The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q4 2014 Earnings Presentation
35 slides from The Goodyear Tire & Rubber's earnings presentation, Feb 17, 2015
Slide 1: Fourth Quarter 2014 Conference Call
Fourth Quarter 2014 Conference Call February 17, 2015
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: Highlights
Highlights • Record full-year segment operating income of $1.7 billion(a) • Full-year free cash flow from operations of $1.0 billion(b) • North America sets earnings records for fourth quarter, full year • Completed $150 million in share repurchases in fourth quarter • Company releases $2.2 billion
Slide 4: North America Kelly Edge
North America Kelly Edge Branded lineLine Branded meeting Meetingcustomer needs Customer Needs 4
Slide 5: North America E-Commerce: Buy Online. Install Locally.
North America E-Commerce Buy Online. Install Locally. Making the Tire-Buying Process Easier 5
Slide 6: Strategy Roadmap
Strategy Roadmap Where We Are Executing Plan Value Creating Innovation Leader Investing for Growth Record Earnings US Pension Fully Funded Key Strategies Key How To’s Industry Market-Back Innovation Excellence 1. North America: Grow Profitably MegaTrends Sales & Marketing Excellence 2. Asi
Slide 7: Financial Update
Financial Update
Slide 8: Income Statement
Fourth Quarter 2014 Income Statement Three Months Ended In millions, except EPS December 31, December 31, 2014 2013 Change Units 39.5 40.7 (3)% Net Sales $ 4,356 $ 4,791 (9)% Gross Margin 23.3% 23.0% 0.3 pts SAG $ 702 $ 736 (5)% Segment Operating Income(a) $ 359 $ 419 (14)% Segment Operating Margin
Slide 9: Segment Operating Results
Fourth Quarter 2014 Segment Operating Results $ in millions ($60) Includes Amiens plant closure and N. American $419 $105 pension expense savings ($29) ($77) ($24) $30 ($81) $359 ($17) $33 Un- Volume absorbed Raw Cost Currency Other(c) Q4 Fixed 2013 Materials(a) Price / Mix Savings Inflation(b) Q4 C
Slide 10: Balance Sheet
Fourth Quarter 2014 Balance Sheet $ in millions December 31, September 30, December 31, 2014 2014 2013 Cash and cash equivalents $ 2,161 $ 1,744 $ 2,996 Accounts receivable 2,126 3,021 2,435 Inventories 2,671 2,924 2,816 Accounts payable - trade (2,878) (2,827) (3,097) Working capital(a) $ 1,919 $ 3
Slide 11: Free Cash Flow from Operations
Free Cash Flow from Operations $ in millions Year Ended December 31, 2014 2013 Net Income $ 2,521 $ 675 Depreciation and Amortization 732 722 Change in Working Capital (1) 415 Pension Expense (a) 158 285 Provision for Deferred Income Taxes (1,970) (34) Other 464 109 Capital Expenditures (923) (1,168
Slide 12: Segment Results
Fourth Quarter 2014 Segment Results in millions North America Europe, Middle East and Africa 2014 2013 Change 2014 2013 Change Units 16.0 16.3 (1.1%) Units 12.8 14.4 (11.8%) Net Sales $2,105 $2,131 (1.2%) Net Sales $1,306 $1,631 (19.9%) Operating Income $229 $199 15.1% Operating Income $30 $101 (70.
Slide 13: 2015 Key Segment Operating Income Drivers
2015 Key Segment Operating Income Drivers Driver 2015 FY vs 2014 Comments • Assumes growth in North America, Latin Global Volume +1-2% America, and Asia Pacific; slower growth North America H1 vs. H2 • Raw material costs down 10%; benefit reflects Price/Mix vs. Raw partial offsets from raw material
Slide 14: 2015 Outlook Other Financial Assumptions
2015 Outlook Other Financial Assumptions 2015 FY Assumption Interest Expense $415 - $440 million Financing Fees ~$80 million Expense: ~30% of global pre-tax operating income Income Tax Cash: ~15% of global pre-tax operating income Depreciation & ~$725 million Amortization Global Pension Expense $125
Slide 15: 2014-2016 Capital Allocation Plan Update
2014-2016 Capital Allocation Plan Update Current Plan Update (May 2014) (Feb. 2015) ~ $1.5B ~ $1.15B $350 Million Growth CapEx Reallocated Within the Capital Plan Shareholder $0.6 - $0.9B* $0.6 - $1.25B* Return Program ~ $0.6B ~ $0.6B Restructurings Debt Repayment / $0.8 - $0.9B $0.8 - $0.9B Pension
Slide 16: Appendix
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Slide 17: Tire Unit & Sales Summary
Full Year 2014 Tire Unit & Sales Summary in millions 2014 Sales = $18,138 Unit/Sales Mix 2014 2013 % Change Consumer Units 147.4 147.5 (0.0%) Sales $10,510 $10,946 (4.0%) Commercial Units 12.6 12.7 (0.6%) Sales $3,849 $4,113 (6.4%) 17
Slide 18: Segment Operating Results
Full Year 2014 Segment Operating Results $ in millions +$132 $454 ($296) $284 ($376) ($77) $108 … $1,712 $1,580 ($23) $58 Un- Volume absorbed Raw Cost Currency Other(c) FY Fixed 2013 Materials (a) Price / Mix Savings Inflation(b) FY Cost 2014 +$35 ($92) +$158 Primarily OTR (a) Raw material variance
Slide 19: Price/Mix vs. Raw Materials
Price/Mix vs. Raw Materials(a) $ in millions $2,356 (c) $1,822 $942 $1,017 $712 $689 (b) $549 (d) $327 $207 ($115) ($321) ($376) ($553) (f) ($985) (e) 2008 2009 2010 2011 2012 2013 2014 Price/Mix Raw Materials (a) Reflects impact on Segment Operating Income. Raw Materials include the impact of raw m
Slide 20: Raw Materials
