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TRANSCRIPT
Second Quarter 2013 Conference Call July 30, 2013
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; pension plan funding obligations;
actions and initiatives taken by both current and potential competitors; 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
Q2 Highlights
3
• Record segment operating income of $428 million
– All business units achieved higher year-over-year SOI
– All-time records for North America and Asia Pacific
• Three business units posted higher tire unit volumes versus last year
• Strong cash flow
– Cash flow positive in Q2 and continued progress managing working capital
• Pension underfunded status benefitting from higher interest rates
• Increasing confidence in 2013 targets
– SOI expected at approximately $1.5 billion, at high end of original $1.4 - $1.5 billion range
– Cash-flow positive (excluding pension pre-funding)
4
Strategy Roadmap
Where We Are
Key How To’s
Our Destination
Key Strategies
Industry
MegaTrends
2012 – 2014
1. North America: Profitability
2. Asia: Winning in China
3. EMEA/LA: Continued Success
NA Adding Economic Value
Weak Volume
Pension Remains a Challenge
Executing Plan
Innovation Leader
Strong Earnings
Creating Sustainable Value
First with Customers
Innovation Leader
Leader in Targeted Segments
Competitively Advantaged
Profitable thru Economic Cycle
Cash Flow Positive
Investment Grade
1. Market-Back Innovation Excellence
2. Target Profitable Market Segments
3. Operational Excellence
4. Enabling Investments
5. Top Talent / Top Teams
5
Strong Product Performance Examples
Recent magazine test results confirm strong performance of our new products
EMEA Asia Pacific North America
2013 Tire of The Year - China
Tested by German magazine AUTOBILD June 2013 very
recommended ranking; Tire dimension: 205/55R16 91V Test track:
Goodyear Mireval, France
Tested by Motor Trend Magazine China against other global brands Tested at Bob Bondurant School of High
Performance Driving, Phoenix, Ariz., May 30, 2013,
by independent journalists. Tire dimension:
245/40R18
Dunlop Sport BlueResponse
Goodyear Efficient Grip
Product launch test drive
high marks
6
Record Results in a Challenging Environment
We have demonstrated profitability in a down economic cycle
Now targeting 2013 SOI of ~$1.5 billion at high end of previous range
Creating Sustainable Economic Value
By being…
• First with our customers
• Leader in our targeted segments
• The innovation leader
• Competitively advantaged
And as a result, we will be…
• Profitable through economic cycles
• Cash flow positive
• Investment grade
$ In millions
Segment Operating Income(a)
(a) See Segment Operating Income reconciliation in Appendix on page 28.
$917
$1,368 $1,248
2010 2011 2012 2013E
~$1,500
Financial Update
Second Quarter 2013
Income Statement
(a) See Segment Operating Income and Margin reconciliation in Appendix on page 28.
In millions, except EPS
8
June 30, June 30,
2013 2012 Change
Units 39.5 39.2 1%
Net Sales $4,894 $5,150 (5)%
Gross Margin 21.4% 19.6% 1.8 pts
SAG $691 $697 (1)%
Segment Operating Income(a) $428 $336 27.4%
Segment Operating Margin(a) 8.7% 6.5% 2.2 pts
Goodyear Net Income $188 $92
Less: Preferred Stock Dividends $7 $7
Goodyear Net Income Available to
Common Shareholders$181 $85
Goodyear Net Income Available to
Common Shareholders - Per Share of
Common Stock
Basic $0.74 $0.35
Diluted $0.67 $0.33
Three Months Ended
9
$336
$177
$106 $11 ($85)
($68)
($47) ($12) $10
$428
Raw
Materials(a)
Cost
Savings Inflation(b)
Volume
Unabsorbed
Fixed
Cost
Price / Mix
Other(c) Currency
Q2
2013 Q2
2012
+$92
Second Quarter 2013
Segment Operating Results
(a) Raw material variance of $177 million excludes raw material cost saving measures of $53 million, which are included in Cost Savings above (b) Estimated impact of inflation (wages, utilities, energy, transportation and other) (c) Other includes $16 million pension and ($7) million other tire-related business impact
$ In millions
(a) Working capital represents accounts receivable and inventories, less accounts payable – trade. (b) See Total Debt and Net Debt reconciliation in Appendix on page 29.
