The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q2 2009 Earnings Presentation
36 slides from The Goodyear Tire & Rubber's earnings presentation, Jul 30, 2009
Slide 1: Second Quarter 2009 Conference Call
Second Quarter 2009 Conference Call July 30, 2009
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain information contained in this presentation may constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors, many of which are beyond our control, which affe
Slide 3: Agenda
Agenda • Strategic Update and Market Overview • Financial Results • Industry Outlook • Q&A 3
Slide 4: Executive Overview
Executive Overview • Impact of economic and industry downturn continues • Second quarter results strengthened versus previous quarter • Seeing signs of economic stabilization – U.S. miles driven in May increased for second consecutive month – Government incentive programs stimulating OE demand – Sel
Slide 5: 2009 Actions Aligned with Proven Strategies
2009 Actions Aligned with Proven Strategies 7 Strategic Drivers Leadership Leadership Product Product Leadership Leadership Top Line Leveraged Leveraged Distribution Distribution Cost Actions Build Build Brand Brand Strength Strength Cash Initiatives Advantaged Advantaged Supply Supply Chain C
Slide 6: Top Line – New Product Engine
Top Line – New Product Engine U.S. Industry Mix* * Internal estimate of 2008 • 42 new products launched through June Premium 2009 – on track for > 50 this year ~20% of Market • Strategy began in premium segment – success providing “halo” effect Mid Tier • 2009 new products concentrated in high-volum
Slide 7: Top Line – Second Quarter
Top Line – Second Quarter • Sales increased sequentially versus Q1 • Strong market share performance • Revenue per tire increased despite weak commercial tire mix • Price/mix of $127 million – more than offset raw materials • Wrangler HP All Weather wins China’s Motor Trend “SUV Tire of the Year” •
Slide 8: Cost Actions – Second Quarter
Cost Actions – Second Quarter • 4-Point cost savings plan progress – $200 million in Q2 • Eliminated approximately 5,500 positions year-to-date • Progressing on efforts to reduce capacity by additional 15 – 25 million units, including: – Amiens, France = 6 million units – Las Pinas, Philippines = 2
Slide 9: Advantaged Supply Chain
Cash Initiatives Advantaged Supply Chain Supplier Plan Source Make Deliver Customer • Strategic decision to build Advantaged Supply Chain instrumental to Goodyear competitive position – Invested in new leadership – Focused on having the right tires, at the right time and in the right place • Key ben
Slide 10: Cash Initiatives – Second Quarter
Cash Initiatives – Second Quarter • Strong working capital management (e.g., inventory) • Capex on target with plan of $700 to $800 million full year • Completed $1 billion unsecured notes offering • Sale of non-core assets progressing • Accounts receivable impact from General Motors/Chrysler bankru
Slide 11: Strategic and Market Overview Summary
Strategic and Market Overview Summary • Proven leadership team • Industry-leading new product engine • Major advances in supply chain • Intense focus on reducing cost structure • Prospects for industry remain attractive Actions taken to address downturn also position Goodyear for market recovery 11
Slide 12: Second Quarter Financial Summary
Second Quarter Financial Summary • Second Quarter Key Considerations: Continued impact of weak industry demand Results strengthened versus Q1 Strong price/mix more than offset raw materials Continued “double hit” from production cuts Increased net cost savings Cash actions bolster liquid
Slide 13: First Half 2009 Industry Summary