Raw Materials • Raw materials ~50% of tire business cost of goods sold – Tires ~85% of total cost of goods sold Goodyear Global Raw Material Usage 2014 FY Estimate – ~25% of raw materials cost not affected by commodity prices * • Around two-thirds of raw materials are influenced by oil prices * – P&
Slide 21: Raw Materials: Modeling Assumptions
Raw Materials: Modeling Assumptions 2014 Total $ in billions COGS $13.9 Tire Business: Tire Business Non-Tire COGS COGS 85% of Total Company ~$11.8 ~$2.1 COGS Tire Raw Tire Other (a) Raw Materials: Materials COGS COGS 50% of Tire Business COGS ~$5.9 ~$5.9 Commodities(b): Non- Commodity 75% of Tire B
Slide 22: Foreign Exchange: Modeling Assumptions
Foreign Exchange: Modeling Assumptions $ in millions, except exchange rates 2015 Sensitivity Modeling ‘Rules of Thumb’ SOI Impact for Every 1 US Cent Change Translation(a) Transaction(b) Euro $4.4 $2.4 Brazilian Real $0.5 $1.2 Canadian Dollar $1.9 $2.9 2015 SOI Currency Impact 2015 Spot Assumption T
Slide 23: Liquidity Profile
Fourth Quarter 2014 Liquidity Profile $ in billions Liquidity Profile $4.5(a) Available Credit Lines Cash & Equivalents(b) (a) Total liquidity comprised of $2,161 million cash and cash equivalents, as well as $2,317 million of unused availability under various credit agreements. (b) Includes $289 mi
Slide 24: Maturity Schedule
Fourth Quarter 2014 Maturity Schedule $ in millions Undrawn Credit Lines Funded Debt $2,000 (b) $118 (c) (d) $1,842 $1,265 $900 $700 $485 (a) $150 2015 2016 2017 2018 2019 2020 2021 2022 ≥ 2023 Note: Based on December 31, 2014 balance sheet values and excludes notes payable, capital leases and other
Slide 25: 2015 Full-Year Industry Outlook
2015 Full-Year Industry Outlook Driven by expected decline in Chinese NA EMEA imports Consumer (2)-(3)% ~Flat Replacement Consumer OE +1-2% +1-2% Commercial +0-1% +0-1% Replacement Commercial OE Flat-(1)% ~Flat 25
Slide 26: Fourth Quarter 2014 Significant Items
Fourth Quarter 2014 Significant Items (After Tax and Minority Interest) $ in millions (except EPS) Rationalizations, Asset Write-offs, Net Income and Net Venezuela Net Gains on As and Accelerated Other Discrete As Currency Losses Asset Sales Reported Depreciation Tax Benefits Adjusted Charges Net Sa
Slide 27: Full Year 2014 Significant Items
Full Year 2014 Significant Items (After Tax and Minority Interest) $ in millions (except EPS) Rationalizations, Charges for Asset Write-offs, Pension Labor Claims Government Net Income and Net Venezuela Net Gains on As and Acclerated Curtailments & Related to a Investigation in Other Discrete As Cur
Slide 28: Fourth Quarter 2013 Significant Items
Fourth Quarter 2013 Significant Items (After Tax and Minority Interest) $ in millions (except EPS) Rationalizations, Asset Write-offs, Net Income and Net Gains on As and Accelerated Other Discrete As Asset Sales Reported Depreciation Tax Benefits Adjusted Charges Net Sales $ 4,791 $ - $ (5) $ - $ 4,
Slide 29: Full Year 2013 Significant Items
Full Year 2013 Significant Items (After Tax and Minority Interest) $ in millions (except EPS) Rationalizations, Charges for Asset Write-offs, Labor Claims Insurance Net Income and Net Venezuela Net Gains on As and Acclerated Related to a Recoveries from Other Discrete As Currency Losses Asset Sales
Slide 30: Pension Update
Pension Update $ in millions a) Includes cash funding for direct benefit payments for 2011 - 2014 only b) Excludes one-time charges and benefits from pension settlements and curtailments c) 2015E - 2017E are based on assumptions as of December 31, 2014 30
Slide 31: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin $ in millions Three Months Ended Twelve Months Ended December 31, December 31, 2014 2013 2014 2013 Total Segment Operating Income $ 359 $ 419 $ 1,712 $ 1,580 Rationalizations (15) (17) (95) (58) Interest expense (113) (105) (428) (392) Other incom
Slide 32: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt $ in millions December 31, September 30, December 31, 2014 2014 2013 Long-Term Debt and Capital Leases $ 6,216 $ 6,719 $ 6,162 Notes Payable and Overdrafts 30 38 14 Long-Term Debt and Capital Leases Due Within One Year 148 98 73 Total Debt $ 6,394 $ 6,855 $
Slide 33: EBITDAP, Adjusted Debt & Leverage Ratio Reconciliations
EBITDAP, Adjusted Debt & Leverage Ratio Reconciliations $ in millions Year Ended December 31, 2014 2013 Net Income $2,521 $675 Interest Expense 428 392 Income Tax (Benefit) Expense (1,834) 138 Depreciation and Amortization 732 722 Pension Expense(a) 158 285 Other(b) 397 155 EBITDAP, as adjusted $2,4
Slide 34: Reconciliation for Free Cash Flow from Operations
Reconciliation for Free Cash Flow from Operations The amounts below are calculated from the Consolidated Statements of Cash Flows except for pension expense, which is as reported in the pension-related note in the Notes to Consolidated Financial Statements. Year Ended Dec. 31, Dec. 31, ($ in million
Slide 35: wo Oe a On
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