The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q3 2010 Earnings Presentation
32 slides from The Goodyear Tire & Rubber's earnings presentation, Oct 28, 2010
Slide 1: Third Quarter 2010 Conference Call
Third Quarter 2010 Conference Call October 28, 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 • Q3 Financial Results • 2010 Outlook • Q&A 3
Slide 4: Executive Summary
Executive Summary • Industry recovery firmly established • Strong third quarter operating performance – Higher unit sales, branded share gains – Improved capacity utilization – Significant price/mix benefits, product successes – Segment operating income improved from second quarter despite increase
Slide 5: Financial Highlights
Third Quarter Financial Highlights • Tire shipments increased 6% • Sales increased 13% to $5 billion • Price/mix drives 8% revenue per tire increase • Commercial truck volumes increase 15% • Cost savings of $70 million (about $350 million YTD) • Segment operating income of $234 million • Completed $
Slide 6: Business Highlights
Third Quarter Business Highlights • Market and brand strength in Latin American business mitigating Venezuela impact – Brazil recovery remains strong • North American business profitable despite raw material increases – Revenue per tire up 7% on strong price / mix – Stronger-than-expected demand pre
Slide 7: Natural Rubber
Natural Rubber Natural Rubber (TSR20) Average Monthly Spot Price (U.S. Dollars per pound) Continue to see ample supply • Despite recovery, demand at approximately $2.00 2007 and 2008 levels 2010 • Inclement weather in SE Asia adversely $1.50 influencing views on near-term supply 2009 • Supply expect
Slide 8: Price/Mix Improvements
Price/Mix Improvements Price/Mix vs. Raw Materials(a) ($ in millions) $942 $829 $746 $712 $639 $596 $526 $322 (net benefit) $374 $195 $207 (b) $152 ($115) 2005 2006 2007 2008 2009 September YTD 2010 Price/Mix Raw Materials (a) Reflects impact on Segment Operating Income. Raw Materials include the im
Slide 9: Innovation Highlights
Third Quarter Innovation Highlights Eagle F1 Asymmetric • Assurance Fuel Max passes 3 million mark – earns Good Housekeeping seal • Eagle F1 Asymmetric and Dunlop SP Sport Maxx GT top ultra high performance category – earn Best Buy recommendations • Goodyear / Dunlop dominate German winter tire test
Slide 10: Selective Investment Strategy
Selective Investment Strategy • Goodyear investments focused in three areas: – Increase low cost footprint – Improve capability to supply tires with increasing levels of consumer relevant technology – Drive profitable growth in emerging markets • Capex level of $1.0 to $1.1 billion in 2010 – About $
Slide 11: Q3 Financial Results
Q3 Financial Results
Slide 12: Income Statement
Third Quarter 2010 Income Statement Total Company (In millions, except Margin and EPS) Third Quarter 2010 2009 Change Units 47.7 45.0 6.0% Net Sales $4,962 $4,385 13.2% Gross Margin 17.0% 19.7% -2.7 pts SAG $640 $617 3.7% (a) Segment Operating Income $234 $275 -14.9% (a) Segment Operating Margin 4.7
Slide 13: Segment Operating Results
Third Quarter 2010 Segment Operating Results ($ in millions) ($41) $25 ($412) $50 $67 Pension(1) $75 Volume $252 Cost Savings Unabsorbed Fixed Cost ($59) $275 Raw Materials(2) ($20) ($19) Inflation(3) $234 Price/Mix Currency Q1 2 0 0 9 Other (Primarily Q3 Advertising, Q3 2009 Transportation and Ince
Slide 14: Balance Sheet
Third Quarter 2010 Balance Sheet ($ in millions) September 30, June 30, December 31, September 30, 2010 2010 2009 2009 Cash and cash equivalents $ 1,665 $ 1,683 $ 1,922 $ 2,590 Accounts receivable 3,461 2,840 2,540 3,065 Inventories 2,993 2,901 2,443 2,543 Accounts payable - trade (2,813) (2,613) (2
Slide 15: Debt Maturities
Management for Cash Debt Maturities ($ in millions) $1,478(b) $1,405(c) $1,200 $995 $964 $688 $446 $539 $483(a) $149 (a) 2010 2011 2012 2013 2014 2015 2016 2020 & > 2016 Utilized 1st Lien R/C Undrawn 1st Lien R/C Undrawn Euro R/C Facilities Utilized Euro R/C Facilities Beyond 2nd Lien TL Euro A/R Fa
Slide 16: U.S. Pension Funding Relief
U.S. Pension Funding Relief • U.S. Pension funding relief legislation signed June 25, 2010 – Provides for reduction in near-term funding • Conducted comprehensive analysis of 6 qualifying plans in Q3 • Selected 9-year (2+7) contribution period • 2011 now at about 2010 levels 16
Slide 17: Segment Results: North American Tire
Third Quarter 2010 Segment Results North American Tire (In millions) Third Quarter 2010 2009 Change Units 18.0 17.1 4.8% Net Sales $2,176 $1,862 16.9% Segment Operating Income $5 $2 Margin 0.2% 0.1% • Higher Consumer and Commercial volumes − Strong replacement market share improvement − Consumer OE
