The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q3 2017 Earnings Presentation
31 slides from The Goodyear Tire & Rubber's earnings presentation, Oct 27, 2017
Slide 1: Third Quarter 2017 Conference Call
Third Quarter 2017 Conference Call October 27, 2017
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: Third Quarter Overview
Third Quarter Overview • Segment operating income (SOI) of $357 million (a) • Adjusted earnings per share of $0.70 (b) • Americas earnings of $189 million, 9.3% operating margin • Europe, Middle East and Africa earnings of $87 million, 6.6% operating margin • Asia Pacific earnings of $81 million, 14
Slide 4: U.S. Industry Fundamentals: >17”
U.S. Industry Fundamentals: >17” U.S. Consumer Replacement Industry 2017 vs 2016 Growth Rate(a) Q3 • U.S. sell-out flat to slightly down, hurricane headwind of ~1% USTMA Members (>17”) 5% • Volume impacted by relative price USTMA Members (<17”) -9% positioning in the market • Goodyear U.S. retail ch
Slide 5: Driving growth in ≥17” rim sizes
New Product Highlights Assurance WeatherReady • 40 sizes with options for the most popular trim levels • 80% coverage in targeted segments • Focus on ≥17” rim sizes • Includes 5 of the fastest growing tire sizes in the segment • Designed to outperform top competitors Driving growth in ≥17” rim sizes
Slide 6: EMEA Industry Fundamentals: >17”
EMEA Industry Fundamentals: >17” Europool & Turkey Replacement Industry 2017 vs 2016 Growth Rate(a) Q3 • Goodyear above market growth in ≥17” in both summer and winter ETRMA Members (>17”) 7% segments ETRMA Members (<17”) -4% • Footprint action completed in July; positive cost impact Total -1% • Win
Slide 7: Raw Materials and Price/Mix
Raw Materials and Price/Mix Terms: US$ millions Raw Material Cost (a) Price/Mix per Tire Change (b) 2017 vs 2016 ~$736 2017 vs 2016 ~19% $300 Note: $736M is 32% ~5.5% of 2016 tire revenue ~4% ~4% ~4% $189 ~$205 ~3.5% ~22% 21% ~2% Note: $205M is ~6% of 2016 $42 tire revenue 4% Q1 Q2 Q3 Q4E Year Q1 Q2
Slide 8: 2018 Segment Operating Income Drivers
2018 Segment Operating Income Drivers (a) Low High Global Volume +$80M +$155M Net Price / Mix vs Raw Materials +$75M +$100M Overhead Absorption +$40M +$80M Cost Savings vs Inflation +$160M +$180M Other(b) -$105M -$115M Total SOI Change +$250M +$400M % SOI Growth 17% 27% Positive SOI drivers in 2018
Slide 9: Income Statement
Third Quarter 2017 Income Statement Terms: US$ millions Three Months Ended (except EPS) September 30, September 30, 2017 2016 Change Units 39.8 42.0 (5)% Net Sales $ 3,921 $ 3,847 2% Gross Margin 21.7% 28.9% (7.2) pts SAG $ 556 $ 599 (7)% (a) Segment Operating Income $ 357 $ 556 (36)% (a) Segment Op
Slide 10: Segment Operating Results
Third Quarter 2017 Segment Operating Results Terms: US$ millions $556 ($53) ($33) Q3 ($300) 2016 Volume SOI Unabsorbed $72 ($36) $357 Fixed Cost $4 $16 $131 Inflation(b) Q3 Currency Other(c) 2017 Cost SOI Savings Raw Price/Mix Materials(a) ($86) Total Volume Impact ($169) Net P/M vs Raws $36 Net Cos
Slide 11: Balance Sheet
Third Quarter 2017 Balance Sheet Terms: US$ millions September 30, June 30, December 31, September 30, 2017 2017 2016 2016 Cash and Cash equivalents $ 822 $ 903 $ 1,132 $ 975 Accounts receivable 2,672 2,309 1,769 2,649 Inventories 2,991 3,184 2,627 2,754 Accounts payable - trade (2,624) (2,774) (2,5
Slide 12: Free Cash Flow
Third Quarter 2017 Free Cash Flow Terms: US$ millions Three Months Ended Trailing Twelve September 30, Months Ended 2017 2016 (b) September 30, 2017 Net Income $ 132 $ 320 $ 1,022 Depreciation and Amortization 199 181 777 Change in Working Capital (294) (264) (223) Pension Expense 21 19 83 Pension C
Slide 13: Americas
Third Quarter 2017 - Segment Results Americas Terms: US$ millions Units in millions Third Quarter • Volume decline driven by U.S. 2017 2016 Change consumer replacement, OE Units 17.1 18.6 (7.7%) • Double digit growth in Brazil for both consumer and commercial Net Sales $2,041 $2,070 (1.4%) • 25% gro
Slide 14: Europe, Middle East & Africa
Third Quarter 2017 - Segment Results Europe, Middle East & Africa Terms: US$ millions Units in millions Third Quarter 2017 2016 Change • Volume decline driven by lower consumer OE sales Units 14.9 15.4 (4.0%) • Commercial OE and replacement volume both positive Net Sales $1,311 $1,236 6.1% • SOI ref
Slide 15: Asia Pacific
Third Quarter 2017 - Segment Results Asia Pacific Terms: US$ millions Units in millions Third Quarter • Continuing to deliver strong operating 2017 2016 Change margins Units 7.8 8.0 (1.5%) • China consumer replacement above market at +12%, partially offset by declines in OE Net Sales $569 $541 5.2%
Slide 16: 2017 Key Segment Operating Income Drivers