Second Quarter 2013
Balance Sheet
$ In millions
10
June 30, March 31, December 31, June 30,2013 2013 2012 2012
Cash and cash equivalents 2,564$ 2,386$ 2,281$ 2,156$
Accounts receivable 2,880 3,021 2,563 3,174Inventories 3,138 3,168 3,250 3,940Accounts payable - trade (3,213) (3,218) (3,223) (3,324)
Working capital(a)
2,805$ 2,971$ 2,590$ 3,790$
Total debt(b)
6,529$ 6,581$ 5,086$ 5,670$
Net debt(b)
3,965$ 4,195$ 2,805$ 3,514$
Memo:Net Global Pension Liability 2,487$ 3,522$
Pension Update
11
a) Reflects discretionary contributions and February 28, 2013 remeasurement of frozen U.S. pension plans.
b) Includes cash funding for direct benefit payments for 2008 - 2012 only.
c) Excludes one-time charges.
$ In millions
U.S. D.R. 6.50% 5.75% 5.20% 4.52% 3.71% 3.78% 3.78%
$364 $430 $405
$294
$684
$350-$400
$-
$200
$400
$600
$800
$1,000
$1,200
2008 2009 2010 2011 2012 2013E 2014E
Total Global Cash Flow Impact (a) (b)
Domestic International
$1,100-$1,150
$2,748 $2,715 $2,549
$3,097 $3,522
$2,275 $1,875
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2008 2009 2010 2011 2012 2013E 2014E
Global Unfunded Obligations(a)
Domestic International
$181
$387
$300 $266
$307
$225-$275
$-
$100
$200
$300
$400
2008 2009 2010 2011 2012 2013E 2014E
Global Pension Expense (a)(c)
Domestic International
$275-$325
Unfunded status at year-end 2013 would
improve by an additional ~$400 million,
based on conditions at June 30, primarily
due to increased discount rate
U.S. Pension Unfunded Liability Sensitivity Analysis (2013)
(a) Assumes parallel shifts in interest rates. 12
$ In millions
Favorable / (Unfavorable) + 50 bps
Liability 1,191$ 794$ 397$ (397)$ (794)$
Funded Frozen Plans (400) (266) (133) 133 266
Hedged Hourly Plans (181) (68) - 214 353
Net Unfunded Liability Impact 610$ 460$ 264$ (50)$ (175)$
(50) bps
Interest Rate
Decrease
Interest Rate Movement (a)
Interest Rate
Increase
+ 100 bps+ 150 bps (100) bps
Cash Flow
Creating Sustainable Value
First with Customers
Innovation Leader
Leader in Targeted Segments (a) See page 30 for a reconciliation of “Free Cash Flow from Operations,” a non-GAAP measure, to the most directly comparable GAAP measure.
$ In millions
13
Trailing Twelve
Months Ended
June 30, 2013 June 30, 2012 June 30, 2013
Net Income 193$ 103$ 350$
Depreciation and Amortization 180 167 707
Working Capital 114 (1) 1,004
Pension Expense 72 74 303
Other 20 90 214
Capital Expenditures (222) (214) (1,130)
Free Cash Flow from Operations (non-GAAP) (a) 357$ 219$ 1,448$
Memo:
Pension Contributions & Direct Payments (85)$ (113)$ (1,450)$
Debt Change, net (32)$ 98$ 741$
Rationalization Payments (19)$ (17)$ (101)$
Net (Gains) / Losses on Asset Sales (5)$ (13)$ (11)$
Three
Months Ended
Second Quarter 2013
Segment Results
In millions
14
2013 2012 Change 2013 2012 Change
Units 14.8 15.4 (3.4%) Units 14.6 14.2 2.5%
Net Sales $2,201 $2,451 (10.2%) Net Sales $1,577 $1,596 (1.2%)
Operating Income $204 $188 8.5% Operating Income $51 $19 168.4%
Margin 9.3% 7.7% Margin 3.2% 1.2%
2013 2012 Change 2013 2012 Change
Units 4.5 4.3 4.1% Units 5.6 5.3 5.3%
Net Sales $531 $503 5.6% Net Sales $585 $600 (2.5%)
Operating Income $82 $58 41.4% Operating Income $91 $71 28.2%
Margin 15.4% 11.5% Margin 15.6% 11.8%
North America Europe, Middle East and Africa
Latin America Asia Pacific
2013 Full-Year Industry Outlook
July Full-Year
2013 Guidance
April Full-Year
2013 Guidance
NAT EMEA NAT EMEA
Consumer
Replacement ~Flat ~ Flat ~ Flat ~ Flat
Consumer OE ~ +5% ~ (5)% ~ +5% ~ (5)%
Commercial
Replacement ~Flat ~ +5% ~ Flat ~ +5%
Commercial OE ~Flat Flat to +5% ~ Flat Flat to +5%
15
July full-year guidance unchanged from April
2013 Key Segment Operating Income Drivers
Fourth Quarter 2011 Segment Operating Income [slightly below/similar t]o]
2010 Level Note: All referenced USD figures relate to year-over-year impact on Segment Operating Income.
Driver Q3 Full Year Comments
Global
Volume + 3 – 5% ~ Flat
• Volumes stabilizing; growth in
2nd half
Price/Mix vs.
