The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q3 2012 Earnings Presentation
30 slides from The Goodyear Tire & Rubber's earnings presentation, Oct 26, 2012
Slide 1: Third Quarter 2012 Conference Call
Third Quarter 2012 Conference Call October 26, 2012
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 Summary
Third Quarter Summary + - • Strong performance in North • Global volume weakness America, despite weak volumes continues • Consistency of SOI, despite • EMEA performance weak recessionary volumes • Impact of lower chemical • Revenue per tire growth prices on other tire-related • Strong cost savings
Slide 4: Strategy Roadmap
Strategy Roadmap Where We Are Executing Plan NAT Profitable Innovation Leader Investing to Grow Solid Earnings Balance Sheet Improving Industry Key Strategies Key How To’s 1. North America: Profitability 1. Market-Back Innovation Excellence 2. Target Profitable Market Segments 2. Asia: W
Slide 5: September YTD Trend
September YTD Trend Tire Unit Volume (in millions) Segment Operating Margin(a) 150 10% 140 137.4 135.5 6.9% 6.1% 130 124.0 5.0% 123.4 5% 120 110 1.0% 100 0% 2009 2010 2011 2012 2009 2010 2011 2012 Goodyear has enhanced earnings power & consistency a) Segment Operating Income and Margin reconciliatio
Slide 6: 2013 Outlook
2013 Outlook • Continue to target $1.6 billion of Segment Operating Income • Reduced 2012 volume (especially in EMEA) increases the challenge • More reliant on North America • More focus on cost efficiency • Driving cash flow • Focus on working capital • Reviewing capital spending plans 6
Slide 7: Income Statement
Third Quarter 2012 Income Statement (In millions, except Margin and EPS) Third Quarter 2012 2011 Change Units 41.8 47.7 (12.4)% Net Sales $5,264 $6,062 (13.2)% Gross Margin 18.0% 18.0% - SAG $652 $677 (3.7)% Segment Operating Income(a) $348 $463 (24.8)% Segment Operating Margin(a) 6.6% 7.6% (1.0) pt
Slide 8: Segment Operating Results
Third Quarter 2012 Segment Operating Results ($ in millions) 8
Slide 9: Balance Sheet
Third Quarter 2012 Balance Sheet ($ in millions) September 30, June 30, December 31, September 30, 2012 2012 2011 2011 Cash and cash equivalents $ 2,257 $ 2,156 $ 2,772 $ 2,126 Accounts receivable 3,555 3,174 2,849 4,008 Inventories 3,596 3,940 3,856 4,037 Accounts payable - trade (3,146) (3,324) (3
Slide 10: Cash Flow
Cash Flow ($ in millions) Three Months Trailing Twelve Ended Months Ended Sept. 30, 2012 Sept. 30, 2012 Net Income $133 $270 Depreciation & Amortization 176 681 Working Capital (136) 584 Pension Expense 77 295 Other 153 277 Capital Expenditures (298) (1,025) Free Cash Flow from Operations* $105 $1,0
Slide 11: Segment Results
Third Quarter 2012 Segment Results (In millions) North American Tire Europe, Middle East and Africa Tire 2012 2011 Change 2012 2011 Change Units 15.6 16.6 (5.9%) Units 16.3 20.7 (21.6%) Net Sales $2,404 $2,557 (6.0%) Net Sales $1,748 $2,226 (21.5%) Operating Income $130 $78 66.7% Operating Income $1
Slide 12: 2012 Full Year Industry Outlook
2012 Full Year Industry Outlook October Full Year July Full Year 2012 Guidance 2012 Guidance NAT: (2) to (3)% NAT: (1)% to (3)% Consumer Replacement EMEA: (8)% to (10)% EMEA: (8)% to (10)% Consumer NAT: +8% to +10% NAT: +5% to +10% OE EMEA: (6)% to (8)% EMEA: (5)% to (10)% Commercial NAT: (6)% to (8
Slide 13: 2012 Key Segment Operating Income Drivers
2012 Key Segment Operating Income Drivers Driver Trend Comments Q4 Global Tire Unit Volume ~ (3)% – (5)% - • Lower EMEA industry demand Raw Materials • 2012 raw material cost increase of ~7% • Q4 ~10% below prior year Unabsorbed Overhead (net) ~ $(230) – $(250) mm - • $80 mm Union City benefit • Low
Slide 14: Financial Assumptions
2012 Outlook Financial Assumptions Assumption Trend Comments Interest Expense • $355 - $365 million Income tax • 25% - 30% of International Segment Operating Income Global Pension • ~$300 mm Expense • $550 - $600 mm Cash Contribution Working Capital • Neither a source nor a use Capital Expenditures
Slide 15: Appendix
Appendix
Slide 16: Tire Unit & Sales Summary
Third Quarter 2012 Tire Unit & Sales Summary (in millions) 2012 Q3 Sales = $5,264 Q3 Unit/Sales Mix 2012 2011 % Change Consumer Consumer Units 38.1 43.3 (12.0%) Commercial 55% 20% Sales $2,913 $3,281 (11.2%) Other 12% Commercial Retail 7% Units 3.2 3.9 (17.8%) Sales $1,048 $1,227 (14.6%) Chemical 6%
