The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q4 2009 Earnings Presentation
42 slides from The Goodyear Tire & Rubber's earnings presentation, Feb 18, 2010
Slide 1: Fourth Quarter & Full Year 2009 Conference Call
Fourth Quarter & Full Year 2009 Conference Call February 18, 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 • Q4 and Full Year Overview & Strategy Update • Q4 Financial Results • 2010 Outlook • Q&A 3
Slide 4: Executive Overview
Executive Overview • Top Line, Cost and Cash actions drove improvement in 2009 – Leading management team – Success in the marketplace – Aggressive cost reductions – Advantaged Supply Chain • Full year results reflect success of actions – Price/mix improvements – 4-point cost savings greater than $70
Slide 5: Executive Overview: North American Dealer Conference
Executive Overview North American Dealer Conference January 2010 • January 2010 North American Dealer Conference: – Largest industry event of its kind – Focused on building business with dealers • Customer feedback highly positive: – Confidence in Goodyear strategy and team – Recognition of achievem
Slide 6: Executive Overview: Fourth quarter highlights
Executive Overview • Fourth quarter highlights include: – Sales increased 7% to $4.4 billion – Tire shipments increased 8% – Segment operating income of $249 million, year- over-year increase of more than $400 million – Favorable impact of price/mix and raw materials $290 million – 4-point cost savi
Slide 7: Top Line, Cost and Cash Actions Aligned to Strategic Drivers
Top Line, Cost and Cash Actions Aligned to Strategic Drivers Leadership Leadership Product Product Leadership Leadership Platforms for Growth Leveraged Leveraged Distribution Distribution Build Build Brand Brand Strength Strength Top Line Advantaged Advantaged Supply Supply Chain Chain Cost Lowe
Slide 8: Platforms for Growth: Top Line
Platforms for Growth Top Line • Continued success in Top Line performance attributed to: – Strength of dealer network – Leading new product engine – Impactful marketing – Advantaged Supply Chain Top Line actions having desired impact on performance 8
Slide 9: Platforms for Growth: Top Line
Platforms for Growth Top Line • Launched record 62 new products in 2009 • Assurance Fuel Max an unprecedented success – Popular Science magazine’s “100 Most Innovative Products of the Year” – Most successful high-value-added launch in company history – Demonstrates ability to expand addressable ma
Slide 10: Top Line – New Product Engine
Platforms for Growth Top Line – New Product Engine • Rapidly launching products across markets globally NATIONAL LABS • Plan to leverage new THIRD PARTIES ACADEMIA labeling regulations GOODYEAR GOODYEAR RD&E RD&E • Accelerating “Open Innovation” technology JOINT VENTURES / ALLIANCES SUPPLIERS develo
Slide 11: Cost Actions – 2009
Platforms for Growth Cost Actions – 2009 • 4-point cost savings of $730 million • Reduced global workforce by 8% • Completed USW agreements – Comprehensive 4-year agreement – Shift reduction at 5 USW plants – Union City unprotected status • Closed Philippines plant and announced end of consumer tire
Slide 12: Cost Actions – 2010 and Beyond
Platforms for Growth Cost Actions – 2010 and Beyond • Cost savings of $1 billion over three year period • Reaffirm 15 to 25 million unit high-cost capacity reduction (8 million announced to date) • Lower unabsorbed fixed cost • Increase low-cost sourcing to more than $900 million by year-end Target
Slide 13: Cash Initiatives – 2009
Platforms for Growth Cash Initiatives – 2009 • Reduced net debt to $2.6 billion • Lowered inventory by more than $1.1 billion • Reduced capital expenditures to $746 million (in-line with target range) • $1 billion bond offering in May extended debt maturities • Repaid $500 million bond and $800 mill
Slide 14: Cash Initiatives – 2010 and Beyond
Platforms for Growth Cash Initiatives – 2010 and Beyond • Announced debt exchange to further extend maturities • Continue to manage for cash doing more with less • Advantaged supply chain focused on driving simplification: 1) Customers looking for it – Simplifying product portfolios – Reducing SKU
Slide 15: Economic and Industry Environment
