Forward-Looking Statements

Transcription

1 Goldman Sachs Industrials Conference November 12, 2014

2 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 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; 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

3 Company Overview Goodyear tires are sold in two distinct tire markets... (% of 2013 Units of 162 million) available in a diverse selection of products... (% of 2013 Revenue of ~$20 billion)...and stretch around the world (% of 2013 Revenue of ~$20 billion) Replacement Market 69% OE Market 31% OE ~20% of 2013 Revenue Consumer 56% Chemical 4% Commercial 21% Other 12% Retail 7% Includes: OTR, Farm, Race, & Aviation North America 44% Europe, Middle East & Africa 34% Latin America 11% Asia Pacific 11% Goodyear is a global tire industry leader with powerful brands and broad product reach. 3

4 Goodyear Then And Now $ In billions Segment Operating Income Growth $1.6 $1.8 $1.4 $1.2 $0.9 (a) ~$0 North America Turnaround Segment Operating Income $0.3B loss in 2009 $0.3 $0.5 $0.7 $ TTM (b) TTM (b) Progress on Global Unfunded Pension $3.1 $3.5 $1.9 Fully funded, froze, and derisked U.S. plans ~$0.7 (d) Strong Free Cash Flow (c) $1.0 $0.7 $0.4 $ E Significant SOI growth and cash generation capability (a) See Segment Operating Income reconciliation in Appendix on page 38 (b) Trailing twelve months as of September 30, 2014 (c) See Free Cash Flow from Operations reconciliation in Appendix on page 40 (d) Primarily non-us plans; projected for December 31, 2014 using 2013 year-end assumptions 4

5 Third Quarter Highlights Record Q3 segment operating income of $520 million (a), up 21% Record North America Q3 SOI up 30% to $210 million Europe, Middle East and Africa Q3 SOI up 57% to $181 million Global SOI margin of 11.2% (a) for the quarter, best in more than a decade Strong value proposition and cost savings driving results Adjusted EPS of 87 cents per share (b) Year-to-date segment operating income of $1.4 billion (a), up 17% Expect 2014 earnings growth near high end of 10-15% range Announced up to $150 million share repurchase during Q4 14 Our strategy continues to deliver strong earnings performance (a) See Segment Operating Income and margin reconciliation in Appendix on page 38. (b) See Adjusted Diluted Earnings Per Share reconciliation in Appendix on pages 36. 5

6 Tire Industry Growth Drivers Long-term Industry Growth Outlook Global industry growth of ~3% Emerging markets growth 5-6% Mature markets growth of ~1% Industry trends require advanced capabilities to capture growth Drive to high value added (HVA) technology continues Green and fuel efficiency are growing global themes Tire labeling to become industry standard, highlighting superior performance Goodyear Near-term Outlook N.A. industry distortion from potential U.S. tariffs on imported consumer tires Weaker macro conditions in Europe; green winter expected Emerging markets slowdown Brazil OE environment China slowing Premium HVA demand outpacing supply Strong long-term industry fundamentals provide growth and profit opportunities 6

7 2015 Outlook Preliminary Planning Assumptions Global volume growth of 1-2% Positive Drivers Positive price mix vs. raw materials (~$50-$100 million) Other Factors FX headwind (similar impact as 2014) Venezuela uncertainty Cost savings Operational Excellence Amiens closure / EMEA Farm tire business exit $1.2 billion capex Neutral OTR Potential release of US tax valuation allowance Tax rate if released: 30-35% of global pre-tax income, no US cash taxes for ~5 years Reaffirming 10-15% SOI growth target for 2015; planning assumptions to be updated in year-end call 7

8 Strategy Overview

9 Strategy Roadmap Where We Are Executing Plan Innovation Leader Record Earnings Value Creating Improving Volume US Pension Fully Funded Key Strategies 1. North America: Grow Profitably 2. Asia: Win in China / Grow Asia 3. EMEA / LA: Return to Historical Profit Industry MegaTrends Long-term Growth Drivers Key How To s Market-Back Innovation Excellence Sales & Marketing Excellence Operational Excellence Enabling Investments Top Talent / Top Teams Our Destination - Creating Sustainable Value Top Line / Bottom Line Growth First with Customers Innovation Leaders Leader in Targeted Segments Competitively Advantaged Profitable thru Economic Cycle Cash Flow Positive Investment Grade 9

10 Goodyear s Competitive Advantage Advantaged Value Proposition Operational Excellence Iconic brand Industry leading products Pervasive distribution Strong customer relations Consumer-centric focus Market-Back Approach AND Right Tire Right Time Right Place Right Cost Sufficient HVA Capacity For winners, not an OR it is an AND Goodyear delivers both in an integrated manner 10

