The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q2 2019 Earnings Presentation
35 slides from The Goodyear Tire & Rubber's earnings presentation, Jul 26, 2019
Slide 1: Second Quarter 2019 Conference Call
é a4 GOODSYEAR Second Quarter 2019 Conference Call July 26, 2019
Slide 2: Forward-Looking Statements
Forward-Looking Statements GOODFYEAR 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, tha
Slide 3: Our Goal
<——— OURSGOAL DELIVER SUSTAIN EAND PROFIT GROWTH WHILEINCREASING THE VALUE OF OUR BRAND INNOVATION SALES & MARKETING EXCELLENCE EXCELLENCE ACTWITH Build trust and earn the confidence of athers th INTEGRITY — hor r ( ct Our Good Na ENERGIZE menvironme THETEAM | lIness ar PROMOTE COLLABORATION BE AGIL
Slide 4: Reflecting on Q2 2019 Results
Reflecting on Q2 2019 Results GOOD YEAR. Positives Negatives Global revenue per tire increased 3% Weak global light vehicle production U.S. consumer replacement volume growth Continued volatility in China and Brazil cae ie Of 4%, led by cutperformance In =17 Soft replacement demand in Western Europe
Slide 5: Consumer Replacement Industry Fundamentals
Consumer Replacement Industry Fundamentals: >17” GOODSYEAR U.S. Replacement Industry Europool & Turkey Replacement Industry 2019 vs. 2018 Growth Rate) 2019 vs. 2018 Growth Rate) Q2 19 1H 19 USTMA Members (<17”) ETRMA Members (<17”) Total Total Non-Members Total U.S. Non-Members Total EU + Turkey ) S
Slide 6: U.S. Market Share
U.S. Market Share GOODFYEAR. U.S. Consumer Replacement Volume Trailing 4 Quarters Impact of relative ag 204 20 2028 = Industry” = Goodyear”
Slide 7: Supplier Recognition, Third-Party Surveys and Tests
Supplier Recognition Third-Party Surveys and Tests * Earned General Motor’s Supplier of the fi F F Year and Ford's World Excellence Award Ranked highest in J.D. Power's U.S. OE Tire Customer Satisfaction Study iM (performance sport category) Eagle F1 Asymmetric 5 placed first in Auto Bild Allrad’s p
Slide 8: Financial Review
Financial Review avitgaooD
Slide 9: Second Quarter 2019 Income Statement
Second Quarter 2019 Income Statement Terms: US$ millions (except EPS) Units Net Sales Gross Margin SAG Segment Operating Income Segment Operating Margin @ Goodyear Net Income (a) Goodyear Net Income Per Share Weighted Average Shares Outstanding Basic Weighted Average Shares Outstanding - Diluted Dil
Slide 10: Segment Operating Income Bridge
($48) Unabsorbed | a a on ($42) Fixed Cost Inflation’) Cost ore Savings Raw Price/Mix ‘) Other! Materials) ($17) ($46) Total Volume Impact Net P/M vs Raws Net Cost Savings
Slide 11: Second Quarter 2019 Balance Sheet
Second Quarter 2019 Balance Sheet GOODZYEAR. Terms: US$ millions June 30, March 31, December 31, June 30, 2019 2019 2018 2018 Cash and cash equivalents 917 860 $ 801 975 Accounts receivable 2,473 2,446 2,030 2,388 Inventories 3,091 2,940 2,856 2,941 Accounts payable - trade (2,750) (2,737) (2,920) (
Slide 12: Second Quarter 2019 - Liquidity Profile
Second Quarter 2019 - Liquidity Profile GOODSYEAR Terms: US$ billions Available Credit Lines Cash & Equivalents June 30, 2019
Slide 13: Second Quarter 2019 Free Cash Flow
Second Quarter 2019 Free Cash Flow GOODSYEAR Terms: US$ millions Three Months Ended Trailing Twelve June 30, Months Ended 2019 2018 June 30, 2019 Net Income 476 Depreciation and Amortization 775 Change in Working Capital (409) Pension Expense 121 Pension Contributions and Direct Payments (64) Provis