Economic and Industry Environment • Global environment continues to improve • U.S. consumers driving more miles • OE sales rebounding from historically low levels • Strong winter tire season in Europe • Robust economic growth in China and India • Commercial truck markets remain weak Market recovery
Slide 16: Recovery Presenting Challenges and Opportunities
Recovery Presenting Challenges and Opportunities What we Know What You Can Expect From Goodyear • Raw material pressures • Focus on price/mix expected to intensify • Continue industry-leading new product engine • Continue to run plants as efficiently as possible • Implement USW contract • Markets wi
Slide 17: Q4 Financial Results
Q4 Financial Results • Returned to year-over-year top line growth • Increased production – reduced impact from unabsorbed fixed cost • Continued adverse impact of business mix (e.g., consumer vs. commercial, OE vs. replacement) • Stronger than expected segment operating income – especially North Ame
Slide 18: Fourth Quarter 2009 Results
Fourth Quarter 2009 Results Income Statement Total Company (In millions, except Margin and EPS) Fourth Quarter 2009 2008 Change Units 43.6 40.5 7.8% Net Sales $4,437 $4,135 7.3% Gross Margin 19.3% 11.3% 8.0 pts SAG $640 $603 6.1% (a) Segment Operating Income (Loss) $249 ($159) (a) Segment Operating
Slide 19: Fourth Quarter 2009 Segment Operating Results
Fourth Quarter 2009 Segment Operating Results ($ in millions) $408 $23 $35 (as reported) ($56) $45 ($11) ($9) $290 ($76) Unabsorbed Currency Fixed Cost Pension Volume Inflation (2) $249 Other including Q4'09 incentive Q4 compensation 2009 accrual vs. Q4'08 reversal ($36) $190 ($159) Q4 Price/Mix ($6
Slide 20: Unabsorbed Fixed Cost
Fourth Quarter 2009 Results Unabsorbed Fixed Cost ($ in millions) Unabsorbed Fixed Cost(a) $863 • Weak industry demand and inventory reductions drove unabsorbed fixed cost in 2008 and 2009: – Production cuts reached 52 million units in 2009 $373 – Level of production cuts impact timing of recognitio
Slide 21: 4-Point Cost Savings Plan
Cost Actions 4-Point Cost Savings Plan 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 – $250 millio
Slide 22: Balance Sheet
Fourth Quarter 2009 Balance Sheet ($ in millions) December 31, September 30, December 31, 2009 2009 2008 Cash and cash equivalents $ 1,922 $ 2,590 $ 1,894 Accounts receivable 2,540 3,065 2,517 Inventories 2,443 2,543 3,592 Accounts payable - trade (2,278) (2,042) (2,529) Working capital(a) $ 2,705 $
Slide 23: Liquidity Profile
Fourth Quarter 2009 Liquidity Profile Liquidity Profile ($ in billions) $4.7(a) Pan European 0.2 Securitization (b) Available Credit Lines (c) $2.6 Cash & Equivalents (d) $1.9 $1 billion required for operations Dec. 31, 2009 (a) Total liquidity comprised of $1,922 million cash and cash equivalents,
Slide 24: 2009 Year-End Postretirement Funded Status
2009 Year-End Postretirement Funded Status ($ in millions) December 31, December 31, December 31, 2009 2008 2007 Postretirement Funded Status U.S. pension $ (1,931) $ (2,129) $ (649) Non-U.S. pension (784) (619) (813) Other postretirement benefits (551) (510) (1,758) Net unfunded obligation $ (3,266
Slide 25: Segment Results: North American Tire
Fourth Quarter 2009 Segment Results North American Tire (In millions) Fourth Quarter 2009 2008 Change Units 16.9 16.9 -0.2% Net Sales $1,884 $1,943 -3.0% Segment Operating (Loss) ($27) ($193) 86.0% Margin -1.4% -9.9% • Improved results versus expectations • Industry improving, but mix remains weak •
Slide 26: Segment Results: Europe, Middle East and Africa Tire
Fourth Quarter 2009 Segment Results Europe, Middle East and Africa Tire (In millions) Fourth Quarter 2009 2008 Change Units 16.2 15.1 7.3% Net Sales $1,559 $1,406 10.9% Segment Operating Income (Loss) $125 ($32) Margin 8.0% -2.3% • Sales driven by strong winter season and OE • Favorable currency imp
Slide 27: Segment Results: Latin American Tire
Fourth Quarter 2009 Segment Results Latin American Tire (In millions) Fourth Quarter 2009 2008 Change Units 5.3 4.1 29.9% Net Sales $508 $405 25.4% Segment Operating Income $81 $49 65.3% Margin 15.9% 12.1% • Industry demand drove higher volume • Favorable currency impact • Price/mix combined with ra
Slide 28: Venezuela Update
