Deutsche Bank Global Automotive Conference 2016

Deutsche Bank Global Automotive Conference 2016 January 12, 2016 Forward-Looking Statements Certain information contained in this presentation cons...
Author: Linda Lamb
0 downloads 0 Views 2MB Size
Deutsche Bank Global Automotive Conference 2016 January 12, 2016

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 our operations, performance, business strategy and results and could cause our actual results and experience to differ materially from the assumptions, expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to: our ability to implement successfully our strategic initiatives; actions and initiatives taken by both current and potential competitors; foreign currency translation and transaction risks; increases in the prices paid for raw materials and energy; a labor strike, work stoppage or other similar event; deteriorating economic conditions or an inability to access capital markets; work stoppages, financial difficulties or supply disruptions at our suppliers or customers; the adequacy of our capital expenditures; our failure to comply with a material covenant in our debt obligations; potential adverse consequences of litigation involving the company; as well as the effects of more general factors such as changes in general market, economic or political conditions or in legislation, regulation or public policy. Additional factors are discussed in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

2

Company Overview

Goodyear tires are sold in two distinct tire markets...

…available in a diverse selection of products...

...and serve customers around the world

(% of 2014 Units of 162 million)

(% of 2014 Revenue of ~$18 billion)

(% of 2014 Revenue of ~$18 billion)

Replacement Market 70%

Europe, Middle East & Africa 34%

Consumer 58%

Commercial 21% Other 10%

OE Market 30%

North America 45% Asia Pacific 11%

Includes: OTR, Farm,

OE ~20% of 2014 Revenue

Chemical 3%

Retail 8%

Race, & Aviation

Latin America 10%

Goodyear Is a Tire Industry Leader with Powerful Brands, a Broad Product Offering and Global Distribution .

3

2015 Key Segment Operating Income Drivers as of October 29, 2015

Driver

Global Volume Price/Mix vs. Raw Materials Overhead Absorption Cost Savings vs. Inflation

July Outlook 2015 FY vs 2014

October Outlook 2015 FY vs 2014

+1-2%

+1-2%

~$330 million

~$370 million

Neutral

Neutral

Comments • No change

• Updated for Q3 performance • No change • Operational Excellence delivering on plan; reflects higher than expected inflation in Venezuela

~$70 million

~$0 million

~($200) million

~($160) million

Amiens Closure

~$20 million

~$20 million

• No change

Other Tire Related

~$0 million

~$20 million

• Based on Q3 year-to-date results

Foreign Exchange

• Based on October spot rates

4

Q4 Transactions • Dissolution of joint venture with SRI complete on October 1 – No impact to the company’s existing financial targets or capital allocation plan as a result of this transaction – Volume, revenue and SOI will be regionally impacted as disclosed on June 5

• US bond refinancing – Net proceeds from $1 billion offering of 5.125% senior notes used to redeem outstanding $1 billion in principal amount of 8.25% senior notes due 2020

– Reduction in annual interest expense of $31 million beginning in 2016

• Euro bond refinancing – Net proceeds from €250 million offering of 3.75% senior notes will be used to redeem outstanding €250 million in principal amount of 6.75% senior notes due 2019 – Reduction in annual interest expense of $8 million beginning in 2016

5

Goodyear Then…And Now $ In billions

Segment Operating Income

$1.6

$1.4

(a)

$1.7

North America Turnaround

$1.9

$1.1

Segment Operating Income

$0.7

$0.3B loss in 2009

$1.2

$0.9

$0.8

$0.5 $0.3

~$0 2010 2011 2012 2013 2014 TTM (b) Progress on Global Unfunded Pension

$3.1

$3.5 $1.9

2012

2013

Strong Free Cash Flow (c)

(d)

~$0.7

(d)

2014 2015E

$1.3

$1.0 $1.0

Fully funded, froze, and derisked U.S. plans

$0.7 2011

2010 2011 2012 2013 2014 TTM (b)

$0.7

$0.4 $0.2 2010 2011 2012 2013 2014 TTM (b)

Past performance provides strong foundation for the future (a) (b) (c) (d)

See Segment Operating Income reconciliation in Appendix on page 16. Trailing twelve months as of September 30, 2015. See Free Cash Flow from Operations reconciliation in Appendix on page 17. Primarily non-US plans, projected for December 31, 2015 as of September 30, 2015 using 2014 year end assumptions.

6

Advantaged Value Proposition What does it take?

