Dissolution of Global Alliance Conference Call June 5, 2015 - - PowerPoint PPT Presentation

Dissolution of Global Alliance Conference Call June 5, 2015

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

• n 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.

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Overview Framework Agreement

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• Binding agreement executed June 4, 2015 with Sumitomo Rubber Industries (SRI)
• n dissolution of global alliance
• Goodyear will acquire:
• SRI’s 25% interest in Goodyear Dunlop Tires Europe
• SRI’s 75% interest in Nippon Goodyear (Japan)
• SRI will acquire:
• Goodyear’s 75% interest in Goodyear Dunlop Tires North America
• Goodyear’s 25% interest in Dunlop Goodyear Tires (Japan)
• Net payment at closing from Goodyear to SRI of $271 million
• Repayment of a pre-existing debt obligation of approximately $55 million to

SRI

• Provides for sale of Goodyear’s 3.4 million shares of SRI (currently valued at

approximately $60 million)

Full Year Financial Expectations

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• On a full year basis, we expect:
• Increased consumer unit volumes of about 3 million units, driven by

acquisition of Japan-based Nippon Goodyear

• Increase in adjusted net income of $40 to $50 million
• Driven by elimination of minority interest in Goodyear Dunlop

Tires Europe

• Accretive to adjusted EPS of $0.15 to $0.18 per share
• Elimination of redeemable minority shareholder’s equity at closing
• No impact on 2015 or 2016 financial targets, including annual SOI growth
• f 10-15%
• Provided for within existing capital allocation plan

Note: Based on 2015 annual operating plan. Subject to adjustments customary to transactions of this nature.

(1) Motorcycle units are not included in externally reported tire units but are included in revenue. Note: In millions. Full year impacts are approximations based on 2015 plan. Subject to adjustments customary to transactions of this

• nature. Under the terms of the agreement, North America includes the U.S., Canada, and Mexico.

North America

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Goodyear

• Retains exclusive rights to the

Dunlop tire brand in the following areas:

• Consumer and commercial

replacement channels

• Non-Japanese OE

manufacturers

Units(1) Revenue(1) Segment Operating Income (1)-(2) ($250)-($300) ($50)-($60) SRI

• Acquires Goodyear’s 75% interest in

Goodyear Dunlop Tires North America

• Full ownership of Tonawanda,

NY tire plant

• Ownership of the motorcycle

business

• Right to sell Dunlop-brand tires

to Japanese OE manufacturers Full year impacts:

Goodyear

• Acquires SRI’s 25% interest in

Goodyear Dunlop Tires Europe

• Retains exclusive rights to sell

Dunlop-brand tires in European countries where the current joint venture exclusively serves the market:

• Consumer
• Commercial
• Motorcycle
• Race

Europe, Middle East & Africa

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Full year impacts:

Units(1) Revenue(1) Segment Operating Income(2) (0)-(1) ($50)-($60) $20-$30 SRI

• Obtains exclusive rights to the

Dunlop tire brand in areas including:

• Limited areas of Eastern

Europe (e.g., Russia and Turkey)

• Certain countries in Africa

(1) Reflects the reduction of sales in currently non-exclusive territories. (2) Net change in SOI reflective of reduction in sales margin from non-exclusive territories being more than offset by reduced royalty payments to SRI. Note: In millions. Full year impacts are approximations based on 2015 plan. Subject to adjustments customary to transactions of this nature.

Asia Pacific

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Units(1) Revenue(1) Segment Operating Income(2) 4-5 $200-$250 $10-$20 Goodyear

• Acquires SRI’s 75% interest in

Nippon Goodyear (Japan)

• Committed to serving Japanese OE

and replacement customers with top-quality Goodyear-brand tires for the long term

SRI

• Acquires Goodyear’s 25% interest in

Dunlop Goodyear Tires (Japan)

• Will continue to have exclusive

rights to sell Dunlop-brand tires in the Japanese replacement and OE channels Full year impacts:

(1) Reflects incremental sales from Nippon Goodyear (Japan) only. (2) Reflects incremental sales from Nippon Goodyear (Japan) exceeding the effect of the elimination of minority equity income from Dunlop Goodyear Tires (Japan). Note: In millions. Full year impacts are approximations based on 2015 plan. Subject to adjustments customary to transactions of this nature.

Summary

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• Successful resolution positive for Goodyear – enhances flexibility

as we increase focus on growth in our core businesses

• SRI and Goodyear are committed to ensuring seamless transition

for all customers and consumers

• Expected closing in Q4 2015
• Transaction subject to customary closing conditions
• Regulatory approvals
• SRI’s completion of labor agreement with United

Steelworkers union for Tonawanda, N.Y. plant