Slide 18: Segment Results: Europe, Middle East and Africa Tire
Third Quarter 2010 Segment Results Europe, Middle East and Africa Tire (In millions) Third Quarter 2010 2009 Change Units 19.1 17.8 7.2% Net Sales $1,696 $1,581 7.3% Segment Operating Income $77 $106 (27.4%) Margin 4.5% 6.7% • Higher Consumer and Commercial volumes – Robust winter tire demand drives
Slide 19: Segment Results: Latin American Tire
Third Quarter 2010 Segment Results Latin American Tire (In millions) Third Quarter 2010 2009 Change Units 5.2 5.0 4.4% Net Sales $569 $486 17.1% Segment Operating Income $95 $99 (4.0%) Margin 16.7% 20.4% • Segment operating income ex-Venezuela up $20 million – Improved Consumer and Commercial volume
Slide 20: Segment Results: Asia Pacific Tire
Third Quarter 2010 Segment Results Asia Pacific Tire (In millions) Third Quarter 2010 2009 Change Units 5.4 5.1 7.8% Net Sales $521 $456 14.3% Segment Operating Income $57 $68 (16.2%) Margin 10.9% 14.9% • Record units and sales – Consumer replacement market share growth in China and India • Price/mi
Slide 21: 2010 Industry Outlook
2010 Industry Outlook October October October October Full Full Year Year versus versus July July Guidance Guidance Guidance Guidance No NAT: ~ +4% Consumer Change Replacement EMEA: ~ +5% Consumer NAT: ~ +30% OE EMEA: ~ +10% No Commercial Change NAT: ~ +15% Replacement EMEA: ~ +15% Commercial NAT: ~
Slide 22: 2010 Outlook Items
2010 Outlook Items Previous Previous (July) (July) Current Current (October) (October) Outlook Outlook Comparison Comparison Outlook Outlook Raw Materials • Q4 approximately 30% • Q4 at least 35% Interest Expense • $325 to $350 million • FY about $325 million Tax Rate • FY 25% to 30% of • No change
Slide 23: Appendix
Appendix
Slide 24: 2010 Cash Flow
2010 Cash Flow ($ in millions) Nine Months Ended September 30, September 30, 2010 2009 Net Income (Loss) $2 ($499) (a) Depreciation and amortization 509 485 (b) Working capital (806) 287 Pension contributions and direct payments (248) (304) Venezuela currency devaluation 110 - Other (including compe
Slide 25: Legacy Costs and Interest Expense
Legacy Costs and Interest Expense ($ in millions) 2006 2007 2008 2009 2010E (a) Global pension contributions and direct payments $708 $719 $364 $430 $300 - $325 (b) Pension expense (global) $388 $276 $181 $387 $300 - $325 (c) (d) Postretirement benefit payments $228 $225 $169 $64 $60 - $70 (d) (d) P
Slide 26: Liquidity Profile
Third Quarter 2010 Liquidity Profile Liquidity Profile ($ in billions) $4.2(a) Pan European $0.1 Securitization (b) Available Credit Lines (c) $2.4 Cash & Equivalents(d) $1.7 $1 billion required for operations September 30, 2010 (a) Total liquidity comprised of $1,665 million cash and cash equivalen
Slide 27: Unabsorbed Fixed Costs
Unabsorbed Fixed Costs 2009 2010 (in millions) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Production Variance(a) 13.4 14.2 12.8 11.2 51.6 7.7 7.5 7.7 Unabsorbed Fixed Cost Realized from Current Period Production: - Result of Period Costing (formerly SFAS 151) $ 134 $ 116 $ 67 $ 25 $ 7 $ 4 $ 5 -Through COGS (not SFAS 1
Slide 28: Third Quarter Significant Items
Third Quarter Significant Items (after taxes and minority interest) 2010 • Cash premiums and write-offs of deferred financing fees resulting from the early redemption of debt, $56 million (23 cents per share) • Rationalizations, asset write-offs and accelerated depreciation, $10 million (4 cents per
Slide 29: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin ($ in millions) Three Months Ending September 30, 2010 2009 Total Segment Operating Income $234 $275 Rationalizations (8) (16) Interest expense (90) (85) Other expense (62) (4) Asset write-offs and accelerated depreciation (4) (18) Corporate incen
Slide 30: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt ($ in millions) September 30, June 30, December 31, September 30, 2010 2010 2009 2009 Long term debt and capital leases $ 4,595 $ 4,288 $ 4,182 $ 5,020 Notes payable and overdrafts 259 184 224 243 Long term debt and capital leases due within one year 118 13
Slide 31: Reconciliation for Cash Flow
Reconciliation for Cash Flow Nine Months Ended ($ in millions) September 30, 2010 2009 Cash Flows From Operating Activities: Net Income (Loss) $ 2 $ (499) Adjustments to reconcile Net Income (Loss) to cash flows from operating activities: Depreciation and amortization 487 471 Amortization and write-
Slide 32: a GOODSYEAR
a GOODSYEAR ‘aeeiial Get there
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