Slide 14: Second Quarter 2019 - Segment Results: Americas
Second Quarter 2019 - Segment Results . GOOD; YEAR. Americas de Terms: US$ millions Units in millions Second Quarter 2019 2018 Change ¢ Strong growth in U.S. replacement offset by weakness in consumer OE Units aLy/eil 17.3 (1.4)% ¢ U.S. consumer replacement up 4% ¢ Delivered U.S. commercial volume N
Slide 15: Second Quarter 2019 - Segment Results: EMEA
Second Quarter 2019 - Segment Results Europe, Middle East & Africa GOODFYEAR Terms: US$ millions Units in millions Second Quarter 2019 2018 Change * Volume decline driven by weak consumer OE demand and strategic fitment choices ¢ European consumer replacement gained share in a challenging environmen
Slide 16: Second Quarter 2019 - Segment Results: Asia Pacific
Second Quarter 2019 - Segment Results Asia Pacific Terms: US$ millions Units in millions Second Quarter 2019 2018 Units TO fps Net Sales Operating Income Margin GOODZYEAR. ¢ Volume declines driven by continued weakness in China and soft OE demand in India * SOI decline driven by lower volume, higher
Slide 17: Americas and EMEA Outlook Drivers
Americas (+) Price > Raw Materials (+) Volume (+) Mix (-) Brazilian VAT settlement (non-recurrence) EMEA (+) Price/Mix > Raw Materials (+) Volume (+) Volume (-) Unabsorbed Overhead (-) Inflation (wages, utilities, etc.) (-) Unabsorbed Overhead
Slide 18: Manufacturing Footprint, OE Volume, Raw Material Recovery
Manufacturing Footprint Actions * Previously announced German modernization expected annual savings of $60M to $70M by 2022 ¢ Working on a significant U.S. restructuring plan with savings at least as high as the actions in Germany (similar timetable) Inflection in OE Volume * Consumer OE volume (glo
Slide 19: Price vs Raws Over Time
Price vs Raws Over Time: Comparing Current Cycle to Prior Cycle GOOD} YEAR Price vs Raw Materials®) Impact from price in 2011 Full recovery by 2013 raw material prices (Q2 2010, Q1 2017) 2010-2012 Cycle a c a a S & po G i 3 rat ic} a2) G a — ® Steeper raw material increase in 2010 36 months zuela. R
Slide 20: 2019 Full-Year Financial Assumptions
~$350 million Financing fees: ~$40 million Global pension related (excluded from SOI): $95 - $120 million ~$850 - $875 million; Driving >17” growth in volume & mix ~$50 million ~$100 million
Slide 21: 2019 Full-Year Industry Outlook
2019 Full-Year Industry Outlook GOODZYEAR. Full-Year 2019 Guidance United States Western Europe ©) Consumer Replacement ~Flat - 2% Consumer OE ~(4)% - Flat ~(5) - (3)% Commercial Replacement ~(11) - (7%) Commercial OE ~(2) - 3% ~(5) - (1)% (0) For replacement, Western Europe is Europoo and Tukey for
Slide 22: Modeling Assumptions
Modeling Assumptions Volume Sensitivities (Impact on Goodyear's Annual Units in 000's) + 1% A in U.S. Consumer OE Industry ~120 * 1% Ain US, Consumer Replacement Industry “355 * 1% A in U.S, Commercial OE Industry ~10 + 1% A in U.S. Commercial Replacement Industry ~30 * 1% A in European Consumer OE
Slide 23: Appendix
Appendix avitgaooD
Slide 24: Raw Material Costs
Raw Material Costs!) $300 $189 $194 $128 $137 $93 $81 $42 $43 ql Q2 Q3 a4 ql Q2 Q3 Q4 Ql Q2 2H (Full Year=$725 | \_FullYear=$266 ) Y y 2017 2018 |___stiacingnonfcedstockcostand Pxchallongesinaiao |
Slide 25: Strengthening the Business for the Future