Slide 17: Tire Unit & Sales Summary
Full Year 2011 Tire Unit & Sales Summary (in millions) 2011 Sales = $22,767 2011 Unit/Sales Mix 2011 2010 % Change Consumer Consumer Commercial Units 163.6 164.4 (0.5%) 53% 20% Sales $12,065 $10,343 16.6% Other 12% Retail Commercial 8% Units 14.8 14.0 5.5% Sales $4,588 $3,501 31.0% Chemical 7% 17
Slide 18: Price/Mix Improvements
Price/Mix Improvements Price/Mix vs. Raw Materials(a) ($ in millions) $2,356 (b) $1,822 $942 $997 $639 $712 $689 (c) $549 $578 $195 $207 ($115) 2007 2008 2009 2010 2011 Through YTD Through September September30, 30, 2012 2012 Price/Mix Raw Materials (a) Reflects impact on Segment Operating Income. R
Slide 19: 2012 Cash Flow
2012 Cash Flow ($ in millions) Nine Months Ended September 30, September 30, 2012 2011 Net Income $244 $391 Depreciation and amortization(a) 577 576 Working capital(b) (904) (2,138) Pension contributions and direct payments (490) (221) Other (including compensation and benefits) 244 420 Total Cash F
Slide 20: Maturity Schedule
Third Quarter 2012 Maturity Schedule ($ in millions) Undrawn Credit Lines Funded Debt $2,000(c) $1,516 $1,259 $849 $580(a) $516(b) $393 $441 $348 2012 2013 2014 2015 2016 2017 2018 2019 2020 ≥2021 2021 Note: Based on September 30, 2012 balance sheet values and excludes notes payable, capital leases
Slide 21: Liquidity Profile
Third Quarter 2012 Liquidity Profile Liquidity Profile ($ in billions) $4.6(a) $0.1 Pan European Securitization(b) Available Credit Lines (c) $2.2 Cash & $2.3 Equivalents(d) $1 billion required for operations September 30, 2012 (a) Total liquidity comprised of $2,257 million cash and cash equivalent
Slide 22: Pension Update
Pension Update Total Global Cash Flow Impact (1) (2) Global Unfunded Obligations (1) (3) $550 - $600 $4,000 $600 $3,097 $ in millions $500 $2,748 $2,715 $2,549 $2,625 $430 $3,000 $ in millions $405 $364 $325 - $375 $2,250 $400 $294 $2,000 $300 $200 $1,000 $100 $0 $0 2008 2009 2010 2011 2012E 2013E 2
Slide 23: Third Quarter Significant Items
Third Quarter Significant Items (after tax and minority interest) 2012 (See next page) • Rationalizations, asset write-offs and accelerated depreciation, $32 million (12 cents per share) • Pension settlements in the United Kingdom, $6 million (2 cents per share) • Discrete tax charges, $3 million (1
Slide 24: Third Quarter Significant Items
Third Quarter Significant Items (after taxes and minority interest) Third Quarter 2012 ($ in millions, except EPS) Significant Items Rationalizations, Asset Write-offs & Pension Insurance Recoveries Accelerated Settlements in the DiscreteTax Gains from Asset Related to Flooding in Reported Depreciat
Slide 25: Mandatory Convertible Preferred Stock
Mandatory Convertible Preferred Stock Common Share Impact Upon Conversion Common Shares Common Share Common Conversion Issuable upon Price Share Price Rate Conversion % Dilution* Appreciation** $14.57 3.4317 34,317,000 14.0% 0% and below $15.00 3.3333 33,333,333 13.6% 3% $16.00 3.1250 31,250,000 12.
Slide 26: Reconciliation for Segment Operating Income / Margin
Reconciliation for Segment Operating Income / Margin ($ in millions) Three Months Ended September 30, Nine Months Ended September 30, 2012 2011 2012 2011 2010 2009 Total Segment Operating Income $ 348 $ 463 $ 976 $ 1,172 $ 693 $ 123 Rationalizations (26) (25) (67) (80) (16) (207) Interest expense (8
Slide 27: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt ($ in millions) September 30, June 30, December 31, September 30, 2012 2012 2011 2011 Long term debt and capital leases $ 5,708 $ 5,395 $ 4,789 $ 5,559 Notes payable and overdrafts 163 168 256 312 Long term debt and capital leases due within one year 110 10
Slide 28: 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 net periodic pension cost as reported in the pension-related note in the Notes to Consolidated Financial Statements. Trailing Twel
Slide 29: Third Quarter 2012 Debt
Third Quarter 2012 Debt ($ in millions) September 30, June 30, March 31, December 31, 2012 2012 2012 2011 Notes Payable: Notes Payable and Overdrafts $ 163 $ 168 $ 291 $ 256 Long-Term Debt: Notes: 10.5% due 2016 $ - $ - 631 6.75% Euro Notes due 2019 322 317 334 324 8.25% due 2020 994 994 994 994 8.7
Slide 30: Goodyear
GOODS YEAR
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