The Goodyear Tire & Rubber Company · NASDAQ:GT
The Goodyear Tire & Rubber — Q2 2017 Earnings Presentation
31 slides from The Goodyear Tire & Rubber's earnings presentation, Jul 28, 2017
Slide 1: Second Quarter 2017 Conference Call
Second Quarter 2017 Conference Call July 28, 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: Second Quarter Overview
Second Quarter Overview • Segment operating income (SOI) of $361 million (a) • Adjusted earnings per share of $0.70 (b) • Americas earnings of $213 million, 10.5% operating margin • Europe, Middle East and Africa earnings of $77 million, 6.9% operating margin • Asia Pacific earnings of $71 million,
Slide 4: 2017 First Half U.S. Average Tire Pricing Trend
2017 First Half U.S. Average Tire Pricing Trend PREVIOUSLY NOW June Investor Conference Q2 Earnings Call 6.0% May YTD Actual / June Trend 6.0% June YTD Actual 5.0% 5.0% 4.0% Goodyear Average(a) 4.0% Goodyear Average(a) 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% -1.0% -1.0% Industry PPI(b) Industry PPI(
Slide 5: First Half Industry Dynamics
First Half Industry Dynamics Raw Material Spot Prices Goodyear P/L Impact of Raws in 2017 (using Natural Rubber TSR20 $/lb as example) ~$1,100M ~$750M ~$700M ~$700M Recent volatility in raw materials uncharacteristic of duration of typical cycle Q4 Call Q1 Call June Conference Q2 Call February 8, 20
Slide 6: Global Goodyear ≥17” Consumer Replacement Sales vs Prior Year
Global Goodyear ≥17” Consumer Replacement Sales vs Prior Year 16% 13% 12% 11% ~10% ~10% 7% -3% Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 2H/17E 2018E While our ≥17” segment was temporarily impacted in the complex environment, we remain confident going forward 6
Slide 7: Raw Materials and Price/Mix
Raw Materials and Price/Mix Terms: US$ millions Raw Material Cost (a) Price/Mix per Tire Change (b) 2017 vs 2016 ~$700 2017 vs 2016 ~20% ~$300 ~5% ~5% Note: $700M is ~32% ~5.5% of 2016 tire revenue ~4% ~4% $189 Note: $300M is ~9% of 2016 ~$170 tire revenue 21% ~18% ~2% Note: $170M is ~5% of 2016 $42
Slide 8: Margins: Our Confidence
Margins: Our Confidence Note: This is price only; excludes the Note: This is benefits of mix price only; excludes the benefits of mix Q1 Q2 Q1 Q2 2010 2017 2010 2017 While not always in a calendar year, history has shown that we are able to protect absolute margin dollars during periods of rising &
Slide 9: Segment Operating Income Trend
Segment Operating Income Trend (a) 2018 Positive SOI Drivers • Continued Volume Growth $125M - $175M Primarily in Consumer ≥ 17-inch • Improved Unabsorbed Overhead $45M - $65M • Price / Mix vs Raws $175M - $225M • Net Cost Savings $115M - $140M • EMEA Cost Savings ~$45M Positive SOI drivers in 2018
Slide 10: Income Statement
Second Quarter 2017 Income Statement Terms: US$ millions Three Months Ended (except EPS) June 30, June 30, 2017 2016 Change Units 37.4 41.5 (10)% Net Sales $ 3,686 $ 3,879 (5)% Gross Margin 24.3% 27.5% (3.2) pts SAG $ 583 $ 593 (2)% Segment Operating Income(a) $ 361 $ 531 (32)% (a) Segment Operating
Slide 11: Segment Operating Results
Second Quarter 2017 Segment Operating Results Terms: US$ millions $531 ($98) Q2 2016 ($40) SOI Volume ($189) $59 ($34) $361 Unabsorbed ($3) $8 Fixed Cost $127 Inflation(b) Currency Other(c) Q2 Cost 2017 Savings SOI Raw Price/Mix Materials(a) ($138) ($62) $25 Total Volume Impact Net P/M vs Raws Net C
Slide 12: Balance Sheet
Second Quarter 2017 Balance Sheet Terms: US$ millions June 30, March 31, December 31, June 30, 2017 2017 2016 2016 Cash and Cash equivalents $ 903 $ 961 $ 1,132 $ 1,138 Accounts receivable 2,309 2,270 1,769 2,475 Inventories 3,184 2,845 2,627 2,686 Accounts payable - trade (2,774) (2,631) (2,589) (2
Slide 13: Free Cash Flow
Second Quarter 2017 Free Cash Flow Terms: US$ millions Three Months Ended Trailing Twelve June 30, Months Ended (b) 2017 2016 June 30, 2017 Net Income $ 154 $ 208 $ 1,210 Depreciation and Amortization 202 181 759 Change in Working Capital (166) (75) (193) Pension Expense 23 17 81 Pension Contributio
Slide 14: Americas
Second Quarter 2017 - Segment Results Americas Terms: US$ millions Units in millions Second Quarter • Volume decline driven by U.S. 2017 2016 Change consumer replacement, OE Units 17.1 18.8 (9.2%) • Sequential improvement in U.S. commercial truck volume Net Sales $2,029 $2,090 (2.9%) • Brazil volume
Slide 15: Europe, Middle East & Africa
Second Quarter 2017 - Segment Results Europe, Middle East & Africa Terms: US$ millions Units in millions Second Quarter 2017 2016 Change • Volume decline driven by summer Units 13.0 15.4 (15.8%) consumer replacement, OE Net Sales $1,114 $1,261 (11.7%) • Operating income decline driven by volume and