Raw Materials Slightly Positive Positive • Lower raw material costs
Unabsorbed
Overhead ~Flat
~ ($25) – ($50)
million
• Production ramp-up in line
with stabilizing volume
Cost Savings
vs. Inflation
~Flat
Second Half Positive
• Cost savings & inflation
expected to offset in H2;
impact of H2 marketing efforts
Foreign
Exchange ~ ($15) million ~ ($60) million
• Venezuela devaluation and
other impacts of stronger
dollar
Other
Tire-Related ~$20 million ~Flat • Impact of Chemical earnings
China Startup ~$5 million $20 - $30 million • Improved ramp-up of
Pulandian facility
16
2013 Outlook Financial Assumptions
Assumption Comments
Interest Expense $395 – $415 million
Income Tax ~25% of International
Segment Operating Income
Global Pension
$275 - $325 million expense
~$1.10 - $1.15 billion in total
contributions
Working Capital Neither source, nor use
Capital Expenditures ~$1.1 billion
Depreciation &
Amortization ~$700 million
17
Appendix
2013 2012 % Change
Consumer
Units 35.7 35.5 0.7%
Sales $2,643 $2,709 (2.4%)
Commercial
Units 3.2 3.2 0.9%
Sales $1,023 $1,038 (1.4%)
Unit/Sales Mix
Second Quarter 2013
Tire Unit & Sales Summary
2013 Q2 Sales = $4,894
In millions
19
Consumer 54%
Commercial 21%
Other 13%
Retail 7%
Chemical 5%
Full Year 2012
Tire Unit & Sales Summary
2012 Sales = $20,992
In millions
20
2012 2011 % Change
Consumer
Units 149.2 163.6 (8.8%)
Sales $11,429 $12,065 (5.3%)
Commercial
Units 12.8 14.8 (13.6%)
Sales $4,202 $4,588 (8.4%)
Unit/Sales Mix
Consumer 54% Commercial
20%
Other 13%
Retail 7%
Chemical 6%
$942
$207
$689
$2,356
$1,017
($157)
$712
($115)
$549
$1,822
$327
($517)
2008 2009 2010 2011 2012 2013 Through 6/30/13
Price/Mix Raw Materials
Price/Mix Improvements
(a) Reflects impact on Segment Operating Income. Raw Materials include the impact of raw material cost savings measures. (b) Raw material variance of $327 million includes raw material cost savings measures of $249 million. (c) Raw material variance of ($517) million includes raw material cost savings measures of $110 million.
Price/Mix vs. Raw Materials(a)
$ in millions
(c)
21
(b)
Second Quarter 2013
Liquidity Profile
(a) Total liquidity comprised of $2,564 million cash and cash equivalents, $2,421 million of unused availability under various credit agreements, and the additional $241 million committed under the Pan-European securitization program.
(b) Committed Pan-European securitization program of $586 million (€450 million) subject to available receivables. At June 30, 2013, the amounts available and utilized under this program totaled $345 million (€265 million).
(c) Includes $324 million of cash in Venezuela denominated in bolivares fuertes at the official exchange rate of 6.3 bolivares fuertes per U.S. dollar at June 30, 2013.
22
$5.2(a)
Cash &
Equivalents(c)
$1 billion
required for
operations
Available
Credit Lines
Liquidity Profile
Pan European
Securitization(b)
$ In billions
$2.6
$2.4
$0.2
June 30, 2013
Note: Based on June 30, 2013 balance sheet values and excludes notes payable, capital leases and other domestic and foreign debt. Details on all other actual
outstanding debt as of June 30, 2013 in Appendix on page 31.
(a) At June 30, 2013, the amounts available and utilized under the committed Pan-European securitization program of $586 million (€450 million) totaled $345 million
(€265 million).
(b) At June 30, 2013, there were no borrowings under the European revolving credit facility. Letters of credit issued as of this date totaled $10 million (€7 million).
