The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q2 2003 Earnings Presentation
22 slides from The Goodyear Tire & Rubber's earnings presentation, Jul 30, 2003
Slide 1: 2003 Second Quarter Conference Call
2003 Second Quarter Conference Call July 30, 2003 This conference call contains certain forward-looking statements based on expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed by such statements. These ris
Slide 2: Agenda
Agenda Second Quarter Financials Product Liability Pension Plan Update Operations Review Outlook 7/30/2003 8:01 AM 2
Slide 3: Second Quarter Assessment
Second Quarter Assessment + - Bargaining resumes Segment operating income Solid performance in intl. tire and down 4% product businesses Higher raw material prices Revenue/tire increased 8% Higher energy prices N. America revenue/tire increased 4% Consumer replacement Market share gains in commercia
Slide 4: Financial Highlights
Financial Highlights (In (In Millions) Millions) 2003 2002 Change Segment Operating Income $161 $168 ($7) Inter-SBU income (18) (17) Rationalizations & Asset Sales (33) 0 (33) Interest Expense (82) (60) (22) Foreign Currency Exchange (20) 6 (26) Minority Interest in Net Income (12) (16) of Subsidiar
Slide 5: Second Quarter Overview
Second Quarter Overview (In (In Millions, Millions, except except EPS) EPS) 2003 2002 Units 52.8 53.3 Net Sales $ 3,758 $ 3,479 Segment Operating Income* $ 161 $ 168 Income (Loss) Before Income Tax* $ (52) $ 49 Taxes $ 22 $ 20 Net Income $ (74) $ 29 EPS $ (0.42) $ 0.18 7/30/2003 8:01 AM 5 *Reconcili
Slide 6: Non-operating Items
Non-operating Items (In (In Millions) Millions) 2003 2002 Segment Operating Income $161 $168 Inter-SBU income (18) (17) Rationalizations & Asset Sales (33) 0 Interest Expense (82) (60) Foreign Currency Exchange (20) 6 Minority Interest in Net Income (12) (16) of Subsidiaries Financing fees and instr
Slide 7: Product Liability
Product Liability 6/30/03 3/31/03 Other Income (expense) General & Product Liability--discontinued products $ 11.8 $ (7.4) Reclassified charges for claims related to asbestos and for products no longer manufactured Recorded charges for General & Product liability totaling $90 million for the second
Slide 8: 2003 Rationalizations
2003 Rationalizations ($ in millions) First Quarter Second Quarter North America $56 0 European Union 9 9 Latin America 1 5 Asia 0 1 EPD 0 3 Corporate 2 0 Pre-tax Costs $68 $18 Pre-tax Savings $70 $20 Headcount reductions 950 350 7/30/2003 8:01 AM 8
Slide 9: Asset Sale
Asset Sale Sale of 20.8 million shares of SRI for $83 million Q Q $62 million used to pay down balance on $645 mm U.S. term loan 7/30/2003 8:01 AM 9
Slide 10: Cash Flow Summary
Cash Flow Summary ($ in millions) Second Quarter 2003 Net Loss $(74) Depreciation & Amortization 153 Rationalizations/Asset Sales 27 Net cash flow from sale of A/R* (674) Change in Operating Assets and Liabilities: Accounts and Notes Receivables (71) Inventories (54) Accounts and Notes Payable--Trad
Slide 11: Balance Sheet Highlights
Balance Sheet Highlights 6/30/03 12/31/02 6/30/02 Current Assets $6,740 $5,226 $5,334 Current Liabilities 3,557 4,071 3,717 Working Capital $3,183 $1,155 $1,617 Working Capital % of sales 22.2% 8.3% 11.6% Consolidated Debt $5,023 $3,642 $3,666 Shareholders’ Equity 611 651 2,844 Debt to Debt+Equity 8
Slide 12: Liquidity
Liquidity Cash and credit lines available totaled $1,625 million at June 30 $1,183 million cash Q $277 million undrawn foreign lines Q $166 million available under Q restructured facilities Within the covenants of the banking agreements 7/30/2003 8:01 AM 12
