The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q1 2017 Earnings Presentation
31 slides from The Goodyear Tire & Rubber's earnings presentation, Apr 28, 2017
Slide 1: First Quarter 2017 Conference Call
First Quarter 2017 Conference Call April 28, 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain information contained in this presentation constitutes 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 affect o
Slide 3: First Quarter Highlights
First Quarter Highlights • Segment operating income (SOI) of $385 million (a) • Adjusted earnings per share of $0.74 (b), up 3% • Positive price / mix versus raw materials • Americas earnings of $214 million, 10.9% operating margin • Europe, Middle East and Africa earnings up 23% to $98 million, 7.9
Slide 4: U.S. Consumer OE Trends
U.S. Consumer OE Trends USA Light Truck & SUV Sales (b) 150 Cumulative Growth (a) 12 (in millions) % Indexed to Q4 2014 8 140 Outperformance driven by light truck/SUV new model ramp-ups 4 130 0 120 2010 2011 2012 2013 2014 2015 2016 110 Strong Q1 2016 comparable 100 Industry Goodyear 90 Q4 Q1 Q2 Q3
Slide 5: U.S. Industry Fundamentals: >17”
U.S. Industry Fundamentals: >17” U.S. Consumer Replacement Industry 2017 vs 2016 Growth Rate(a) Q1 • Soft sell out during first quarter RMA Members (>17”) 8% • Impact of relative timing of our Q1 RMA Members (<17”) -6% price increase Total 1% • Confident in underlying drivers of Non-Members 0% deman
Slide 6: EMEA Industry Fundamentals: >17”
EMEA Industry Fundamentals: >17” Europool & Turkey Replacement Industry 2017 vs 2016 Growth Rate(a) Q1 ETRMA Members (>17”) 12% • Above market growth in >17” segment driven by summer ETRMA Members (<17”) 2% • Goodyear volume declines in Total 4% <17” driven by choices in Non-Members 4% summer segmen
Slide 7: Income Statement
First Quarter 2017 Income Statement Terms: US$ millions Three Months Ended (except EPS) March 31, March 31, 2017 2016 Change Units 40.0 41.5 (3.5)% Net Sales $ 3,699 $ 3,691 0% Gross Margin 25.3% 26.8% (1.5) pts SAG $ 579 $ 615 (6)% (a) Segment Operating Income $ 385 $ 419 (8)% Segment Operating Mar
Slide 8: Segment Operating Results
First Quarter 2017 Segment Operating Results Terms: US$ millions $419 ($34) $71 ($32) ($37) ($4) ($3) $385 Q1 ($42) $47 Inflation(b) Currency Volume Other(c) Q1 2016 SOI Unabsorbed Cost 2017 Fixed Cost Savings SOI Raw Price/Mix Materials(a) ($71) $5 $39 Total Volume Impact Net P/M vs Raws Net Cost S
Slide 9: Balance Sheet
First Quarter 2017 Balance Sheet Terms: US$ millions March 31, December 31, March 31, 2017 2016 2016 Cash and Cash equivalents $ 961 $ 1,132 $ 1,079 Accounts receivable 2,270 1,769 2,482 Inventories 2,845 2,627 2,636 Accounts payable - trade (2,631) (2,589) (2,653) (a) Working capital $ 2,484 $ 1,80
Slide 10: Free Cash Flow
First Quarter 2017 Free Cash Flow Terms: US$ millions Three Months Ended Trailing Twelve March 31, Months Ended 2017 2016 March 31, 2017 Net Income $ 169 $ 189 $ 1,264 Depreciation and Amortization 185 174 738 Change in Working Capital (596) (611) (102) Pension Expense 22 18 75 Pension Contributions
Slide 11: Americas Segment Results
First Quarter 2017 - Segment Results Americas Terms: US$ millions Units in millions First Quarter 2017 2016 Change • Volume decline driven by U.S. consumer OE Units 17.2 18.0 (4.6%) • U.S. commercial truck volume relatively stable Net Sales $1,958 $1,951 0.4% • Brazil strengthening; volume up 7% Ope
Slide 12: Europe, Middle East & Africa Segment Results
First Quarter 2017 - Segment Results Europe, Middle East & Africa Terms: US$ millions Units in millions First Quarter • Increased operating income driven by 2017 2016 Change positive price/mix and cost savings Units 15.5 16.2 (3.8%) • Continued growth in consumer replacement >17”, driven by summer N
Slide 13: Asia Pacific Segment Results
First Quarter 2017 - Segment Results Asia Pacific Terms: US$ millions Units in millions First Quarter • Consumer volume flat as 2017 2016 Change replacement growth is offset by Units 7.3 7.3 (0.2%) decline in OE • Higher OE comparable related to Net Sales $502 $489 2.7% China tax incentive Operating
Slide 14: 2017 SOI Cadence
2017 SOI Cadence (a) 1 Half 2017 vs 2016 st 2 Half 2017 vs 2016 nd ~ -10% ~ +10% -- Volume (driven by EMEA) + Volume -- Unabsorbed Overhead + Unabsorbed Overhead -- Unfavorable Price/Mix vs Raws (Timing) + Favorable Price/Mix vs Raws -- Unfavorable Foreign Exchange -- Unfavorable Foreign Exchange +
Slide 15: 2017 Key Segment Operating Income Drivers
2017 Key Segment Operating Income Drivers (a) February Outlook Current Outlook Driver Comments 2017 vs 2016 2017 vs 2016 Disciplined volume execution; Global Volume ~1% ~Flat Q2 volume similar to Q1 Net Price/Mix vs Raw Impact of moderating raw materials; ~Flat ~$25 million Materials Q2 negative dri
Slide 16: 2017 Outlook – Other Financial Assumptions