Strengthening the Business for the Future GOODZYEAR. ¢ Advancing distribution and retail - Leverage TireHub to fully capture the value of the Goodyear brand - Enhance distributor alignment in key markets outside of the U.S. - Challenge traditional retail tire business with innovative new concepts ¢
Slide 26: Looking Beyond the Cyclicality
Looking Beyond the Cyclicality $ in Billions A Great Recession Earnings Power Current Raw Mat Cycle 2008 - 2009 2014 - 2016 2017 - 2018 ¢ Average SOI $0.6 |}° Average SOI $1.9 |}- Average SO! $1.4 * Average SOI margin 3% |j* Average SOI margin 12% |}- Average SOI margin 9% ¢ Average Adj EBITDA $1.1
Slide 27: Strategy Delivering Strong Results
Strategy Delivering Strong Results Segment Operating Income!) (in billions) 2007 2008 2009 : 2010 2011 2012 2013 2014 2015 2016 2017 2018 mm Americas mm EMEA om Asia Pacific --SOI Margin Generating stronger earnings throughout the earnings cycle
Slide 28: Second Quarter 2019 - Maturity Schedule
Second Quarter 2019 - Maturity Schedule cGoopfVear Terms: US$ millions , Undrawn Credit Lines | | Funded Debt $1,570") 2019 2020 2021 2022 2023 2024 2 2025 yable, finance and operating jlability, under the U.S. revolving credit f jon of borrowings and ¢:
Slide 29: Use of Historical and Forward-Looking Non-GAAP Financial Measures
Use of Historical and Forward-Looking Non-GAAP Financial Measures GOOD/YEAR This presentation contains historical and forward-looking non-GAAP financial measures, including Total Segment Operating Income and Margin, Adjusted EBITDA, Free Cash Flow, Adjusted Net Income and Adjusted Diluted Earnings P
Slide 30: Reconciliation for Segment Operating Income/Margin
Reconciliation for Segment Operating P= Income/Margin® GOOD; YEAR Terms: US$ millions ‘Twelve Months Ended December 31, 2019 2018 2018-2017 _—«20T6~—=—«OTS «OTA —«aTS—«OT—«ONT_——«2010~—«2000 ~—«2008~—=—=«2007~—«2006~—=—=«2005~—=—«004~—(003 Total Segment Operating Income $ 20 $ Sh S 4,274 $ 1,556 $1,
Slide 31: Second Quarter 2019 Significant Items
Second Quarter 2019 Significant Items GoopZVEAR (After Tax and Minority Interest) Terms: US$ millions (except EPS) Rationalizations, Asset Write-offs, As and Accelerated Reported Depreciation Net Sales $ 3,632 Cost of Goods Sold 2,855 Gross Margin SAG Rationalizations Interest Expense Other (Income)
Slide 32: Second Quarter 2018 Significant Items
Second Quarter 2018 Significant Items GoopfYEAR (After Tax and Minority Interest) Terms: US$ millions (except EPS) Insurance Recovery - TireHub Brazil As Discrete Tax J Net Gains on ff Discontinued | Transaction Hurricane ff Transportation Pension Reported Items Asset Sales Products Effect Strike Se
Slide 33: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt coopfYear Terms: US$ millions June 30, March 314, December 31, June 30, 2019 2019 2018(@) 2018 (2) Long-Term Debt and Finance Leases 5,766 5,545 5,110 5,726 Notes Payable and Overdrafts 480 495 410 335 Long-Term Debt and Finance Leases Due Within One Year 4
Slide 34: Reconciliation for Adjusted EBITDA
Reconciliation for Adjusted EBITDA GOODS YEAR. ($ in millions) Year Ended December 31, 2018 2017 2016 2015") 2014!) 2009!) 2008") Goodyear Net Income (Loss) $693 $346 $1,264 $307 $2,452 ($375) ($77) Interest Expense 321 335 372 438 444 311 320 Income Tax Expense (Benefit) 303 513 (77) 232 (1,834) 7
Slide 35: GOODFSYEAR
GOODFSYEAR
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