11 HVA Tire Technology A Tire Is Not a Tire LVA Tire (Low-Value-Added) Dual Tread Zones with TredLock Technology HVA Tire (High-Value-Added) Silica Tread 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 Carbon Fiber Dual Reinforced Sidewalls 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 Additional Components For Handling Industry migration to high-value-added tires advantages Goodyear given manufacturing know-how, product innovation, and industry-leading products 11

12 Capital Allocation

13 Sources and Uses of Cash $ In billions SOI Target $5.5 - $5.8 Adjustments for: Corporate Expense, Depreciation, and Pension Expense ~ (400) ~ ~ 2.1 ~ ~ EBITDAP ~ $7.8 - $8.2 Maintaining the Business Interest Expense ~$1.2 - $1.4 Taxes Paid ~ $0.8 - $1.0 Sustaining CapEx ~ $2.0 - $2.2 Working Capital ~ $0.0 ~$4.0 - $4.6 Capital Allocation Plan Cash Available for Deployment Dividends / Share Repurchase Growth CapEx Debt Reductions (incl. Pension) Restructurings ~$3.6 - $3.8 Strong earnings growth driving significant cash available for deployment Note: All estimates based on current assumptions and available data 13

14 Capital Allocation Plan Driving Value Growth CapEx $1.5B Shareholder Return Program $0.6 - $0.9B* Restructurings $0.6B Debt Repayment / Pension Funding $0.8 - $0.9B $3.6 - $3.8B A balanced capital allocation plan * $0.65B approved by Board of Directors; increases dependent on Company performance including the achievement of financial targets 14

15 Growth CapEx Investment Heavy investment in new China plant and Europe tire labeling ~$1.3 billion EMEA & Asia ~ 70% Americas NA & LA ~ 30% Primarily investment in HVA capacity & tire labeling capabilities ~$1.5 billion EMEA & Asia ~ 45% Includes new plant for the Americas ~$500 million Americas NA & LA ~ 55% Continue to invest for growth... shifting focus to meet business needs Targeting ~20% IRR 15

16 Our Destination Segment Operating Income (a) $ in millions $1,368 $1,248 $1, Near high end of % range % SOI growth % SOI growth $917 $ E 2015T 2016T Our strategy gives us confidence in the future (a) See Segment Operating Income reconciliation in Appendix on page

17 Balance Sheet Management Leverage Targets 4.3x 3.9x Adjusted Debt / EBITDAP (a) 4.1x 3.4x 2.0x-2.1x T Leverage consistent with commitment to achieving investment grade metrics Reduces cost of capital Improves global access to credit Greater ability to move debt overseas 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 41 17

18 Shareholder Return Program September dividend payment: 20% increase over prior quarter to $0.06 per share Share repurchase program ($450 million ) $30 million Q3; $83 million YTD Plan to purchase up to $150 million in Q4 Continued focus on shareholder returns 18

19 Summary Goodyear has evolved over the past several years and today is a very different company We are advantaged in a competitive industry given industry-leading products, an iconic brand, pervasive distribution and market-back approach Targeting continued earnings growth , leading to positive free cash flow generation capital allocation plan balances investing in the business for future earnings growth, de-levering the balance sheet, and providing immediate return of capital to shareholders Our strategy is working and delivering record results We are committed to building long-term shareholder value 19

20 Q & A

21 Appendix

22 Third Quarter 2014 Income Statement In millions, except EPS Three Months Ended September 30, September 30, Change Units (2)% Net Sales $ 4,657 $ 5,002 (7)% Gross Margin 24.5% 21.1% 3.4 pts SAG $ 653 $ 686 (5)% Segment Operating Income (a) $ 520 $ % Segment Operating Margin (a) 11.2% 8.6% 2.6 pts Goodyear Net Income $ 161 $ 173 Less: Preferred Stock Dividends $ - $ 7 Goodyear Net Income Available to Common Shareholders $ 161 $ 166 Goodyear Net Income Available to Common Shareholders - Per Share of Common Stock Basic $ 0.58 $ 0.67 Diluted $ 0.58 $ 0.62 Cash Dividends Declared Per Common Share $ 0.06 $ 0.05 Adjusted Diluted Earnings Per Share (b) $ 0.87 $ 0.68 (a) See Segment Operating Income and Margin reconciliation in Appendix on page 38. (b) See Adjusted Diluted Earnings Per Share reconciliation in Appendix on pages 36 and

