The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q1 2020 Earnings Presentation
33 slides from The Goodyear Tire & Rubber's earnings presentation, Apr 30, 2020
Slide 1: First Quarter 2020 Conference Call
First Quarter 2020 Conference Call April 30, 2020
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: 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 4: Supporting Our Communities
Responding to the Needs During COVID-19 Discounted and free tire Supporting Our Communities CTSC & Raben Tire offering services to essential workers ‘Zero Contact’ service to Fleets Adapting How We Work Free DOT inspections Donations of PPE and financial to U.S. Fleets support to local health system
Slide 5: Mitigating the Impact of COVID-19
Mitigating the Impact of COVID-19 Operational Financial • Temporarily suspended production at the • Refinanced $2.0 billion U.S. revolving credit majority of our manufacturing facilities facility, extending maturity to 2025 • Altered operating hours at our retail • Temporarily suspended our quarterl
Slide 6: China Business Conditions
China Business Conditions Expected Volume Recovery Curve(a) Improving Environment • Goodyear-Pulandian is operating with Full 100% of its workforce and able to meet Recovery customer demand Improving • Major OEMs have resumed production Demand • All key distributors are up and running • >95% of reta
Slide 7: Tire Production: Status Update as of April 30th
Tire Production: Status Update as of April 30th Americas ≥ 70% Capacity 0 plants EMEA < 70% Capacity 1 plants ≥ 70% Capacity 0 plants Idle 12 plants < 70% Capacity 10 plants Asia Pacific Idle 3 plants ≥ 70% Capacity 2 plants < 70% Capacity 0 plants Idle 5 plants Majority of manufacturing facilities
Slide 8: Financial Review
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Slide 9: Financial Review Summary
Financial Review Summary Q2 Cost Reductions − Salaried payroll ($65 million) − Marketing and other SAG ($75 million) Cash & Liquidity Actions (2020 Impact) − Capex ($100 million) − Dividend suspension ($110 million) − Tax deferrals ($60 million U.S., International TBD) − Expanded U.S. ABL “borrowing
Slide 10: Price vs Raw Materials During the Great Recession
Price vs Raw Materials During the Great Recession Price and Raw Materials(a) Net Price vs Raw Materials (a) $400 $400 $354 $280 $258 Margin Impact ($ Millions) Margin Impact ($ Millions) $200 $200 $24 $- $0 ($20) $(200) ($200) ($162) Raw Materials Price $(400) Q1 Q2 ($400) Q1 Q2 2009 2010 2009 2010
Slide 11: Income Statement
First Quarter 2020 Income Statement Terms: US$ millions Three Months Ended (except EPS) March 31, March 31, 2020 2019 Change Units 31.3 38.0 (18)% Net Sales $ 3,056 $ 3,598 (15)% Gross Margin 16.5% 20.0% (3.5) pts SAG $ 581 $ 547 6% Segment Operating Income (Loss)(a) $ (47) $ 190 (125)% (a) Segment
Slide 12: Segment Operating Results
First Quarter 2020 Segment Operating Results Terms: US$ millions $190 ($120) Q1 2019 SOI Other Includes ($70) ($15M) WIP write-off Volume $38 ($38) ($10M) Gadsden production costs ($8M) Other tire-related businesses $50M of period charges $13 ($3) ($57) $0 Cost Inflation(c) Currency Unabsorbed Raw S
Slide 13: Balance Sheet
First Quarter 2020 Balance Sheet Terms: US$ millions March 31, December 31, March 31, 2020 2019 2019 Cash and cash equivalents $ 971 $ 908 $ 860 Accounts receivable $ 2,025 $ 1,941 $ 2,446 Inventories 2,919 2,851 2,940 Accounts payable - trade (2,645) (2,908) (2,737) (a) Working capital $ 2,299 $ 1,
Slide 14: Liquidity Profile (Pro Forma)
First Quarter 2020 Liquidity Profile (Pro Forma) Terms: US$ billions $3.6(a) Available Credit Lines Cash & Equivalents (a) Total liquidity is comprised of $971 million of cash and cash equivalents, as well as $2,627 million of unused availability under various credit agreements, pro forma for the re
Slide 15: Maturity Schedule (Pro Forma)
First Quarter 2020 Maturity Schedule (Pro Forma) Terms: US$ millions Note: Based on March 31, 2020 balance sheet values, pro forma for the refinancing of the $2.0 billion U.S. revolving credit facility, and excludes notes payable, finance and operating leases and other domestic and foreign debt (a)
Slide 16: Free Cash Flow
First Quarter 2020 Free Cash Flow Terms: US$ millions Three Months Ended Trailing Twelve Months March 31, Ended 2020 2019 March 31, 2020 Net Income (Loss) $ (617) $ (44) $ (870) Depreciation and Amortization 196 193 798 Change in Working Capital (482) (589) 189 Pension Expense 30 34 128 Pension Cont
Slide 17: Americas
First Quarter 2020 - Segment Results Americas Terms: US$ millions Units in millions First Quarter • Americas’ operating income ahead of prior year through February 2020 2019 Change • U.S. consumer volume significantly affected Units 14.5 16.7 (13.4)% by lower industry demand • U.S. commercial replac
