The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q1 2013 Earnings Presentation
39 slides from The Goodyear Tire & Rubber's earnings presentation, Apr 26, 2013
Slide 1: First Quarter 2013 Conference Call
First Quarter 2013 Conference Call April 26, 2013
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: Q1 Highlights
Q1 Highlights • Segment Operating Income of $302 million – Record North America Q1 results – Three SBUs report year-over-year SOI growth • North America segment operating income up 59% from prior year, a first quarter record • Asia Pacific and Latin America report unit volume growth and report stron
Slide 4: Strategy Roadmap
Strategy Roadmap Where We Are Executing Plan NAT Adding Economic Value Innovation Leader Weak Volume Strong Earnings Pension remains a challenge Industry Key Strategies MegaTrends Key How To’s 1. Market-Back Innovation Excellence 1. North America: Profitability 2. Target Profitable Marke
Slide 5: Record Results in a Challenging Environment
Record Results in a Challenging Environment $ In millions Creating Sustainable Economic Value $1,400 - $1,500 By being… $1,368 $1,248 • First with our customers • Leader in our targeted segments $917 • The innovation leader • Competitively advantaged And as a result, we will be… • Profitable throug
Slide 6: EMEA Situation Assessment
EMEA Situation Assessment • Industry volumes remain very weak • De-stocking in channels continuing – Manufacturer sales < sell-out to consumers • Goodyear working to improve service levels and supply chain flexibility • Actions needed to match weak economic environment – Full closure of Amiens (Fren
Slide 7: Summary
Summary Addressing weak environment Pent-up demand creates future upside Addressing operating issues in EMEA Continue delivering in North America, Latin America & Asia Solid Q1 Results…Full Year SOI and Cash Flow Outlook Unchanged 7
Slide 8: Financial Update
Financial Update
Slide 9: Income Statement
First Quarter 2013 Income Statement In millions 1st Quarter 2013 2012 Change Units 39.5 43.0 (8.1)% Net Sales $4,853 $5,533 (12.3)% Gross Margin 18.8% 16.7% SAG $645 $662 (2.6)% Segment Operating Income(a) $302 $292 3.4% Segment Operating Margin(a) 6.2% 5.3% 0.9 pts Goodyear Net Income (Loss) $33 ($
Slide 10: Segment Operating Results
First Quarter 2013 Segment Operating Results $ In millions +$10 $99 ($78) ($71) $230 Unabsorbed ($64) Cost Fixed ($60) Savings Cost Price / Mix (net of NAT profit Inflation(2) ($17) sharing) ($29) $292 $302 Volume Currency Raw Other(3) Materials(1) Q1 Q1 2012 2013 1. Raw material variance of $230 mi
Slide 11: Balance Sheet
First Quarter 2013 Balance Sheet $ In millions March 31, December 31, March 31, 2013 2012 2012 Cash and cash equivalents $ 2,386 $ 2,281 $ 2,083 Accounts receivable 3,021 2,563 3,530 Inventories 3,168 3,250 3,969 Accounts payable - trade (3,218) (3,223) (3,571) (a) Working capital $ 2,971 $ 2,590 $
Slide 12: Cash Flow
Cash Flow $ In millions Three Trailing Twelve Months Ended Months Ended March 31, 2013 March 31, 2012 March 31, 2013 Net Income $ 31 $ 8 $ 260 Depreciation and Amortization 177 170 694 Working Capital (335) (767) 889 Pension Expense 76 78 305 Other 46 (98) 284 Capital Expenditures (271) (276) (1,122
Slide 13: Segment Results
First Quarter 2013 Segment Results In millions North American Tire Europe, Middle East, and Africa Tire 2013 2012 Change 2013 2012 Change Units 14.8 15.8 (6.4%) Units 15.1 18.0 (16.1%) Net Sales $2,166 $2,497 (13.3%) Net Sales $1,607 $1,938 (17.1%) Operating Income $127 $80 58.8% Operating Income $3
Slide 14: 2013 Full-Year Industry Outlook
2013 Full-Year Industry Outlook April Full-Year February Full-Year 2013 Guidance 2013 Guidance NAT EMEA NAT EMEA Consumer ~ Flat ~ Flat Flat to +2% Flat to +2% Replacement Consumer OE ~ +5% ~ (5)% ~ +5% ~ (5)% Commercial ~ Flat ~ +5% ~ Flat ~ +5% Replacement Commercial OE ~ Flat Flat to +5% ~ Flat F
Slide 15: 2013 Key Segment Operating Income Drivers