Fourth Quarter 2009 Venezuela Update • Situation continues to evolve – January 8th announced devaluation – Accounting will reflect highly inflationary environment – Challenging market environment • Expected to negatively impact segment operating income $50 to $75 million in 2010 versus prior year(a)
Slide 29: Segment Results: Asia Pacific Tire
Fourth Quarter 2009 Segment Results Asia Pacific Tire (In millions) Fourth Quarter 2009 2008 Change Units 5.2 4.4 19.6% Net Sales $486 $381 27.6% Segment Operating Income $70 $17 311.8% Margin 14.4% 4.5% • Strong market growth, led by China • Improved fourth quarter and full year profits versus 2008
Slide 30: 2010 Outlook
2010 Outlook 2010 Industry Outlook Original Equipment Replacement (year over year) Consumer Commercial Consumer Commercial North America: 20% - 30% 5% - 15% 1% - 3% 1% - 5% Europe: (3)% - 5% 20% - 30% 0% - 2% 5% - 10% 2010 Full Year Outlook • Raw materials – Benefit of 15% in Q1 and 5% first half –
Slide 31: Appendix
Appendix
Slide 32: Price/Mix Improvements
Price/Mix Improvements Price/Mix vs. Raw Materials ($ in millions) $942 $829 $746 $712 $639 $587 $596 $526 $268 $195 $207 ($115) 2004 2005 2006 2007 2008 2009 Price/Mix Raw Materials Note: Reflects impact on Segment Operating Income. 32
Slide 33: Revenue Per Tire
Full Year 2009 Revenue Per Tire (Y-o-Y, excluding impact of exchange) 4.0% 2.8% 3.0% 2.0% 1.7% 1.0% 0.0% -1.0% -1.0% -2.0% -1.8% -3.0% -4.0% -5.0% -4.7% -6.0% North America EMEA Latin America Asia Pacific Total Company Weak commercial truck markets impacting revenue per tire 33
Slide 34: 2009 Cash Flow
2009 Cash Flow ($ in millions) Year Ended December 31, December 31, 2009 2008 Net Loss ($364) ($23) (a) Depreciation and amortization 656 686 (b) Working capital 1,081 (127) Pension contributions and direct payments (430) (364) VEBA funding - (1,007) Other (including compensation and benefits) 354 9
Slide 35: Debt Maturities
Management for Cash Debt Maturities ($ in millions) $1,386(b) $1,200 $975 $1,368 $892 $961 $726(a) $697 $260 $712 $437 $149 $494(a) 2010 2011 2012 2013 2014 2015 2016 >2016 Utilized 1st Lien R/C Undrawn Euro R/C Facilities Undrawn 1st Lien R/C Utilized Euro R/C Facilities 2nd Lien TL Euro A/R Facili
Slide 36: Legacy Costs and Interest Expense
Legacy Costs and Interest Expense ($ in millions) 2006 2007 2008 2009 2010E (a) Global pension contributions and direct payments $708 $719 $364 $430 $275-$325 (b) Pension expense (global) $388 $276 $181 $387 $275-$325 (c) (d) Postretirement benefit payments $228 $225 $169 $64 < $60 (b) (d) Postretir
Slide 37: Unabsorbed Fixed Costs
Unabsorbed Fixed Costs (in millions) 2008 2009 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Production Cuts 1.4 4.3 8.4 16.8 30.9 13.4 14.2 12.8 11.2 51.6 Unabsorbed Fixed Cost Realized from Current Period Production: - Result of Period Costing (formerly SFAS 151) $ - $ 2 $ 70 $ 155 $ 227 $ 134 $ 116 $ 67 $ 25 $ 3
Slide 38: Fourth Quarter Significant Items
Fourth Quarter Significant Items (after-taxes and minority interest) 2009 • Rationalizations, asset write-offs and accelerated depreciation, $20 million (8 cents per share) • Expenses related to a legal reserve for a closed facility, $4 million (2 cents per share) • Net tax benefits related to emplo
Slide 39: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin Total Company - 4th Quarter 2009 ($ in millions) Three Months Ending December 31, 2009 2008 Total Segment Operating Income (Loss) $ 249 ($159) Rationalizations (20) (50) Interest expense (83) (82) Other income and (expense) 26 (83) Asset write-off
Slide 40: Reconciliation for Net Debt
Reconciliation for Net Debt ($ in millions) December 31, September 30, December 31, 2009 2009 2008 Long term debt and capital leases $ 4,182 $ 5,020 $ 4,132 Notes payable and overdrafts 224 243 265 Long term debt and capital leases due within one year 114 647 582 Total debt $ 4,520 $ 5,910 $ 4,979 L
Slide 41: Reconciliation for Cash Flow
Reconciliation for Cash Flow Year Ended ($ in millions) December 31, 2009 2008 Cash Flows From Operating Activities: Net Loss $ (364) $ (23) Adjustments to reconcile Net Loss to cash flows from operating activities: Depreciation and amortization 636 660 Amortization and write-off of debt issuance co
Slide 42: a GOODSYEAR
a GOODSYEAR noel Get there
The Goodyear Tire & Rubber Company — Q4 2009 Earnings Presentation on 6ix