23 Third Quarter 2014 Segment Operating Results $ In millions +$89 +21% $431 ($16) $14 $98 ($112) $135 ($75) ($31) $76 $520 Q Volume Unabsorbed Fixed Cost Raw Materials (a) Price / Mix Cost Savings Inflation (b) Currency Other (c) Q ($2) ($14) OTR more +$60 than explains variance (a) Raw material variance of $98 million excludes raw material cost saving measures of $71 million, which are included in Cost Savings above (b) Estimated impact of inflation (wages, utilities, energy, transportation and other) (c) Includes $23 million benefit from lower incentive compensation, non-recurrence of $20 million in 2013 USW agreement charges, $16 million savings from Amiens plant closure and $14 million of US pension expense savings 23

24 Third Quarter 2014 Balance Sheet $ In millions September 30, June 30, December 31, September 30, Cash and cash equivalents $ 1,744 $ 1,637 $ 2,996 $ 2,500 Accounts receivable 3,021 2,841 2,435 3,254 Inventories 2,924 3,130 2,816 2,944 Accounts payable - trade (2,827) (3,097) (3,097) (3,084) Working capital (a) $ 3,118 $ 2,874 $ 2,154 $ 3,114 Total debt (b) $ 6,855 $ 6,762 $ 6,249 $ 6,542 Net debt (b) $ 5,111 $ 5,125 $ 3,253 $ 4,042 (a) Working capital represents accounts receivable and inventories, less accounts payable trade. (b) See Total Debt and Net Debt reconciliation in Appendix on page

25 Free Cash Flow from Operations $ In millions Three Months Ended September 30, Trailing Twelve Months Ended September 30, 2014 Net Income $ 199 $ 195 $ 649 Depreciation and Amortization Change in Working Capital (362) (284) (50) Pension Expense (a) Other Capital Expenditures (193) (241) (1,068) Free Cash Flow from Operations (non-gaap) (b) $ 87 $ 19 $ 792 (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) See Free Cash Flow from Operations reconciliation in Appendix on page

26 Third Quarter 2014 Segment Results In millions North America Europe, Middle East and Africa Change Change Units (3.8%) Units (1.3%) Net Sales $2,057 $2,186 (5.9%) Net Sales $1,618 $1,752 (7.6%) Operating Income $210 $ % Operating Income $181 $ % Margin 10.2% 7.4% Margin 11.2% 6.6% Latin America Asia Pacific Change Change Units (5.2%) Units % Net Sales $451 $527 (14.4%) Net Sales $531 $537 (1.1%) Operating Income $49 $89 (44.9%) Operating Income $80 $ % Margin 10.9% 16.9% Margin 15.1% 12.3% 26

27 US Chinese Tire Tariff Speculation & Impact on North America Replacement Volume Q3 Industry Consumer Replacement Sell-In Year-on-year sell-in volume % growth Total US Industry (a) +3% Q3 Goodyear Replacement Volume (d) Q3 Replacement volume down -4% Channels stocking Chinese tires well above market demand (i.e., sell out ) Our strategy not to chase volume with price Affecting economy and mid-tier segments Chinese Imports (b) +25% All Other Tires (c) -4% Industry effect will linger until excess inventory can be sold In a sell-out market that is growing 1-2% (~ miles driven) Chinese tire tariff speculation impacting industry & Goodyear sell-in demand (a) Total US Industry as reported by the Rubber Manufacturers Association, Sept 9, 2014 (b) Chinese tire imports into the US as reported by the US Department of Commerce for July/August with September a Goodyear estimate (c) Mathematical difference between (a) and (b) (d) Goodyear North America Replacement includes Consumer and Commercial for U.S. and Canada 27

28 2014 Key Segment Operating Income Drivers (as of October 29, 2014) Driver 2014 FY vs 2013 vs. July Outlook Comments Global Volume Flat to +1% Consistent with YTD performance Price/Mix vs. Raw Materials Slightly Negative N/C Assumes neutral Q4 Overhead Absorption ~$50-75 million N/C Trending to mid-point of range Net Cost Savings Foreign Exchange ~$130-$150 million ~($100) million Cost savings net of inflation offset by incremental investments in advertising and R&D Assumes spot rates as of October 29, 2014 Other Tire-Related ~$15 million - Start-up Costs Neutral N/C Amiens Closure ~$50 million Pension Expense Savings (a) ~$90 million N/C Brazil modernization costs offset China start-up benefit $75 million annualized savings, including exit of EMEA Farm tire Pension expense savings net of incremental 401(k) contributions (a) Global pension expense savings. Excludes savings impact related to corporate associates (outside of Segment Operating Income) 28