2017 Outlook – Other Financial Assumptions Current 2017 FY Assumption Interest Expense $340 - $365 million Financing Fees ~$35 million Expense: ~30% of global pre-tax operating income; Income Tax Cash: ~15% of global pre-tax operating income Depreciation & Amortization ~$750 million Global Pension E
Slide 17: Our Goal
OURSGOAL DELIVER SUSTAINABLEREVEN AND PROFIT GROWTH WHILE INCREASING THE VALUE OF OUR BRAND. HOW WE'LL WIN HOW WE'LL WORK INNOVATION SALES & MARKETING EXCELLENCE EXCELLENCE ft, OPERATIONAL EXCELLENCE ACTWITH INTEGRITY ENERGIZE THE TEAM PROMOTE COLLABORATION BE AGILE DELIVER RESULTS Winning at the in
Slide 18: Appendix
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Slide 19: Raw Materials
Raw Materials Raw materials are ~40% of tire COGS Global Raw Material Spend ~65% of raw materials are influenced by oil FY 2016 prices Natural Rubber, 19% - P&L impact lags spot rates by 1-2 quarters Synthetic Rubber, 28%* depending on commodity ~60% of raw materials are purchased in USD Wire
Slide 20: 2017 Raw Material Headwinds
2017 Raw Material Headwinds (a) Terms: Estimate in US$ millions Variance to 2016 $300 ~$275 $250 ~$215 ~$215 $200 $150 28% 23% 23% $100 $50 $42 4% $0 Q1 Q2 Q3 Q4 (a) Impact to cost of goods sold before raw material cost saving measures. 20
Slide 21: First Quarter 2017 – Liquidity Profile
First Quarter 2017 – Liquidity Profile Terms: US$ billions $4.0(a) Available $3.1 Credit Lines Cash & $1.0 Equivalents March 31, 2017 (a) Total liquidity comprised of $961 million of cash and cash equivalents, as well as $3,071 million of unused availability under various credit agreements. 21
Slide 22: 2020 Segment Operating Income Target
2020 Segment Operating Income Target (a) Terms: US$ millions Positive SOI Drivers 2020 SOI Target 2018 vs 2017 Potential Impact ~$3,000 • Catch-up on 2017 OE RMI pricing ~$100 • EMEA cost programs $50 - $60 • U.S. Commercial recovery $25 - $35 • Net cost savings $100 - $150 ~$2,000 • >17” volume/mix
Slide 23: $3.0 Billion Segment Operating Income Target Key Drivers and Risk Factors
$3.0 Billion Segment Operating Income Target (a) Key drivers Risk Factors Moderate global industry growth, including: Economic environment • Above market growth in > 17” • Significant weakness in key markets • Emerging markets growth Raw materials Goodyear volume growth of 20 million units, pr
Slide 24: First Quarter 2017 – Maturity Schedule
First Quarter 2017 – Maturity Schedule Terms: US$ millions Undrawn Credit Lines Funded Debt Called $2,000 (c) April 2017 $1,750 $1,267 $587 (b) $157 (a) $700 $584 $- $274 2017 2018 2019 2020 2021 2022 2023 ≥ 2024 Note: Based on March 31, 2017 balance sheet values and excludes notes payable, capital
Slide 25: 2017 Full-Year Industry Outlook
2017 Full-Year Industry Outlook Full-Year 2017 Guidance United States Western Europe (a) Consumer Replacement ~Flat – 1% ~Flat – 1% Consumer OE ~Flat ~Flat Commercial Replacement ~1 – 2% ~2% Commercial OE ~(6%) ~4% (a) For replacement, Western Europe is Europool and Turkey. For OE, Western Europe is
Slide 26: Non-GAAP Financial Measures
Use of Historical and Forward-Looking Non-GAAP Financial Measures This presentation contains historical and forward-looking non-GAAP financial measures, including Total Segment Operating Income and Margin, Free Cash Flow, Adjusted Net Income and Adjusted Diluted Earnings Per Share (EPS), which are i
Slide 27: Significant Items
First Quarter 2017 Significant Items (After Tax and Minority Interest) Terms: US$ millions, Rationalizations, (except EPS) Asset Write-offs, As Discrete Tax and Accelerated Reported Items Depreciation As Adjusted Net Sales $ 3,699 $ - $ - $ 3,699 Cost of Goods Sold 2,765 - (8) 2,757 Gross Margin 934
Slide 28: First Quarter 2016 Significant Items
First Quarter 2016 Significant Items (After Tax and Minority Interest) Terms: US$ millions, (except EPS) Rationalizations, Insurance Asset Write-offs, Recovery - As and Accelerated Debt Discontinued Discrete Tax Reported Depreciation Repayments Products Items As Adjusted Net Sales $ 3,691 $ - $ - $
Slide 29: Reconciliation for Segment Operating Income/Margin
Reconciliation for Segment Operating Income/Margin Terms: US$ millions Three Months Ended March 31, 2017 2016 Total Segment Operating Income $ 385 $ 419 Rationalizations (29) (11) Interest expense (87) (91) Other income (expense) - (6) Asset write-offs and accelerated depreciation (8) (2) Corporate
Slide 30: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt Terms: US$ millions March 31, December 31, March 31, 2017 2016 2016 Long-Term Debt and Capital Leases $ 5,257 $ 4,798 $ 5,685 Notes Payable and Overdrafts 217 245 76 Long-Term Debt and Capital Leases Due Within One Year 459 436 314 Total Debt $ 5,933 $ 5,47
Slide 31: Goodyear
GOODFYEAR
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