The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q2 2010 Earnings Presentation
32 slides from The Goodyear Tire & Rubber's earnings presentation, Jul 29, 2010
Slide 1: Second Quarter 2010 Conference Call
Second Quarter 2010 Conference Call July 29, 2010
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, that affec
Slide 3: Agenda
Agenda • Business Review • Q2 Financial Results • 2010 Outlook • Q&A 3
Slide 4: Second Quarter: Strong results as industry recovers
Second Quarter • Strong second quarter results as industry recovers – Sales increased 15% to $4.5 billion – Tire shipments increased 10% – Price/mix improvements of $121 million – Cost savings totaled $133 million (more than $280 million YTD) – Segment operating income of $219 million, up more than
Slide 5: Second Quarter Performance Highlights
Second Quarter Performance Highlights • Strategies continue to transform North American business • Market and brand strength in Latin America mitigating Venezuela impact Goodyear Eagle EfficientGrip • Third-party recognition of successful new products • Progress on high-return capital projects to dr
Slide 6: Industry Environment
Industry Environment • First half recovery better than anticipated • Recovery expected to continue, risks remain • Improving factory utilization • Growth opportunities – mature and emerging markets • Continue to execute strategic plan as global industry improves 6
Slide 7: Global Business Insights: What Did I See?
CEO First 100 Days Global Business Insights “What Did I See?” • Energized teams dedicated to winning • Benefits of “Open Innovation” to R&D programs • Examples of world class production and engineering processes • Highly competitive commercial business model • Enthusiastic customer base supportive o
Slide 8: North American Tire Strategy
CEO First 100 Days North American Tire Strategy • Strategy leveraging economic recovery: – Innovative and impactful new products – Improved brand and channel mix – Cost reduction initiatives • Confident in path to deliver next stage metric (5% SOI margin) – Economic uncertainty remains a factor • Pr
Slide 9: Focus Areas
CEO First 100 Days Focus Areas • Focus on price/mix initiatives Raw Material • Maximize impact of new product engine Volatility • Pursue targeted volume opportunities • Focus on raw material cost-down activities • Achieve USW contract savings Manufacturing • Market-back production scheduling Efficie
Slide 10: Conclusions
CEO First 100 Days Conclusions • Confident in ability to execute strategy • Significant growth and efficiency opportunities • Remain focused on next stage metrics 10
Slide 11: Q2 Financial Results
Q2 Financial Results
Slide 12: Q2 Financial Results: Key Themes
Q2 Financial Results • Key themes impacting results: – Replacement driving price/mix – Volume growth weighted toward OE – Commercial results strengthening – Better factory utilization 12
Slide 13: Income Statement
Second Quarter 2010 Income Statement Total Company (In millions, except Margin and EPS) Second Quarter 2010 2009 Change Units 43.9 40.0 9.9% Net Sales $4,528 $3,943 14.8% Gross Margin 18.6% 15.0% 3.6 pts SAG $670 $614 9.1% Segment Operating Income(a) $219 $24 812.5% Segment Operating Margin(a) 4.8%
Slide 14: Segment Operating Results
Second Quarter 2010 Segment Operating Results ($ in millions) 1. Raw material variance of $89 million excludes raw material cost saving measures of $35 million, which is included in Cost Savings above. 2. Reduction in NAT pension expense. 3. Estimated impact of inflation (wages, utilities, energy, t
Slide 15: Balance Sheet
Second Quarter 2010 Balance Sheet ($ in millions) June 30, March 31, December 31, 2010 2010 2009 Cash and cash equivalents $ 1,683 $ 1,774 $ 1,922 Accounts receivable 2,840 2,861 2,540 Inventories 2,901 2,708 2,443 Accounts payable - trade (2,613) (2,549) (2,278) Working capital(a) $ 3,128 $ 3,020 $
Slide 16: Liquidity Profile
Second Quarter 2010 Liquidity Profile Liquidity Profile ($ in billions) $4.2(a) Pan European Securitization (b) Available Credit Lines (c) Cash & Equivalents(d) $1 billion required for operations (a) Total liquidity comprised of $1,683 million cash and cash equivalents, $2,409 million of unused avai
Slide 17: Segment Results: North American Tire
