The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q3 2009 Earnings Presentation
38 slides from The Goodyear Tire & Rubber's earnings presentation, Oct 28, 2009
Slide 1: Third Quarter 2009 Conference Call
Third Quarter 2009 Conference Call October 28, 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 • Third Quarter Overview • Financial Results & Outlook • Strategy Update • Q&A 3
Slide 4: Fuel Efficiency Technology Becoming Global Success
Fuel Efficiency Technology Becoming Global Success 4
Slide 5: Executive Overview
Executive Overview • Strong third quarter results – Success of 2009 Top Line, Cost and Cash actions – Improving market conditions – Lower raw material costs • Segment operating income of $275 million – Results in-line with operating plan – Improved vs. prior year despite economic environment and res
Slide 6: Top Line – Third Quarter
Top Line – Third Quarter • Sequential improvement in sales and operating income in all business segments (vs. second quarter) – Record profits in Asia Pacific • 57 new products September YTD 2009 – Achieved target of > 50 in 2009 • Fuel Max Technology in North America achieves 1 million units sold i
Slide 7: Top Line – Third Quarter: Building Brands
Top Line – Third Quarter Building Brands • Excellent results in European winter tire tests • Walmart WOW Award for best new product launch in category – best among 5,700 suppliers • Product recommendations: First in ultra high performance in – Dunlop Direzza Sport Z1 Sports Car magazine – Eagle F1 A
Slide 8: Cost Actions – Third Quarter
Cost Actions – Third Quarter • Innovative USW contract – Cost savings of $555 million – Maintains pre-bargain agreements at five USW facilities – Maintains Union City unprotected status – Flexibility to improve productivity “within four walls” of facilities – Replaced defined benefit pension with de
Slide 9: Cash Initiatives – Third Quarter
Cash Initiatives – Third Quarter • Operating cash flow positive in Q3 • Advantaged Supply Chain improvements – Inventory down more than $1 billion year-to-date – Restructuring NAT logistics network – exiting multiple warehouses in U.S. and Canada • Capex on target with full year plan of $700 – $800
Slide 10: Economic and Industry Environment
Economic and Industry Environment • Global environment continues to improve • Asian markets leading recovery • North America & Latin America continue to stabilize • Europe lagging economically, positive signs emerging • Commercial markets remain weak, except for China 10
Slide 11: Market-Oriented Business Model Provides High Confidence in Future
Market-Oriented Business Model Provides High Confidence in Future Recent Success Leadership Leadership • Management team proven throughout the business cycle • New product engine unmatched speed to market Product Product Leadership Leadership • 57 new products focused on growing mid-tier segment L
Slide 12: Agenda
Agenda • Third Quarter Overview • Financial Results & Outlook • Strategy Update • Q&A 12
Slide 13: Third Quarter Financial Summary
Third Quarter Financial Summary • Q3 results reflect Industry volumes recovering Strong market share performance Lower raw materials costs Continued inventory reductions Executing against operating plan 13
Slide 14: Third Quarter 2009 Results
Third Quarter 2009 Results Income Statement Total Company (In millions, except Margin and EPS) Third Quarter 2009 2008 Change Units 45.0 48.2 -6.8% Net Sales $4,385 $5,172 -15.2% Gross Margin 19.7% 16.6% 3.1 pts SAG $617 $627 -1.6% (a) Segment Operating Income $275 $266 3.4% (a) Segment Operating Ma
Slide 15: Third Quarter 2009 Segment Operating Results
Third Quarter 2009 Segment Operating Results ($ in millions) $9 $193 ($64) ($141) Volume ($107) $195 Reported ($38) ($48) Price/Mix ($14) Unabsorbed vs. Fixed Cost ($12) Raw Materials Other Tire ($10) ($66) $207 Related Pension Businesses Currency Inflation (2) $275 $266 4-Point Cost Other Savings i
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, – More than 25 million unit footprint reduction Six Sigma, Lean Manufacturing) – $150 – $250 million
Slide 17: Balance Sheet
Third Quarter 2009 Balance Sheet ($ in millions) September 30, June 30, December 31, September 30, 2009 2009 2008 2008 Cash and cash equivalents $ 2,590 $ 2,366 $ 1,894 $ 1,606 Accounts receivable 3,065 2,549 2,517 3,681 Inventories 2,543 2,909 3,592 3,860 Accounts payable - trade (2,042) (1,928) (2
Slide 18: Liquidity Profile
Third Quarter 2009 Liquidity Profile Liquidity Profile ($ in billions) $4.6(a) Pan European $0.2 Securitization (b) Available $1.8 Credit Lines (c) Cash & $2.6 Equivalents $1 billion required for operations Sept 30, 2009 (a) Total liquidity comprised of $2,590 million cash and cash equivalents, $1,7
Slide 19: Segment Results: North American Tire
Third Quarter 2009 Segment Results North American Tire (In millions) Third Quarter 2009 2008 Change Units 17.1 18.1 -5.4% Net Sales $1,862 $2,185 -14.8% Segment Operating Income (Loss) $2 ($19) Margin 0.1% -0.9% • Replacement volumes equal to prior year – Goodyear brand market share gains • Steady p
Slide 20: Segment Results: Europe, Middle East and Africa Tire