(c) At June 30, 2013, our borrowing base, and therefore our availability, under the U.S. revolving credit facility was $459 million below the facility’s stated amount of
$2.0 billion. Also, $394 million of letters of credit were issued under this facility.
Second Quarter 2013
Maturity Schedule
$ In millions
23
$345
$1,520
$1,262
$900 $849
2013 2014 2015 2016 2017 2018 2019 2020 2021 ≥ 2022
Undrawn Credit Lines
Funded Debt
$586 (a) $521 (b)
$2,000 (c)
Second Quarter Significant Items (after taxes and minority interest)
$ In millions, except EPS
24
Reported
Net Sales 4,894$
Cost of Goods Sold 3,846 (5) - -
Gross Margin 1,048 5 - - -
SAG 691 - - - -
Interest Expense 102 - - - -
Rationalizations 13 (13) - - -
Other Income (14) - - (5) 5
Pre-tax Income 256 18 - 5 (5)
Taxes 63 2 (8) - (1)
Minority Interest 5 3 1 - -
Goodyear Net Income 188$ 13 7 5 (4)
EPS (Diluted) 0.67$ 0.05$ 0.03$ 0.02$ (0.01)$
Second Quarter 2013
Significant Items
Discrete
Tax Items
Charges for
EMEA Labor
Claims
Net Gains on
Asset Sales
Charges for
Restructuring &
Accelerated
Depreciation
Second Quarter Significant Items (after taxes and minority interest)
25
2013
• Rationalizations, asset write-offs and accelerated depreciation, $13 million (5 cents per share)
• Discrete tax charges, $7 million (3 cents per share)
• Charges relating to labor claims with respect to a previously closed facility in Europe, $5 million (2 cents per share)
• Gain from asset sales, $4 million (1 cent per share)
2012
• Rationalizations, asset write-offs and accelerated depreciation, $25 million (9 cents per share)
• Debt financing fees related to the refinancing of $3.2 billion in credit facilities, $24 million (9 cents per share)
• Charges relating to labor claims with respect to a previously closed facility in Europe, $20 million (7 cents per share)
• Discrete tax charges, $2 million (1 cent per share)
• Costs related to tornado damage in 2011 at a manufacturing facility, $2 million (1 cent per share)
• Gain from asset sales, $10 million (3 cents per share)
26
40% 60%
EU Summer Replacement Market(a)
Tire Units in Millions
Summer HP Market Rest of Summer Replacement Market
(a) Passenger market based on Europool 2012 Total Europe (excl. Turkey and Ukraine). All grades based upon publically available information on tires
available for sale as at July 2013. HP segment covers H and V speed indexes.
(b) B grade in Rolling Resistance Index / A grade in Wet Grip Index.
(c) Competitors include Premium brands and best available reported grades by size.
0% 20% 40% 60% 80%
Competitor 4
Competitor 3
Competitor 2
Competitor 1
Dunlop
Goodyear
% Summer HP Market Potential Rated B/A(b) or Better
Latest analysis of summer announcements by competition confirms the label
competitiveness of our new HP line.
(c)
+
Continued strong product performance in EMEA – label grades
Mandatory Convertible Preferred Stock Common Share Impact Upon Conversion
27
* Assumes 246 million common shares outstanding as of 6/30/13
** Appreciation from Goodyear common share price of $14.57 on date of issuance of Mandatory
Convertible Preferred Stock
Common
Share Price
Conversion
Rate
Common Shares
Issuable upon
Conversion % Dilution*
Common Share
Price
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 12.7% 10%
$17.00 2.9412 29,411,765 12.0% 17%
$18.00 2.7778 27,777,778 11.3% 24%
$18.21 2.7454 27,454,000 11.2% 25%and above
Reconciliation for Segment Operating Income / Margin
$ In millions
28
This presentation also presents total segment operating income on a forward-looking basis. The company is unable to reconcile
forward-looking total segment operating income without unreasonable efforts because management cannot predict, with sufficient
certainty, the various elements necessary to provide such a reconciliation.