Operational Excellence

Sales & Marketing Excellence  Iconic brand

 Right Tire

 Industry leading products  Pervasive distribution  Strong customer relations

 Right Time

AND

 Right Place  Right Cost

 Consumer-centric focus Market-Back Innovation

Enabling Investments

Goodyear delivering results through an integrated approach 7

HVA Tire Technology A “Tire” Is Not a “Tire”

HVA Tire (High-Value-Added)

LVA Tire (Low-Value-Added)

Dual Tread Zones with TredLock Technology

Carbon Fiber Dual Reinforced Sidewalls

Silica Tread

Additional Components For Handling

• There is no industry standard definition of “HVA”. For Goodyear … • Consumer HVA tires incorporate one or more of the following features: – – –

Rim diameter 17” or greater Reduced sidewall height Speed-rated H or higher

– – –

Segmented mold Advanced tread compounds Extra load constructions

• Commercial HVA tires have specific performance characteristics (e.g., Fuel Max, DuraSeal) and are retreadable

• HVA tires are more complex to manufacture than LVA tires • Converting LVA to HVA capacity may not be a one-for-one conversion in tire units

Industry migration to high-value-added tires advantages Goodyear given manufacturing know-how, product innovation, and industry-leading products 8

New Americas Consumer Tire Plant • Goodyear building previously announced tire plant in San Luis Potosi, Mexico

Americas Consumer Tire Industry (a) terms: Millions of Tires - Replacment & OE - North and Latin America

500 450 400

403

421

434

434

443

450

460

350 72%

300

68%

150 100

Low Value Added (LVA)

74%

• Central location effectively supports strong and growing demand for HVA tires across both North and Latin America

70%

65%

250 200

468

62% 58% 53%

High Value Added (HVA)

HVA as % of entire industry

50

• Annual capacity at ~6 million tires; first production planned for mid-2017 • Total Capex to be $500 to $550 million during 2015-2018, and funded within existing capital allocation plan

0 2012 2013 2014 2015 2016 2017 2018 2019

2014-2019 Growth Total = +34M (~7M/year, ~2%/year) HVA = +76M (~15M/year, ~5%/year)

• High return project with IRR of 18%, and generating $100 million of free cash flow per year once fully operational

Goodyear building world-class factory to meet growing demand for high-value-added Consumer tires across the Americas (a) Source: LMC International and Goodyear internal analysis, November 2015

9

2014-2016 Capital Allocation Plan Updated (Feb. 2015) Growth CapEx

Shareholder Return Program

Restructurings

Debt Repayment / Pension Funding

~ $1.15B

$0.6 - $1.25B* ~ $0.6B

$0.8 - $0.9B $3.6 - $3.8B

Executing on the 2014-2016 Capital Allocation Plan * $0.65B approved by Board of Directors; increases dependent on Company performance including the achievement of financial targets

10

Balance Sheet Management – Leverage Targets Adjusted Debt / EBITDAP (a)

4.3x

3.9x

4.1x 3.4x

3.0x

~2.0 – 2.1x

2010

2011

2012

2013

2014

2016T

Leverage consistent with commitment to achieving investment grade metrics  Reduces cost of capital

 Greater ability to move debt overseas

 Improves global access to credit

 Ability to reduce cash balances

Committed to achieving investment grade balance sheet by the end of 2016 a)

Total debt plus global pension liability, divided by net income before interest expense, income tax expense, depreciation and amortization expense, net periodic pension cost, rationalization charges and other (income) and expense Note: See reconciliations in Appendix on page 18.

11

Shareholder Return Program

Regular Dividend $75 million per year $0.07 per share quarterly dividend effective December 1, 2015 Quarterly dividend increased 40% since reinstatement in 2013 Anticipate increases over time as cash flow and leverage improves

Share Repurchase $450 million Through Q3, we repurchased $313 million of our current board authorization of $450 million or 11.5 million shares Program designed to offset new shares issued under equity compensation programs and offer incremental shareholder returns

Shareholder return program demonstrates strong commitment to shareholders and confidence in strategy 12

Key Takeaways

• Goodyear is a different company today after the turnaround of our North American business and funding/freezing of US pension plans • Goodyear is advantaged in a competitive industry and is positioned to capitalize on growth in HVA tires • Balanced capital allocation plan demonstrates commitment to reaching investment grade, continuing to grow the business, and returning capital to shareholders

13

Q&A

Appendix

Reconciliation for Segment Operating Income / Margin $ In millions

Twelve Months Ended September 30, Total Segment Operating Income Rationalizations Interest expense Other income (expense) Asset write-offs and accelerated depreciation Corporate incentive compensation plans Pension curtailments/settlements Intercompany profit elimination Retained expenses of divested operations Other Income before Income Taxes United States and Foreign Tax Expense Less: Minority Shareholders Net Income Goodyear Net Income