Slide 13: Domestic Pension Plan Assumptions
Domestic Pension Plan Assumptions Jun-03 2002 2001 Actual Return on Assets 8.50% -14.70% -6.10% Discount Rate --FAS 87 7.25% 7.75% 8.00% Targeted ROA -- FAS 87 8.50% 9.50% 10.00% Sensitivity on Pension 8.5% 8.3% Liabilities • 50 BP Targeted ROA $11 mm Long-term • 25 BP Discount Rate $115 mm Liab. Ta
Slide 14: Six Solid-Performing Businesses
Six Solid-Performing Businesses Units Sales SOI Mgn Units Sales SOI Mgn 2003 14.9 $966 $40 4.1% 2003 4.7 $269 $34 12.8% 2002 14.8 $807 $34 4.3 2002 3.7 193 21 11.1 European Union Eastern Europe, Middle East and Africa Revenue growth due to translation Over 30 percent unit growth in OE Lower conversi
Slide 15: Six Solid-Performing Businesses
Six Solid-Performing Businesses Units Sales SOI Mgn Units Sales SOI Mgn 2003 4.4 $258 $34 13.0% 2003 3.5 $149 $12 8.3% 2002 5.2 $254 $26 10.0 2002 3.2 $135 $12 9.0 Latin America Asia OE units decreased 34 percent China sales and profit up 22 percent Replacement units down 5 percent Replacement units
Slide 16: Six Solid-Performing Businesses
Six Solid-Performing Businesses Sales Seg. Op. Inc. Mgn Sales Seg. Op. Inc. Mgn. 2003 $299 $19 6.4% 2003 $304 $24 7.8% 2002 $304 $17 5.6 2002 $224 $19 8.3 Engineered Products Chemical Revenues down 2 percent due to Revenues increased 36 percent due lower sales of OE, replacement and primarily to hig
Slide 17: NAT Assessment
NAT Assessment Units Sales Seg. Op. Inc. Margin 2003 25.3 $1,693 ($2) (0.1%) 2002 26.4 $1,698 $39 2.3 + - Profitability improving each Economy/Industry month of quarter Raw Materials Revenue/tire increased 4% Labor contract Dealer Channel Retail Commercial market share gains Cost Reduction Supply Ch
Slide 18: North America Market Update
North America Market Update Second Quarter Industry Goodyear Consumer OE (8.5%) Market share gain Consumer Flat Slight share loss Replacement Increase in Goodyear and Dunlop brands Commercial OE (1.6%) 5 points market share gain Commercial 1.4% 2 points market share Replacement gain 7/30/2003 8:01 A
Slide 19: NAT Actions to Gain Share
NAT Actions to Gain Share Consumer Replacement Commercial Rebuild our relationships New business development with our dealers for Top 200 Fleets and expanding brands to existing Kelly Overdrive Initiative dealers New products Focus on small to medium Supply chain initiatives to sized dealers improve
Slide 20: NAT Cost Reduction Update
NAT Cost Reduction Update SAG Manufacturing Reduced workforce by 300 Cost targets on plan plus 820 fewer people from year- Benefit changes and merit end freeze implemented Low cost sourcing on track for 10 mm units in 2003 Cost reduction efforts ahead of plan Continue to evaluate further areas for r
Slide 21: Second Half Outlook
Second Half Outlook Risks Opportunities Continued weakness in GDP growth of 2 to 2.5% North America consumer North America consumer market replacement market returns to Union settlement continues trendline growth to be delayed Industry price increases hold Raw materials down from 1st half level An a
Slide 22: Second Quarter Segment Operating Income Reconciliation
Second Quarter Segment Operating Income Reconciliation 3 months ending June 30, 2003 June 30, 2002 North American Tire $ (2) $ 39 European Union 40 34 Eastern Europe, Africa and Middle East 34 22 Latin America 34 26 Asia 12 12 Engineered products 19 17 Chemical products 24 19 Total Segment Operating
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