2013 2012 2012 2011 2010
Total Segment Operating Income 428$ 336$ 1,248$ 1,368$ 917$
Rationalizations (13) (26) (175) (103) (240)
Interest expense (102) (83) (357) (330) (316)
Other income / (expense) 14 (37) (139) (73) (186)
Asset write-offs & accelerated depreciation (5) (4) (20) (50) (15)
Corporate incentive compensation plans (35) (15) (69) (70) (71)
Corporate pension curtailments/settlements - - 1 (15) -
Intercompany profit elimination 3 9 (1) (5) (14)
Retained expenses of divested operations (6) (5) (14) (29) (20)
Other (28) (9) (34) (75) (47)
Income before Income Taxes 256$ 166$ 440$ 618$ 8$
United States and Foreign Taxes 63 63 203 201 172
Less: Minority Shareholders Net Income 5 11 25 74 52
Goodyear Net Income (Loss) 188$ 92$ 212$ 343$ (216)$
Sales $4,894 $5,150 $20,992 $22,767 $18,832
Return on Sales 3.8% 1.8% 1.0% 1.5% (1.1)%
Total Segment Operating Margin 8.7% 6.5% 5.9% 6.0% 4.9%
Three Months Ended
June 30,
Twelve Months Ended
December 31,
Reconciliation for Total Debt and Net Debt
$ In millions
29
($ in millions)
June 30, March 31, December 31, June 30,
2013 2013 2012 2012
Long term debt and capital leases 6,325$ 6,307$ 4,888$ 5,395$
Notes payable and overdrafts 79 107 102 168
Long term debt and capital leases due within one year 125 167 96 107
Total debt 6,529$ 6,581$ 5,086$ 5,670$
Less: Cash and cash equivalents 2,564 2,386 2,281 2,156
Net debt 3,965$ 4,195$ 2,805$ 3,514$
Reconciliation for Free Cash Flow from Operations
(1) Working capital represents total changes in accounts receivable, inventories and accounts payable – trade.
(2) Other includes amortization and write-off of debt issuance costs, net rationalization charges, net (gains) losses on asset sales, Venezuela currency
devaluation, customer prepayments and government grants, insurance proceeds, compensation and benefits less the total defined benefit pension
cost (before curtailments, settlements, and termination benefits) reported in the pension-related note in the Notes to Consolidated Financial
Statements, other current liabilities, and other assets and liabilities. 30
Trailing Twelve
Months Ended
($ in millions)
June 30,
2013
March 31,
2013
Dec. 31,
2012
Sept. 30,
2012
June 30,
2012
June 30,
2013
Net Income 193$ 31$ (7)$ 133$ 103$ 350$
Depreciation and Amortization 180 177 174 176 167 707
Working Capital (1)
114 (335) 1,361 (136) (1) 1,004
Pension Expense 72 76 78 77 74 303
Other (2)
20 46 (5) 153 90 214
Capital Expenditures (222) (271) (339) (298) (214) (1,130)
Free Cash Flow from Operations (non-GAAP) 357$ (276)$ 1,262$ 105$ 219$ 1,448$
Capital Expenditures 222 271 339 298 214 1,130
Pension Contributions & Direct Payments (85) (908) (194) (263) (113) (1,450)
Rationalization Payments (19) (24) (40) (18) (17) (101)
Cash Flow from Operating Activities (GAAP) 475$ (937)$ 1,367$ 122$ 303$ 1,027$
The amounts below are calculated from the Consolidated Statements of Cash Flows except for pension expense, which is the total defined benefit
pension cost (before curtailments, settlements, and termination benefits) as reported in the pension-related note in the Notes to Consolidated
Financial Statements.
Three Months Ended
Financing Arrangements
$ In millions
31
June 30, March 31, December 31, June 30,
2013 2013 2012 2012
Notes Payable:
Notes Payable and Overdrafts 79$ 107$ 102$ 168$
Long-Term Debt:
Notes:6.75% Euro Notes due 2019 326$ 321$ 330$ 317$
8.25% due 2020 995 995 994 994
8.75% due 2020 267 266 266 265
6.5% due 2021 900 900 - -
7% due 2022 700 700 700 700
7% due 2028 149 149 149 149
Credit Facilities:
$2.0 billion first lien revolving credit facility due 2017 - - - -
$1.2 billion second lien term loan facility due 2019 1,194 1,194 1,194 1,194
€400 million revolving credit facility due 2016 - 256 - 292 Pan-European accounts receivable facility due 2015 345 186 192 395 Chinese credit facilities 531 505 471 469
Other domestic and international debt 976 933 630 694
6,383$ 6,405$ 4,926$ 5,469$
Capital lease obligations 67 69 58 33
Long-Term Debt Total: 6,450$ 6,474$ 4,984$ 5,502$
Total Debt 6,529$ 6,581$ 5,086$ 5,670$