2013 Key Segment Operating Income Drivers Driver Q2 Full Year Comments • Slow recovery in developed Global ~ Flat ~ Flat consumer replacement Volume business Price/Mix vs. +$50 – $75 Positive • Lower raw material costs Raw Materials million Unabsorbed ~ ($25) – ($50) • ~4 million unit production cut
Slide 16: 2013 Outlook Financial Assumptions
2013 Outlook Financial Assumptions Assumption Comments Interest Expense $405 - $430 million 25% - 30% of International Income Tax Segment Operating Income $275 - $325 million expense Global Pension ~$1.10 - $1.15 billion in total contributions Working Capital Use of ~$0 - $100 million Capital Expend
Slide 17: Appendix
Appendix
Slide 18: Tire Unit & Sales Summary
First Quarter 2013 Tire Unit & Sales Summary In millions Unit/Sales Mix 2013 Q1 Sales = $4,853 2013 2012 % Change Consumer Units 36.0 39.1 (7.9%) Consumer 55% Sales $2,680 $2,999 (10.6%) Commercial 20% Other Commercial 12% Units 3.0 3.3 (10.4%) Chemical Retail 6% Sales $978 $1,090 (10.3%) 7% 18
Slide 19: Tire Unit & Sales Summary (Full Year 2012)
Full Year 2012 Tire Unit & Sales Summary In millions Unit/Sales Mix 2012 Sales = $20,992 2012 2011 % Change Consumer Units 149.2 163.6 (8.8%) Consumer 54% Commercial 20% Sales $11,429 $12,065 (5.3%) Other Commercial 13% Units 12.8 14.8 (13.6%) Chemical Retail Sales $4,202 $4,588 (8.4%) 6% 7% 19
Slide 20: Price/Mix Improvements
Price/Mix Improvements Price/Mix vs. Raw Materials(a) $ in millions $2,356 $1,822 $942 $1,017 $712 $689 $549 (b) $327 $207 ($115) ($71) (c) ($287) 2008 2009 2010 2011 2012 2013 Through 3/31/13 Price/Mix Raw Materials (a) Reflects impact on Segment Operating Income. Raw Materials include the impact o
Slide 21: Liquidity Profile
First Quarter 2013 Liquidity Profile Liquidity Profile $ In billions $4.9(a) Pan European $0.2 Securitization(b) $2.3 Available Credit Lines (c) Cash & Equivalents(d) $2.4 $1 billion required for operations March 31, 2013 (a) Total liquidity comprised of $2,386 million cash and cash equivalents, $2,
Slide 22: Maturity Schedule
First Quarter 2013 Maturity Schedule $ In millions Undrawn Credit Lines Funded Debt $2,000 (c) $1,515 $1,261 $900 $849 $577 (a) $513 (b) $186 $256 2013 2014 2015 2016 2017 2018 2019 2020 2021 ≥ 2022 Note: Based on March 31, 2013 balance sheet values and excludes notes payable, capital leases and oth
Slide 23: Pension Update
Pension Update $ In millions Total Global Cash Flow Impact (1) (2) $4,000 Global Unfunded Obligations(1) $1,200 $1,100-$1,150 $3,522 $3,500 $3,097 $1,000 $3,000 $2,748 $2,715 $2,549 $800 $684 $2,500 $2,275 $2,000 $1,875 $600 $430 $405 $350-$400 $1,500 $400 $364 $294 $1,000 $200 $500 $- $- 2008 2009
Slide 24: U.S. Pension Liability Sensitivity Analysis (2013)
U.S. Pension Liability Sensitivity Analysis (2013) $ In millions Interest Rate Movement (1) Interest Rate Interest Rate Increase Decrease Favorable / (Unfavorable) + 100 bps + 50 bps (50) bps (100) bps Liability 794 397 (397) (794) Funded Frozen Plans (266) (133) 133 266 Hedged Hourly Plans (124) (2
Slide 25: First Quarter Significant Items
First Quarter Significant Items (after taxes and minority interest) 2013 • Net foreign currency remeasurement loss resulting from the devaluation of the Venezuelan bolivar fuerte, $92 million (37 cents per share) • Rationalizations, asset write-offs and accelerated depreciation charges, $9 million (
Slide 26: First Quarter Significant Items
First Quarter Significant Items (after taxes and minority interest) $ In millions, except EPS First Quarter 2013 Significant Items Restructuring & Insurance Venezuela Loss on Asset Tax Accelerated Recoveries from Devaluation Sales Items (Gain) Depreciation Thailand Flood Reported Net Sales $ 4,853 C
Slide 27: Company Overview
Company Overview Goodyear tires are sold …available in a diverse ...and stretch around the in two distinct tire markets... selection of products... world (% of 2012 Units of 164 million) (% of 2012 Revenue of $21 billion) (% of 2012 Revenue of $21 billion) Commercial Europe, Middle Replacement Marke
