USG Corporation (USG), Pitney Bowes Inc. (PBI), The Goodyear Tire & Rubber Company (GT): Is Debt a Concern at These Three Companies?

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Debt is high but manageable at this tire producer

The Goodyear Tire & Rubber Company (NASDAQ:GT) has a debt-to-equity ratio of 5.7 but a debt-to-EBITDA ratio of only 2.2. In addition, the company’s average debt maturity is locked in at 2021 at 6.5%. Interest expenses were covered 18 times by EBITDA during the second quarter of this year, leading me to conclude very quickly that the company has plenty of financial firepower to sustain its debt.

Metric Value
Total debt $6.5 billion
Net debt $4 billion
Net debt to equity 5.7
Net debt to EBITDA 2.2
Largest debt issue $1 billion
Average maturity 2021
Average interest rate 6.5%
Interest expense Q2 2013 $102 million
Interest cover Q2 2013 by EBITDA 18

Source: Morningstar.

Moreover, The Goodyear Tire & Rubber Company (NASDAQ:GT) has $2.5 billion in cash on its balance sheet, and this is growing at a rate of $100 million a quarter. However, debt has risen 16% year on year, though net debt has grown slightly less at 14%.

Still, the company’s first debt maturity is fixed in 2015 and is worth $400 million. The next is 2020, worth $1 billion — both easily payable with cash in the bank. The longest-dated maturity is 2034, worth $350 million and locked in at a solid rate of 4%.

Overall, although The Goodyear Tire & Rubber Company (NASDAQ:GT)’s debt is high, the company is easily able to sustain it over both the short term and the longer term.

Both Pitney and The Goodyear Tire & Rubber Company (NASDAQ:GT) have long debt maturities and low interest rates; couple this with a large amount of cash available, and the companies seem more than able to sustain their debt piles. USG, however, looks to be sailing into stormy waters. The company’s average rate of interest on debt is high, with the majority of issues falling due before the end of the decade, meaning that the company will have to roll over the debt at a potentially higher interest rate.

The article Is Debt a Concern at These Three Companies? originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 

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