First Half 2009 Industry Summary Industry Volumes (% change versus 2008) Q1 Q2 North America (12) (11) Replacement Europe (4) (8) Consumer North America (51) (48) OE Europe (34) (19) North America (25) (16) Replacement Europe (33) (25) Commercial North America (44) (51) OE Europe (65) (77) Trend of
Slide 14: Second Quarter 2009 Results
Second Quarter 2009 Results Income Statement Total Company (In millions, except Margin and EPS) Second Quarter 2009 2008 Change Units 40.0 47.9 -16.5% Net Sales $3,943 $5,239 -24.7% Gross Margin 15.0% 19.9% -4.9 pts SAG $614 $735 -16.5% (a) Segment Operating Income $24 $330 -92.7% (a) Segment Operat
Slide 15: Second Quarter 2009 Segment Operating Results
Second Quarter 2009 Segment Operating Results ($ in millions) ($306) $127 ($119) Impact Impact of of weak weak markets markets approximately approximately $(412) $(412) million million $200 ($129) Price/Mix Raw Materials ($251) (before restructuring) $330 Volum e 4-Point Cost Savings Plan(1) ($206)
Slide 16: 4-Point Cost Savings Plan Progress
4-Point Cost Savings Plan Progress Continuous Improvement / USW savings Reduce Footprint • USW Contract Savings • Global high cost footprint strategy • Business Process Improvements (Productivity, – Target more than 25 million unit footprint reduction Six Sigma, Lean Manufacturing) – $150 – $250 m
Slide 17: Balance Sheet
Second Quarter 2009 Balance Sheet ($ in millions) June 30, March 31, December 31, 2009 2009 2008 Cash and cash equivalents $ 2,366 1,896 $ 1,894 Accounts receivable 2,549 2,459 2,517 Inventories 2,909 3,262 3,592 Accounts payable - trade (1,928) (2,010) (2,529) (a) Working capital $ 3,530 $ 3,711 $
Slide 18: Liquidity Profile
Second Quarter 2009 Liquidity Profile Liquidity Profile ($ in billions) $4.3(a) Pan European $0.2 Securitization (b) Available Credit Lines (c) 1.7 Cash & Equivalents $2.4 $1 billion required for operations June 30, 2009 (a) Total liquidity comprised of $2,366 million cash and cash equivalents, $1,7
Slide 19: Segment Results: North American Tire
Second Quarter 2009 Segment Results North American Tire (In millions) Second Quarter 2009 2008 Change Units 14.8 18.3 -19.4% Net Sales $1,687 $2,130 -20.8% Segment Operating (Loss) Income ($91) $24 Margin -5.4% 1.1% • Continued weak industry demand • Strong replacement market share performance • Pri
Slide 20: Segment Results: Europe, Middle East and Africa Tire
Second Quarter 2009 Segment Results Europe, Middle East and Africa Tire (In millions) Second Quarter 2009 2008 Change Units 15.8 18.8 -16.4% Net Sales $1,393 $2,024 -31.2% Segment Operating (Loss) Income ($15) $151 Margin -1.1% 7.5% • Continued weak industry demand • Government stimulus efforts supp
Slide 21: Segment Results: Latin American Tire
Second Quarter 2009 Segment Results Latin American Tire (In millions) Second Quarter 2009 2008 Change Units 4.6 5.4 -14.0% Net Sales $437 $572 -23.6% Segment Operating Income $73 $103 -29.1% Margin 16.7% 18.0% • Continued weak industry demand • Price/mix benefits more than offset raw material increa
Slide 22: Segment Results: Asia Pacific Tire
Second Quarter 2009 Segment Results Asia Pacific Tire (In millions) Second Quarter 2009 2008 Change Units 4.8 5.4 -9.1% Net Sales $426 $513 -17.0% Segment Operating Income $57 $52 9.6% Margin 13.4% 10.1% • China and India rebounding • Australia and New Zealand remain weak • Price/mix benefits more t
Slide 23: Outlook
Outlook • Industry environment remains challenging in Q3 • Some signs of stabilization, pace of recovery unclear • Present industry volume expectations NAT – Consumer Q3 slightly better than Q2, led by OE – Commercial Q3 similar to Q2 EMEA – Consumer Q3 similar to Q2, risks remain – Commercial