Third Quarter 2009 Segment Results Europe, Middle East and Africa Tire (In millions) Third Quarter 2009 2008 Change Units 17.8 19.7 -9.2% Net Sales $1,581 $1,936 -18.3% Segment Operating Income $106 $134 -20.9% Margin 6.7% 6.9% • Industry demand improved vs. Q2; remained down vs. prior year – Winter
Slide 21: Segment Results: Latin American Tire
Third Quarter 2009 Segment Results Latin American Tire (In millions) Third Quarter 2009 2008 Change Units 5.0 5.3 -7.2% Net Sales $486 $581 -16.4% Segment Operating Income $99 $101 -2.0% Margin 20.4% 17.4% • Consumer OE demand strengthens • Continued weak commercial demand • Price/mix improvement al
Slide 22: Segment Results: Asia Pacific Tire
Third Quarter 2009 Segment Results Asia Pacific Tire (In millions) Third Quarter 2009 2008 Change Units 5.1 5.1 -2.2% Net Sales $456 $470 -3.0% Segment Operating Income $68 $50 36.0% Margin 14.9% 10.6% • Record segment operating income • Strong recovery in China • Australia stabilizing • Price/mix i
Slide 23: Outlook
Outlook Q4’09 • Expect recovery to continue – significant improvement versus prior year • Compared with Q3’09 – North America SOI lower than Q3 • Seasonal volume declines • Sequential increase in raw materials • Timing of recognition of unabsorbed fixed cost – International operations SOI similar to
Slide 24: Agenda
Agenda • Third Quarter Overview • Financial Results & Outlook • Strategy Update • Q&A 24
Slide 25: End Markets Continue To Grow Steadily
End Markets Continue To Grow Steadily Global demographics will drive continued expansion in both global Consumer and Commercial tire industry Cars In Use Commercial Vehicles In Use 900 400 Global Vehicle Park (millions) Global Vehicle Park (millions) 800 350 700 300 600 250 500 200 400 150 300 2000-
Slide 26: HVA Mix Trends (U.S. Market)
HVA Mix Trends (U.S. Market) OE Market Replacement Market OE OE Drives Drives Replacement Replacement Consumer demand for HVA tires rising as car design/technology evolves 26
Slide 27: Pursuing Attractive Market & Business Opportunities Globally
Pursuing Attractive Market & Business Opportunities Globally Drivers of Further Competitive Advantage • Management team proven throughout the business cycle Leadership Leadership • Continue to strengthen team with internal and external candidates • New product engine unmatched speed to market Prod
Slide 28: Appendix
Appendix
Slide 29: Price/Mix Improvements
Price/Mix Improvements Price/Mix vs. Raw Materials ($ in millions) $942 $829 $746 $712 $639 $587 $596 $526 $268 $275 $243 $195 2004 2005 2006 2007 2008 September YTD 2009 Price/Mix Raw Materials Note: Reflects impact on Segment Operating Income. 29
Slide 30: Revenue Per Tire
Third Quarter 2009 Revenue Per Tire (Y-o-Y, excluding impact of exchange) 3.0% 2.2% 2.0% 1.0% 0.0% -0.1% -1.0% -2.0% -1.5% -2.1% -3.0% -4.0% -5.0% -4.6% North America EMEA Latin America Asia Pacific Total Company Mix due to weak commercial markets impacting revenue per tire 30
Slide 31: Year-to-Date 2009 Cash Flow
Year-to-Date 2009 Cash Flow ($ in millions) Nine Months Ended September 30, September 30, 2009 2008 Net (Loss) Income ($499) $318 (a) Depreciation and amortization 485 517 (b) Working capital 287 (1,167) Pension contributions and direct payments (304) (297) VEBA funding - (980) Other (including comp
Slide 32: Debt Maturities
Management for Cash Debt Maturities ($ in millions) $1,434(b) $136 $1,200 $975 $1,368 $960 $737(a) $1,298(a) $738 $500 $260 $723 $149 $478 2009 2010 2011 2012 2013 2014 2015 2016 >2016 Utilized 1st Lien R/C Undrawn Euro R/C Facilities Undrawn 1st Lien R/C Utilized Euro R/C Facilities 2nd Lien TL Eur
Slide 33: Legacy Costs and Interest Expense
Legacy Costs and Interest Expense Total Company - 3rd Quarter 2009 ($ in millions) 2005 2006 2007 2008 2009E (a) Global pension contributions and direct payments $522 $708 $719 $364 $300 - $325 (b) Pension expense (global) $358 $388 $276 $181 $375 - $400 (c) Postretirement benefit payments $259 $254
Slide 34: Third Quarter Significant Items
Third Quarter Significant Items (after-taxes and minority interest) 2009 • Rationalizations, asset write-offs and accelerated depreciation, $29 million (12 cents per share) • Non-cash loss on liquidation of a subsidiary in Guatemala, $18 million (8 cents per share) • Charge to correct first-half ear
Slide 35: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin Three Months Ended ($ in millions) September 30, 2009 2008 Total Segment Operating Income $275 $266 Rationalizations (16) (34) Interest expense (85) (73) Other income and (expense) (4) (4) Asset write-offs and accelerated depreciation (18) (13) Co
Slide 36: Reconciliation for Net Debt
Reconciliation for Net Debt ($ in millions) September 30, June 30, December 31, September 30, 2009 2009 2008 2008 Long term debt and capital leases $ 5,020 $ 4,940 $ 4,132 $ 5,035 Notes payable and overdrafts 243 275 265 276 Long term debt and capital leases due within one year 647 634 582 80 Total
Slide 37: Reconciliation for Cash Flow
Reconciliation for Cash Flow Nine Months Ended ($ in millions) September 30, 2009 2008 Cash Flows From Operating Activities: Net (Loss) Income $ (499) $ 318 Adjustments to reconcile Income from continuing operations to cash flows from operating activities: Depreciation and amortization 471 494 Amort
Slide 38: GOODS YEAR
GOODS YEAR eelied Get there
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