Sales Return on Sales Total Segment Operating Margin

$

$

$

December 31,

2015 1,905 (97) (424) 53 (9) (89) (2) (11) (82) 1,244 (1,633) 61 2,816

2014 $ 1,712 (95) (428) (302) (7) (97) (33) 4 (16) (51) $ 687 (1,834) 69 $ 2,452

2013 $ 1,580 (58) (392) (97) (23) (108) 4 (24) (69) $ 813 138 46 $ 629

2012 $ 1,248 (175) (357) (139) (20) (69) 1 (1) (14) (34) $ 440 203 25 $ 212

2011 $ 1,368 (103) (330) (73) (50) (70) (15) (5) (29) (75) $ 618 201 74 $ 343

2010 $ 917 (240) (316) (186) (15) (71) (14) (20) (47) $ 8 172 52 $ (216)

$16,736 16.8% 11.4%

$18,138 13.5% 9.4%

$19,540 3.2% 8.1%

$20,992 1.0% 5.9%

$22,767 1.5% 6.0%

$18,832 (1.1)% 4.9%

16

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 pensionrelated note in the Notes to Consolidated Financial Statements.

Trailing Twelve Months Ended

Net Income

Sept. 30, 2015

Dec. 31, 2014

Dec. 31, 2013

Dec. 31, 2012

Dec. 31, 2011

Dec. 31, 2010

$

$

$

$

$

$

Depreciation and Amortization Change in Working Capital Pension Expense

701

(a)

(b)

(1)

142

158

(1,766)

(1,970)

Gain on Recognition of Deferred Royalty Income

(155)

Capital Expenditures

(945)

(923)

139

464

Other (c) Free Cash Flow from Operations (non-GAAP)

$

Capital Expenditures

1,254

-

$

945

981

675

(164)

687

715

652

415

457

(650)

52

285

307

266

300

(34)

16

(55)

-

(1,168)

1,004 1,168

701

-

(1,043)

124 $

6

-

(1,127)

109

923

417

722

-

$

237

(944)

516 $

1,127

166

540 $

1,043

442 944

Pension Contributions and Direct Payments

(123)

(1,338)

(1,162)

(684)

(294)

(405)

Rationalization Payments

(162)

(226)

(72)

(106)

(142)

(57)

Cash Flow from Operating Activities (GAAP)

c)

2,521 732

261

Provision for Deferred Income Taxes

a) b)

2,877

$

1,914

$

340

$

938

$

1,038

$

773

$

924

Working capital represents total changes in accounts receivable, inventories and accounts payable – trade. Pension expense is the net periodic pension cost before curtailments, settlements and termination benefits as reported in the pension-related note in the Notes to Consolidated Financial Statements. Other includes amortization and write-off of debt issuance costs, net pension curtailments and settlements, net rationalization charges, net (gains) losses on asset sales, net Venezuela currency loss, compensation and benefits less pension expense, other current liabilities, and other assets and liabilities.

17

EBITDAP, Adjusted Debt & Leverage Ratio Reconciliations $ in millions

2014 Net Income (Loss) Interest Expense Income Tax (Benefit) Expense Depreciation and Amortization Pension Expense(a) Other(b)

$2,521 428 (1,834) 732 158 397

EBITDAP, as adjusted

$2,402

2014 Notes Payable and Overdrafts Long-Term Debt and Capital Leases Due Within One Year Long-Term Debt and Capital Leases Total Debt Global Unfunded Pension Obligations Adjusted Debt Adjusted Debt/EBITDAP

30 148 6,216

Year Ended December 31, 2013 2012 2011

2010

$675 392 138 722 285 155

$237 357 203 687 307 314

$417 330 201 715 266 176

$2,367

$2,105

$2,105

$1,702

2011 256 156 4,789

2010 238 188 4,319

December 31, 2012 14 102 73 96 6,162 4,888

2013

($164) 316 172 652 300 426

$6,394

$6,249

$5,086

$5,201

$4,745

$714

$1,855

$3,522

$3,097

$2,549

$7,108

$8,104

$8,608

$8,298

$7,294

2.96x

3.42x

4.09x

3.94x

4.29x

(a)

Pension expense is the net periodic pension cost before curtailments, settlements and termination benefits as reported in the pension-related note in the Notes to Consolidated Financial Statements. (b) Other includes rationalization charges and other (income) expense.

18

Suggest Documents