Slide 16: Asia Pacific
Second Quarter 2017 - Segment Results Asia Pacific Terms: US$ millions Units in millions Second Quarter 2017 2016 Change • Volume ~flat vs prior year Units 7.3 7.3 (0.7%) • Total OE +2% Net Sales $543 $528 2.8% • Consumer replacement +1% Operating $71 $92 (22.8%) • Operating income decline driven In
Slide 17: 2017 Key Segment Operating Income Drivers
2017 Key Segment Operating Income Drivers (a) April Outlook Current Outlook Driver Comments 2017 vs 2016 2017 vs 2016 Disciplined volume execution; Global Volume ~Flat ~(3.5%) Expecting positive volume trends in Q4 Net Price/Mix vs Raw Negative P/M vs raws continues into Q3, ~$25 million ~($175) mil
Slide 18: 2017 Outlook – Other Financial Assumptions
2017 Outlook – Other Financial Assumptions Current 2017 FY Assumption Interest Expense $340 - $365 million Financing Fees ~$35 million Expense: ~30% of global pre-tax operating income; Income Tax Cash: ~15% of global pre-tax operating income Depreciation & Amortization ~$750 million Global Pension E
Slide 19: Our Goal
OURSGOAL DELIVER SUSTAINABLEREVEN AND PROFIT GROWTH WHILE INCREASING THE VALUE OF OUR BRAND. HOW WE'LL WIN HOW WE'LL WORK INNOVATION SALES & MARKETING EXCELLENCE EXCELLENCE ft, OPERATIONAL EXCELLENCE ACTWITH INTEGRITY ENERGIZE THE TEAM PROMOTE COLLABORATION BE AGILE DELIVER RESULTS Winning at the in
Slide 20: Appendix
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Slide 21: Raw Materials
Raw Materials ✓ Raw materials are ~40% of tire COGS Global Raw Material Spend ✓ ~65% of raw materials are influenced by oil FY 2016 prices Natural Rubber, 19% - P&L impact lags spot rates by 1-2 quarters Synthetic Rubber, 28%* depending on commodity ✓ ~60% of raw materials are purchased in USD Wire
Slide 22: Segment Operating Income Target Key drivers Risk Factors
Segment Operating Income Target (a) Key drivers Risk Factors ✓ Moderate global industry growth, including: ✓Economic environment • Above market growth in > 17” • Significant weakness in key markets • Emerging markets growth ✓Raw materials ✓ Goodyear volume growth of 20 million units, primarily in >
Slide 23: Second Quarter 2017 – Liquidity Profile
Second Quarter 2017 – Liquidity Profile Terms: US$ billions $3.3(a) Available $2.4 Credit Lines Cash & Equivalents $0.9 June 30, 2017 (a) Total liquidity comprised of $903 million of cash and cash equivalents, as well as $2,440 million of unused availability under various credit agreements. 23
Slide 24: Second Quarter 2017 – Maturity Schedule
Second Quarter 2017 – Maturity Schedule Terms: US$ millions Note: Based on June 30, 2017 balance sheet values and excludes notes payable, capital leases and other domestic and foreign debt. (a) At June 30, 2017 the amounts available and utilized under the Pan-European securitization program totaled
Slide 25: 2017 Full-Year Industry Outlook
2017 Full-Year Industry Outlook Full-Year 2017 Guidance United States Western Europe (a) Consumer Replacement ~(1) – 1% ~Flat – 1% Consumer OE ~(4) – (5)% ~Flat Commercial Replacement ~Flat – 1% ~2% Commercial OE ~3 – 4% ~2% (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
Second Quarter 2017 Significant Items (After Tax and Minority Interest) Terms: US$ millions, (except EPS) Rationalizations, Asset Write-offs, and Debt As Accelerated Redemption Discrete Tax Reported Depreciation Charges Asset Sales Items As Adjusted Net Sales $ 3,686 $ - $ - $ - $ - $ 3,686 Cost of
Slide 28: Second Quarter 2016 Significant Items
Second Quarter 2016 Significant Items (After Tax and Minority Interest) Terms: US$ millions, (except EPS) Americas Rationalizations, Intracompany Insurance Asset Write-offs, Profit Recovery - As and Accelerated Debt Elimination Pension Discrete Tax Discontinued Reported Depreciation Repayments Adjus
Slide 29: Reconciliation for Segment Operating Income/Margin
Reconciliation for Segment Operating Income/Margin Terms: US$ millions Three Months Ended Twelve Months Ended June 30, December 31, 2017 2016 2016 Total Segment Operating Income $ 361 $ 531 $ 1,985 Rationalizations (27) (48) (210) Interest expense (89) (104) (372) Other income (expense) (5) (20) 10
Slide 30: Reconciliation for Total Debt and Net Debt
Reconciliation for Total Debt and Net Debt Terms: US$ millions June 30, March 31, December 31, June 30, 2017 2017 2016 2016 Long-Term Debt and Capital Leases $ 5,403 $ 5,257 $ 4,798 $ 5,745 Notes Payable and Overdrafts 238 217 245 145 Long-Term Debt and Capital Leases Due Within One Year 435 459 436
Slide 31: Goodyear
GOODFYEAR
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