Slide 18: Europe, Middle East & Africa
First Quarter 2020 - Segment Results Europe, Middle East & Africa Terms: US$ millions Units in millions First Quarter • European consumer volume significantly 2020 2019 Change affected by lower industry demand Units 11.6 14.4 (19.6)% • Commercial replacement volume slightly positive • Price vs. raw
Slide 19: Asia Pacific
First Quarter 2020 - Segment Results Asia Pacific Terms: US$ millions Units in millions First Quarter 2020 2019 Change • Strong consumer replacement performance Units 5.2 6.9 (23.9)% excluding China through February • Consumer volume significantly affected Net Sales $388 $501 (22.6)% by lower indust
Slide 20: 2020 Outlook
2020 Outlook • Limited visibility into full-year industry outlook; assume largest decline in Q2 (~50%) • Production volume forecasted down ~25 million units in Q2 (unabsorbed overhead recognized immediately) • COVID-19 impacting retail, chemical and aviation businesses (-$150 million in Q2) • Raw ma
Slide 21: 2020 Outlook – Other Financial Assumptions
2020 Outlook – Other Financial Assumptions Current Assumption Raw Materials $50 - $100 million benefit, excluding transactional foreign currency Interest Expense $350 - $375 million Financing fees: ~$40 million Other (Income) Expense Global pension related (excluded from SOI)(a): $75 - $95 million I
Slide 22: Appendix
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Slide 23: Strong Foundation
Strong Foundation Industry Portfolio of Pervasive Diverse Innovation(a) Leader(a) Brands Distribution End Markets (a) Sales • Largest tire • 2 world-class • Over 13,000 14% 54% company in North innovation retail touch points(b) 32% America centers • Concentrated • $14.7B in revenue • Innovation lab
Slide 24: Modeling Assumptions
Modeling Assumptions Volume Sensitivities Pricing Translational Foreign Currency (Impact on Goodyear's Annual Units in 000's) (Annual Impact of Effective Pricing Yield) (Annual Impact on FX portion of SOI Walk) • 1% Δ in U.S. Consumer OE Industry ~102 • 1% Δ in U.S. Consumer Replacement ~$29M'' • +/
Slide 25: Raw Materials
Raw Materials ✓ Raw materials are ~44% of tire COGS Global Raw Material Spend ✓ ~68% of raw materials are influenced by oil FY 2019 ($4.4 Billion) prices - P&L impact lags spot rates by 1-2 quarters depending on commodity ✓ ~63% of raw materials are purchased in USD ✓ Customer agreements indexed to
Slide 26: Raw Material Overview
Raw Material Overview Outlook Terms: US$ millions • 2020 raw material costs $50 - $100 million benefit, excluding transactional foreign currency • Turkish Lira and Brazilian Real drivers of unfavorable Full Year = $725 Full Year = $266 Full Year = $278 transactional foreign currency (a) Impact to co
Slide 27: Industry Fundamentals: ≥17"
Consumer Replacement Industry Fundamentals: ≥17” U.S. Replacement Industry Europool & Turkey Replacement Industry 2020 vs. 2019 Growth Rate(a) 2020 vs. 2019 Growth Rate(b) Q1 20 Q1 20 USTMA Members (>17”) -8% ETRMA Members (>17”) -6% USTMA Members (<17”) -19% ETRMA Members (<17”) -17% Total -12% Tot
Slide 28: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures This presentation contains historical non-GAAP financial measures, including Total Segment Operating Income (Loss) and Margin, Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) Per Share (EPS), which are important financial measures fo
Slide 29: Reconciliation for Segment Operating Income (Loss)/Margin
Reconciliation for Segment Operating Income (Loss)/Margin Terms: US$ millions Three Months Ended March 31, 2020 2019 Total Segment Operating Income (Loss) $ (47) $ 190 Goodwill impairment (182) - Rationalizations (9) (103) Interest expense (73) (85) Other income (expense) (27) (22) Asset write-offs
Slide 30: First Quarter 2020 Significant Items
First Quarter 2020 Significant Items (After Tax and Minority Interest) Terms: US$ millions, Terms: US$ millions (except EPS) (except EPS) The Goodyear Tire & Rubber Company Q1 2020 Significant Items Rationalizations, Brazil As Discrete Tax As Discrete Insurance Goodwill Transaction TransportationAs
Slide 31: First Quarter 2019 Significant Items
First Quarter 2019 Significant Items (After Tax and Minority Interest) Terms: Terms:US$ US$millions, millions (except (exceptEPS) EPS) Rationalizations, Indirect Tax Legal Claims Brazil Net Insurance As Asset Write-offs, Settlements and Related to As As Discrete Tax Insurance Transaction Transportat
Slide 32: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt Terms: US$ millions March 31, December 31, March 31, 2020 2019 2019 Long-Term Debt and Finance Leases $ 5,212 $ 4,753 $ 5,545 Notes Payable and Overdrafts 691 348 495 Long-Term Debt and Finance Leases Due Within One Year 621 562 466 Total Debt $ 6,524 $ 5,6
Slide 33: GOODFYEAR
GOODFYEAR
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