Second Quarter 2010 Segment Results North American Tire (In millions) Second Quarter 2010 2009 Change Units 16.6 14.8 13.1% Net Sales $2,049 $1,687 21.5% Segment Operating Income (Loss) $16 ($91) Margin 0.8% (5.4%) • Improved Consumer and Commercial volumes − Strong branded consumer market share − O
Slide 18: Segment Results: Europe, Middle East and Africa Tire
Second Quarter 2010 Segment Results Europe, Middle East and Africa Tire (In millions) Second Quarter 2010 2009 Change Units 16.8 15.8 6.2% Net Sales $1,455 $1,393 4.5% Segment Operating Income (Loss) $73 ($15) Margin 5.0% (1.1%) • Improved Consumer and Commercial volumes – Strong early winter tire s
Slide 19: Segment Results: Latin American Tire
Second Quarter 2010 Segment Results Latin American Tire (In millions) Second Quarter 2010 2009 Change Units 5.2 4.6 12.6% Net Sales $529 $437 21.1% Segment Operating Income $66 $73 (9.6%) Margin 12.5% 16.7% • Improved Consumer and Commercial volumes • Venezuela reduced segment operating income by $3
Slide 20: Segment Results: Asia Pacific Tire
Second Quarter 2010 Segment Results Asia Pacific Tire (In millions) Second Quarter 2010 2009 Change Units 5.3 4.8 9.3% Net Sales $495 $426 16.2% Segment Operating Income $64 $57 12.3% Margin 12.9% 13.4% • Strong industry growth continues in emerging markets – Record volumes in China and India replac
Slide 21: 2010 Outlook
2010 Outlook 2010 Industry Outlook Original Equipment Replacement (year over year) Consumer Commercial Consumer Commercial North America: 25% - 30% 15% - 20% 3% - 5% About 15% Europe: 5% - 10% About 60% 1% - 3% 10% - 15% 2010 Full Year Outlook • Raw materials cost increase expectations – Third quart
Slide 22: Appendix
Fs Appendix
Slide 23: Price/Mix Improvements
Price/Mix Improvements Price/Mix vs. Raw Materials(a) ($ in millions) Net Benefit $322 $278(b) (b) (a) Reflects impact on Segment Operating Income. (b) Raw material variance of $156 million excludes raw material cost savings measures of $73 million, which is included in Cost Savings. 23
Slide 24: 2010 Cash Flow
2010 Cash Flow ($ in millions) Six Months Ended June 30, June 30, 2010 2009 Net Income (Loss) $15 ($601) Depreciation and amortization(a) 331 319 Working capital(b) (518) 246 Pension contributions and direct payments (127) (201) Venezuela currency devaluation 110 - Other (including compensation and
Slide 25: Debt Maturities
Management for Cash Debt Maturities ($ in millions) $1,416(b) $1,200 $1,368 $931 $963 $713 $662 $620(a) $260 $412 $608 $485(a) $402 Utilized 1st Lien R/C Undrawn Euro R/C Facilities Undrawn 1st Lien R/C Utilized Euro R/C Facilities 2nd Lien TL Euro A/R Facility Bonds Note: Based on balance sheet val
Slide 26: Legacy Costs and Interest Expense
Legacy Costs and Interest Expense ($ in millions) 2006 2007 2008 2009 2010E Global pension contributions and direct payments(a) $708 $719 $364 $430 $275 - $325(b) Pension expense (global)(c) $388 $276 $181 $387 $275 - $325 Postretirement benefit payments(d) $254 $266 $169(e) $64 $60 - $70 Postretire
Slide 27: Unabsorbed Fixed Costs
Unabsorbed Fixed Costs 2009 2010 (in millions) Q1 Q2 Q3 Q4 FY Q1 Q2 Production Cuts 13.4 14.2 12.8 11.2 51.6 7.7 7.5 Unabsorbed Fixed Cost Realized from Current Period Production: - Result of Period Costing (formerly SFAS 151) $ 134 $ 116 $ 67 $ 25 $ 7 $ 4 -Through COGS (not SFAS 151 related) 20 21
Slide 28: Second Quarter Significant Items
Second Quarter Significant Items (after taxes and minority interest) 2010 • Rationalizations, asset write-offs and accelerated depreciation, $8 million (3 cents per share) • Gain from asset sales, $8 million (3 cents per share) • One-time importation cost adjustment, $3 million (1 cent per share) 20
Slide 29: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin ($ in millions) Three Months Ending June 30, 2010 2009 Total Segment Operating Income $219 $24 Rationalizations (6) (136) Interest expense (77) (79) Other expense (7) (32) Asset write-offs and accelerated depreciation (6) (12) Corporate incentive
Slide 30: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt 30
Slide 31: Reconciliation for Cash Flow
Reconciliation for Cash Flow 31
Slide 32: GOODS YEAR
| “= GOODS YEAR Get there’
The Goodyear Tire & Rubber Company — Q2 2010 Earnings Presentation on 6ix