Slide 24: Appendix
Appendix
Slide 25: Historical U.S. Consumer Replacement Volumes
Historical U.S. Consumer Replacement Volumes US Consumer Replacement Tire Industry Size (millions of tires) 250 200 150 100 50 0 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Note: Recessionary periods highlight
Slide 26: Price/Mix Improvements
Price/Mix Improvements Price/Mix vs. Raw Materials ($ in millions) $942 $829 $746 $712 $639 $587 $596 $526 $450 $268 $289 $195 2004 2005 2006 2007 2008 June YTD 2009 Price/Mix Raw Materials Price/mix of $127 million in the second quarter offset raw materials of $119 million Note: Reflects impact on
Slide 27: Revenue Per Tire
Second Quarter 2009 Revenue Per Tire (Y-o-Y, excluding impact of exchange) 8% 6% 6% 5% 4% 3.5% 2% 1% 0% -2% -4% -4.5% -6% North America EMEA Latin America Asia Pacific Total Company Price/mix improvement continued even with commercial market weakness impacting mix 27
Slide 28: Raw Material Cost
Raw Material Cost Raw material cost breakdown Other(a) 17% Natural Rubber 27% Steel Cord 8% Fabrics(a) 9% Synthetic Rubber(a) Carbon Black(a) 26% Note: (a) As of FY 2008. Dependent upon oil. 13% Raw materials make up approx. 40% of COGS 28
Slide 29: First Half 2009 Cash Flow
First Half 2009 Cash Flow ($ in millions) Six Months Ended June 30, June 30, 2009 2008 Net (Loss) Income ($601) $266 (a) Depreciation and amortization 319 337 (b) Working capital 246 (722) Pension contributions and direct payments (201) (162) Other (including compensation and benefits) 244 66 (c) To
Slide 30: Debt Maturities
Management for Cash Debt Maturities ($ in millions) $1,488(b) $202 $1,200 $975 $959$1,368 $709(a) $1,286(a) $695 $499 $260 $693 $149 $435 2009 2010 2011 2012 2013 2014 2015 2016 >2016 Utilized 1st Lien R/C Undrawn Euro R/C Facilities Undrawn 1st Lien R/C Utilized Euro R/C Facilities 2nd Lien TL Euro
Slide 31: Legacy Costs and Interest Expense
Legacy Costs and Interest Expense Total Company - 2nd Quarter 2009 ($ in millions) 2005 2006 2007 2008 2009E Global pension contributions and direct payments (a) $522 $708 $719 $364 $325 - $375 Pension expense (global)(b) $358 $388 $276 $181 $375 - $425 Postretirement benefit payments $259 $254 $266
Slide 32: Second Quarter Significant Items
Second Quarter Significant Items (after-tax and minority) 2009 • Rationalizations, asset write-offs and accelerated depreciation, $116 million (48 cents per share) • Loss on asset sales, $40 million (17 cents per share) • Gain from income tax settlement, $19 million (8 cents per share) 2008 • Ration
Slide 33: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin Three Months ($ in millions) Ended June 30, 2009 2008 Total Segment Operating Income $24 $330 Rationalizations (136) (87) Interest expense (79) (76) Other income and (expense) (32) 22 Asset write-offs and accelerated depreciation (12) (4) Corporat
Slide 34: Reconciliation for Net Debt
Reconciliation for Net Debt ($ in millions) June 30, March 31, December 31, 2009 2009 2008 Long term debt and capital leases $ 4,940 $ 4,645 $ 4,132 Notes payable and overdrafts 275 317 265 Long term debt and capital leases due within one year 634 564 582 Total debt $ 5,849 $ 5,526 $ 4,979 Less: Cas
Slide 35: Reconciliation for Cash Flow
Reconciliation for Cash Flow Total Company Six Months Ended ($ in millions) June 30, 2009 2008 Cash Flows From Operating Activities: Net (Loss) Income $ (601) $ 266 Adjustments to reconcile Net (Loss) Income to cash flows from operating activities: Depreciation and amortization 312 318 Amortization
Slide 36: GOODS YEAR
GOODS YEAR eelied Get there
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