
Total Depreciation
462
46
24
4
536
490
49
28
5
571
519
53
32
5
609
550
56
37
5
649
583
60
43
6
693

Tires & Related
Oil & Gas
Others
Total FCInv
308
29
32
2
371
326
31
37
2
397
346
33
43
2
424
367
35
50
3
455
389
38
58
3
487

Tires & Related
Oil & Gas
Others
Total WCInv
154
17
40
2
213
163
18
46
2
230
173
20
54
2
249
183
21
62
3
270
194
23
72
3
292
1,025
8,885
4,718
FCFF
Terminal Value
PV FCFF
PV FCFF
Value of Goodyear
Add: Value of Michelin
Add: Synergy
Add: Real Option
Less: Acquisition Cost
Intrinsic Value
809
858
911
966
698
7,171
998
177
6,351
7,927
2,661
680
8,720
8,899
82.86
638
584
534

ROE
Net Income
Dividends
Book Value Ending
1626
20
325
65
1886
1886
19
358
72
2173
2173
18
391
78
2485
2485
17
423
85
2823
358
391
423
Net Income
Equity Charge 13%

Economic Income
282
76
323
68
367
55
15%
0.05753
0.1534
1987
1988
1989
1987
914
571
1485
446
384
1988
975
609
1584
396
341
1989
1041
649
1691
104
77
245.1035
182.1519
Total Revenues
Cost of Goods Sold
Information Metric
Operating Profit After Tax
Addback: Depreciation
After-tax Operating Cash Flow
Outflow
P.V of Outflow
Inflow
P.V of Inflow
Option Valuation
PV OCF (S)
Initial Outlay (X)
Time before option expires, t
Risk free rate of return, r
Standard deviation,
d1
d2
N(d1)
N(d2)
Value of Option
947
874
13
8.04
30%
1.58
0.50
0.94
0.69
680
1990
1991
1990
1991
1112
1188
693
739
1805
1928
22
24
14
13
260
266
166.571 146.9094
1992
1993
1994
1995
1996
1997
1270.629 1359.382 1455.287 1559.052 1671.474 1793.445
789.5278 843.5705 901.8502 964.7753 1032.803 1106.444
2060
2203
2357
2524
2704
2900
25.41258
23
21
19
18
18
12
9
7
6
5
4
268
212
209
207
203
203
127.5983 87.01376 73.95037 63.14027 53.37945 46.01677
S&P
Firestone
Goodrich
Goodyear
102.09
6.625
18.25
11.75
Market Return
Stock Return - Firestone
Stock Return - Goodrich
Stock Return - Goodyear
Stock Return - Average
116.18
114.24
6.875
19.25
13
125.46
8.5
22.75
15.875
135.76
10.5
24.875
16
136
12.5
27.25
19.875
131.21
12.875
25.875
19.125
11.9%
3.8%
5.5%
10.6%
6.6%
9.8%
23.6%
18.2%
22.1%
21.3%
8.2%
23.5%
9.3%
0.8%
11.2%
0.2%
19.0%
9.5%
24.2%
17.6%
-3.5%
3.0%
-5.0%
-3.8%
-1.9%
120.42
0.0365
166.07
0.3791
166.1
0.0002
182.05
0.0960
231.22
0.2701
116.18
10.375
21.75
17.375
122.55
12.625
22.25
19
111.96
10.625
20
21.25
109.61
12
19
24.5
120.42
11.875
22
24.25
140.64
18.5
32.125
35
152.96
19
37.5
28
168.11
20
41
32.25
166.07
20.625
35.5
30.375
-11.5%
-19.4%
-15.9%
-9.2%
-14.8%
5.5%
21.7%
2.3%
9.4%
11.1%
-8.6%
-15.8%
-10.1%
11.8%
-4.7%
-2.1%
12.9%
-5.0%
15.3%
7.7%
9.9%
-1.0%
15.8%
-1.0%
4.6%
16.8%
55.8%
46.0%
44.3%
48.7%
8.8%
2.7%
16.7%
-20.0%
-0.2%
9.9%
5.3%
9.3%
15.2%
9.9%
-1.2%
3.1%
-13.4%
-5.8%
-5.4%
0.1564
164.93
22.25
30.375
30.375
159.18
17.5
33
26.375
153.18
17.125
27
25.75
166.1
19.5
28.375
26.75
167.24
17
27
26
180.6
18.375
29.5
26.875
191.85
21.5
31.875
29.5
182.08
18.375
31.5
27.375
211.28
23.875
32.875
31.25
-0.7%
7.9%
-14.4%
0.0%
-2.2%
-3.5%
-21.3%
8.6%
-13.2%
-8.6%
-3.8%
-2.1%
-18.2%
-2.4%
-7.6%
8.4%
13.9%
5.1%
3.9%
7.6%
0.7%
-12.8%
-4.8%
-2.8%
-6.8%
8.0%
8.1%
9.3%
3.4%
6.9%
6.2%
17.0%
8.1%
9.8%
11.6%
-5.1%
-14.5%
-1.2%
-7.2%
-7.6%
16.0%
29.9%
4.4%
14.2%
16.2%
238.9
25.625
47
36.5
250.84
25.375
43.5
33
231.22
24.625
38.125
34.875
13.1%
7.3%
43.0%
16.8%
22.4%
5.0%
-1.0%
-7.4%
-9.6%
-6.0%
-7.8%
-3.0%
-12.4%
5.7%
-3.2%
3.48%
6.44%
3.97%
5.10%
5.17%

Financial Distress of Goodyear Corporation

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Financial Distress of Goodyear Corporation

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Company

First Calendar Year of Data

Earnings Before Taxes (EBT)

Income Before Extraordinary Items

Income from Extraordinary Items

Total Current Assets

Other Non-Current Assets

Fixed Assets (PPE)

Liabilities and Stockholders' Equity

Total Liabilities and Stockholders' Equity

Market Value of Equity

Common Stockholders' Equity

Indicators and Adjustments

Days of Inventory on Hand

Solvency (Debt) Ratios

Solvency (Coverage) Ratios

Profitability Ratios (Return on Sales)

Return on Equity (ROE)

Sensitivity to Profit Margin

DuPont Sensitivity Analysis

Total Assets Turnover

Sensitivity to Financial Leverage

Most Sensitive Factor of ROE

Altman Z-Score Model

% Gap between Z-Score and Distress Zone

DISTRESS ZONE Z<

Common-Size Balance Sheet

EBIT (1 - Tax Rate)

Fixed Capital Investment

Working Capital Investment

Intrinsic Value Per Share (FCFF)

Book Value Beginning

EBIT (1 - Tax Rate)

Fixed Capital Investment

Working Capital Investment

Intrinsic Value Per Share (FCFF)

Book Value Beginning

Book Value Beginning

EBIT (1 - Tax Rate)

Fixed Capital Investment

Working Capital Investment

Intrinsic Value Per Share (FCFF)

EBIT (1 - Tax Rate)

Fixed Capital Investment

Working Capital Investment

Intrinsic Value Per Share (FCFF)

EBIT (1 - Tax Rate)

Fixed Capital Investment

Working Capital Investment

Intrinsic Value Per Share (FCFF)

EBIT (1 - Tax Rate)

Fixed Capital Investment

Working Capital Investment

Intrinsic Value Per Share (FCFF)

Offer for the Current Holding

Market share of Goodyear

Total Sales of Goodyear

EBIT (1 - Tax Rate)

Fixed Capital Investment

Working Capital Investment

Book Value Beginning

Equity Charge 13%

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