TIRE CITY, INC.

Presented By

1.EVALUATE TIRE CITYS FINANCIAL

HEALTH. HOW
WELL IS THE COMPANY PERFORMING?
TCI 1993-1995
1996-1997

Compustat
(Cooper Tire and Rubber Co.)
(The Goodyear Tire& Rubber Company)
11 TCI

1998 19982000

=( / )

2
=( )/

=( / )

2
=( )/

3
=( / )
=( + +
)/

=( / )

=( +
)/2
2

=( / )

=( + )/2
3

=( / )

=( +
)/2
4

=( / )

=( +
)/2


1 (ROA)
=( (1
))/

2 (ROE)
=( / )
3
=( / )
4
=( / )

98-00

TCI
93-95

64.49%

47.51%

78.9%

226.14%

98-00

TCI
93-95

184.07%

199.44%

116.30%

132.00%

5.64

17.93


98-00

TCI
93-95

5.87

6.46

5.93

6.16

2.39

9.05

1.07

2.56


98-00

TCI
93-95

(ROA)

5.53%

13.41%

(ROE)

10.78%

24.04%

3.88%

4.92%

7.78%

9.25%

2.BASE ON MR. MARTINS PREDICTION FOR

1996
SALES OF $28,206,000, AND FOR 1997 SALES
OF
$33,847,000 AND RELYING ON THE OTHER
ASSUMPTIONS PROVIDED IN THE TIRE
CITY CASE,
PREPARE COMPLETE PRO FORMA
FORECASTS OF
TCIS 1996 AND 1997 INCOME STATEMENTS
AND
YEAR-END BALANCE SHEETS. AS A
PRELIMINARY
ASSUMPTION, ASSUME ANY NEW
FINANCING

1996 1997 1993 1995

3.USING YOUR SET OF PRO FORMA

FORECASTS,
ASSESS1993
THE
FUTURE
FINANCIAL HEALTH1996

1995
OF
TIRE
1997
1997 1995

CITY AS OF THE END OF 1997. WILL TIRE

CITY
BE

IN A STRINGER OR WEAKER FINANCIAL

TCI
SITUATION

TWO YEARS FROM NOW?

1997
1995 1996
1997 20%

1997
1995 50%
1996 1997 20%

TCI 1995
1997 1996
1997

TCI 1995 1996

1997
1995 1997

1993

1994

1995

1996

1997

202.55% 192.30% 203.48% 175.16% 201.94%

132.05% 128.52% 135.43% 133.52% 134.24%

12.14

18.16

23.50

23.90

18.74

TCI
1995 1996
1996
20%
1996

1996

()
( )

()
( )

1993

1994

1995

1996

1997

6.38

6.58

6.44

6.46

6.46

5.79

6.47

6.22

10.09

6.24

8.56

8.93

9.65

6.68

7.89

2.47

2.60

2.62

2.55

2.47

1995 1997

1993

1994

1995

1996

1997

12.92%

13.49%

13.84%

13.61%

13.39%

23.87%

24.53%

23.73%

23.38%

22.24%

4.81%

4.90%

5.06%

5.11%

4.93%

8.90%

9.46%

9.40%

9.42%

9.19%

EXTERNAL
FUNDING NEEDS AS OF THE END OF 1996
IF:
A.INVENTORY WERE NOT REDUCED BY
THE END
OF 1996?
B.ACCRUED EXPENSES WERE TO GROW
LESS
THAN EXPECTED IN 1996?
Answer:

(external funding needs)

EFN
EFN=A - L- E = S(A/S)-S(L/S)-S1*PM*(1-d)

 EFN a b TCI EFN

a
A EFN

b
L EFN

5.WHAT WOULD BE THE IMPACT ON TCIS

EXTERNAL
FUNDING NEEDS AS OF THE END OF 1997
IF:
A.TCI DEPRECIATED MORE THAN 5% OF
THE
WAREHOUSES TOTAL COST IN 1997?
B.TCI EXPERIENCED HIGHER PRICE
INFLATION
IN ITS REVENUES AND OPERATING COSTS
( BUT NOT IN THE COST OF ITS
WAREHOUSE
EXPANSION) THAN WAS ORIGINALLY
ANTICIPATED IN 1996 AND 1997?

Answer:
EFN a b c TCI EFN

a A
EFN

b
(price inflation)
E EFN

c
EFN

6.SUPPOSE THE PROPOSED TERMS OF THE BANK

CREDIT
INCLUDED A COVENANT( A CONTRACTUAL
OBLIGATION
THAT BINDS A BORROWER TO SPECIFIC ACTION
OR
OUTCOMES AS A CONDITION FOR EXTENDING A
LOAN)
THAT READ AS FOLLOWS: THE COMPANY MUST
MAINTAIN NET WORKING CAPITAL( DEFINED
FOR \
PURPOSES OF THIS LOAN AS ACCOUNTS
RECEIVABLE PLUS
INVENTORIES MINUS ACCOUNTS PAYABLE) OF
AS LEAST

Answer:

4,000,000
1996 4,365,000 1,625,000 1,792,000 4,198,000
1997 5,238,000 3,154,000 2,150,000 6,242,000

TCI 1996
1997 4,000,000

7.AS A LENDER, WOULD YOU BE WILLING TO

LOAN
TCI THE FUNDS NEEDED TO EXPAND ITS
WAREHOUSE FACILITIES AND FINANCE ITS
GROWTH?
Answer:
WHY OR WHY NOT?

1993 1995 1996

1997 TCI

1996 1997
TCI