Slide 28: Industry MegaTrends
Industry MegaTrends Significant GDP growth in “Green” (fuel efficiency) will emerging markets will be a growing and permanent 7 Industry provide impressive tire market growth global theme Developed markets’ size, mix MegaTrends and drive for innovation Tire performance labeling will provide profitab
Slide 29: MegaTrend #1: Emerging markets GDP growth
MegaTrend #1: Significant GDP growth in emerging markets will provide impressive tire market growth (In millions) Consumer Industry Total -2% 1,213 1,165 1,103 1,109 1,104 1,066 1,082 Emerging 992 977 944 +5% CAGR 0%/yr (‘11 vs ‘07) -6% Mature 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Goo
Slide 30: MegaTrend #2: Developed markets' profitable segments
MegaTrend #2: Developed markets’ size, mix and drive for innovation provide profitable market segments North American Consumer Replacement Industry Segmentation Commuter Perfor- All- Touring mance Terrain & Winter 5-year growth rate Premium projection: ~2x mid-tier & economy Mid-Tier Economy Premium
Slide 31: MegaTrend #3: High value added technology
MegaTrend #3: High Value Added technology will continue to migrate into mid-tier cars/tires Sample of Latin America OE Fitments requiring low rolling resistance (complex mixing) = HVA Tires Production Start Production Start Production Start Vehicle Vehicle Vehicle and Rim Size and Rim Size and Rim S
Slide 32: MegaTrend #4: Green fuel efficiency
MegaTrend #4: “Green” (fuel efficiency) will be a growing and permanent global theme Governments Fuel Efficiency Enablers • Advanced tread compound • Fuel Economy – High silica content Mandates – Functional polymers • Safety Standards Vehicle OEMs Global trends • CAFE Standards • Oil prices • Advanc
Slide 33: MegaTrend #5: Tire performance labeling
MegaTrend #5: Tire performance labeling will become an industry standard % of Summer High Performance Market EU Summer Replacement Market(a) Potential Rated B/A(b) or Better Goodyear Dunlop 60% 40% Competitor 1 Competitor 2 Competitor 3 Summer HP Market Rest of Summer Replacement Market Competitor 4
Slide 34: Enabling Investments
Enabling Investments CapEx ($ in billions) • Sustain the business Approximately $1.0 $1.0 $1.1 $1.0 - $1.2 $600 to $700 million per year: $0.9 – Plant maintenance/upkeep – Product line extensions molds – New products molds $0.7 – Information technology • Profitable Growth $400 to $500 million per
Slide 35: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin $ In millions Three Months Ended Twelve Months Ended March 31, December 31, 2013 2012 2012 2011 2010 Total Segment Operating Income $ 302 $ 292 $ 1,248 $ 1,368 $ 917 Rationalizations (7) (15) (175) (103) (240) Interest expense (85) (101) (357) (33
Slide 36: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt $ In millions March 31, December 31, March 31, 2013 2012 2012 Long term debt and capital leases $ 6,307 $ 4,888 $ 5,186 Notes payable and overdrafts 107 102 291 Long term debt and capital leases due within one year 167 96 154 Total debt $ 6,581 $ 5,086 $ 5,
Slide 37: Reconciliation for Free Cash Flow from Operations
Reconciliation for Free Cash Flow from Operations The amounts below are calculated from the Consolidated Statements of Cash Flows except for pension expense, which is the total defined benefit pension cost (before curtailments, settlements, and termination benefits) as reported in the pension-relate
Slide 38: First Quarter 2013 Debt
First Quarter 2013 Debt $ In millions March 31, December 31, March 31, December 31, 2013 2012 2012 2011 Notes Payable: Notes Payable and Overdrafts $ 107 $ 102 $ 291 $ 256 Long-Term Debt: Notes: 10.5% due 2016 $ - $ - $ - $ 631 6.75% Euro Notes due 2019 321 330 334 324 8.25% due 2020 995 994 994 994
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