2017 Key Segment Operating Income Drivers (a) July Outlook Current Outlook Driver Comments 2017 vs 2016 2017 vs 2016 Global Volume ~(3.5%) ~(5%) Continued disciplined volume execution; ~flat in Q4 Net Price/Mix vs Raw ~($175) million ~($300) million Reflects current industry environment Materials Ov
Slide 17: 2017 Outlook – Other Financial Assumptions
2017 Outlook – Other Financial Assumptions Current 2017 FY Assumption Interest Expense $345 - $355 million Financing Fees ~$35 million Expense: ~28% of global pre-tax operating income; Income Tax Cash: ~15% of global pre-tax operating income Depreciation & Amortization ~$750 million Global Pension E
Slide 18: Our Goal
OURSGOAL DELIVER SUSTAINABLEREVEN AND PROFIT GROWTH WHILE INCREASING THE VALUE OF OUR BRAND. HOW WE'LL WIN HOW WE'LL WORK INNOVATION SALES & MARKETING EXCELLENCE EXCELLENCE ft, OPERATIONAL EXCELLENCE ACTWITH INTEGRITY ENERGIZE THE TEAM PROMOTE COLLABORATION BE AGILE DELIVER RESULTS Winning at the in
Slide 19: Appendix
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Slide 20: Connected Business Model
Connected Business Model Integrated business model drives long-term value and competitive advantage 20
Slide 21: Raw Materials
Raw Materials ✓ Raw materials are ~40% of tire COGS Global Raw Material Spend ✓ ~65% of raw materials are influenced by oil FY 2016 prices Natural Rubber, 19% - P&L impact lags spot rates by 1-2 quarters Synthetic Rubber, 28%* depending on commodity ✓ ~60% of raw materials are purchased in USD Wire
Slide 22: Segment Operating Income Target Key drivers Risk Factors
Segment Operating Income Target (a) Key drivers Risk Factors ✓ Moderate global industry growth, including: ✓Economic environment • Above market growth in > 17” • Significant weakness in key markets • Emerging markets growth ✓Raw materials ✓ Goodyear volume growth of 20 million units, primarily in >
Slide 23: Third Quarter 2017 – Liquidity Profile
Third Quarter 2017 – Liquidity Profile Terms: US$ billions $3.2(a) Available Credit Lines Cash & Equivalents (a) Total liquidity comprised of $822 million of cash and cash equivalents, as well as $2,420 million of unused availability under various credit agreements. 23
Slide 24: Third Quarter 2017 – Maturity Schedule
Third Quarter 2017 – Maturity Schedule Terms: US$ millions Note: Based on September 30, 2017 balance sheet values and excludes notes payable, capital leases and other domestic and foreign debt. (a) At September 30, 2017 the amounts available and utilized under the Pan-European securitization program
Slide 25: 2017 Full-Year Industry Outlook
2017 Full-Year Industry Outlook Full-Year 2017 Guidance United States Western Europe (a) Consumer Replacement ~Flat – (1)% ~Flat – 1% Consumer OE ~(6) – (7)% ~1% Commercial Replacement ~2 – 3% ~2% Commercial OE ~10 – 11% ~4% (a) For replacement, Western Europe is Europool and Turkey. For OE, Western
Slide 26: Non-GAAP Financial Measures
Use of Historical and Forward-Looking Non-GAAP Financial Measures This presentation contains historical and forward-looking non-GAAP financial measures, including Total Segment Operating Income and Margin, Free Cash Flow, Adjusted Net Income and Adjusted Diluted Earnings Per Share (EPS), which are i
Slide 27: Significant Items
Third Quarter 2017 Significant Items (After Tax and Minority Interest) Terms: US$ millions, (except EPS) Rationalizations, Asset Write-offs, and As Accelerated Hurricane Pension Discrete Tax Insurance Reported Depreciation Impact Settlement Items Recovery As Adjusted Net Sales $ 3,921 $ - $ 23 $ - $
Slide 28: Third Quarter 2016 Significant Items
Third Quarter 2016 Significant Items (After Tax and Minority Interest) Terms: US$ millions, (except EPS) Transaction Rationalizations, Costs and Net Asset Write-offs, As Discrete Tax Gains on Asset and Accelerated Reported Items Sales Depreciation As Adjusted Net Sales $ 3,847 $ - $ - $ - $ 3,847 Co
Slide 29: Reconciliation for Segment Operating Income/Margin
Reconciliation for Segment Operating Income/Margin Terms: US$ millions Three Months Ended September 30, 2017 2016 Total Segment Operating Income $ 357 $ 556 Rationalizations (46) (135) Interest expense (84) (90) Other income (expense) (4) 23 Asset write-offs and accelerated depreciation (10) (3) Cor
Slide 30: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt Terms: US$ millions September 30, June 30, December 31, September 30, 2017 2017 2016 2016 Long-Term Debt and Capital Leases $ 5,737 $ 5,403 $ 4,798 $ 5,446 Notes Payable and Overdrafts 276 238 245 179 Long-Term Debt and Capital Leases Due Within One Year 37
Slide 31: Goodyear
GOODFYEAR
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