29 2014 Outlook Other Financial Assumptions (as of October 29, 2014) 2014 FY Assumption vs. July Outlook Interest Expense $415 - $435 million N/C Financing Fees ~$60 million N/C Income Tax Depreciation & Amortization Global Pension Expense Global Pension Cash Contributions ~20% of international Segment Operating Income ~$725 million N/C ~$150-$175 million N/C ~$1.3 billion in total contributions (a) N/C Working Capital Not a significant source or use N/C Capital Expenditures ~$0.9 billion N/C (a) Cash contributions include $1.2 billion for hourly U.S. pension plan prefunding 29

30 2014 Full-Year Industry Outlook October Full-Year 2014 Guidance July Full-Year 2014 Guidance NA EMEA NA EMEA Consumer Replacement +4-5% +3-4% +2-3% +3-4% Consumer OE +4-5% +2-3% +2-3% +0-1% Commercial Replacement +9-10% +1-2% +3-4% +0-2% Commercial OE % -3-4% +2-3% -3-4% 30

31 Consumer Passenger & Light Truck Tires Industry Outlook Global tire industry is a growth business led by emerging markets (a) CAGR Compound Annual Growth Rate (b) Estimates based on LMC Automotive forecast and internal Goodyear analysis 31

32 Industry-Leading Product Examples Premium Mid Economy Category Segmentation Commuter Touring Performance All- Terrain Winter Commuter Touring Performance All- Terrain Winter Assurance Tripletred & Comfortred Eagle F1 & EfficientGrip Wrangler Adventure UltraGrip 9 Eagle Sport Goodyear s Targeted Segment Examples New HVA products winning in high-value-added segments 32

33 Price/Mix Improvements Price/Mix vs. Raw Materials (a) $ in millions $2,356 $1,822 (c) $942 $712 $207 $689 $549 (b) $1,017 $327 (d) ($115) ($321) ($295) ($985) (e) ($444) (f) Q3 YTD Price/Mix Raw Materials (a) (b) (c) (d) (e) (f) Reflects impact on Segment Operating Income. Raw Materials include the impact of raw material cost savings measures. Raw material variance of $549 million includes raw material cost savings measures of $136 million. Raw material variance of $1,822 million includes raw material cost savings measures of $177 million. Raw material variance of $327 million includes raw material cost savings measures of $249 million. Raw material variance of ($985) million includes raw material cost savings measures of $228 million. Raw material variance of ($444) million includes raw material cost savings measures of $190 million. 33

34 Third Quarter 2014 Liquidity Profile $ In billions Liquidity Profile $3.7 (a) Available Credit Lines $2.0 Cash & Equivalents (b) $1.7 September 30, 2014 (a) Total liquidity comprised of $1,744 million cash and cash equivalents, as well as $1,982 million of unused availability under various credit agreements. (b) Includes $272 million of cash in Venezuela denominated in bolivares fuertes at 12.0 bolivares fuertes per U.S. dollar at September 30,

35 Third Quarter 2014 Maturity Schedule $ In millions Undrawn Credit Lines $2,000 (b) $2,077 (c) Funded Debt $1,264 $504 (a) $1,858 $900 $700 $353 $ Note: Based on September 30, 2014 balance sheet values and excludes notes payable, capital leases and other domestic and foreign debt. (a) At September 30, 2014, the total amount outstanding under the European revolving credit facility was $353 million ( 280 million). Letters of credit issued as of this date totaled $4 million ( 3 million). (b) At September 30, 2014, our borrowing base, and therefore our availability, under the U.S. revolving credit facility was $437 million below the facility s stated amount of $2.0 billion. At September 30, 2014, there were no borrowings outstanding under the first lien revolving credit facility. Letters of credit issued totaled $377 million at September 30, (c) At September 30, 2014, the amounts available and utilized under the Pan-European securitization program of $567 million ( 450 million) totaled $ million ( 276 million).

36 Third Quarter 2014 Significant Items (After Tax and Minority Interest) $ in millions (except EPS) As Reported Discrete Tax Items Government Investigation in Africa Rationalizations, Asset Write-offs, and Accelerated Depreciation Charges Net Losses on Asset Sales Charges for Labor Claims Related to a Closed Facility in Europe As Adjusted Net Sales $ 4,657 $ - $ - $ - $ - $ - $ 4,657 Cost of Goods Sold 3, ,516 Gross Margin $ 1,141 $ - $ - $ - $ - $ - 1,141 SAG 653 $ - $ - $ - $ - $ Rationalizations (15) Interest Expense Other Expense 66 - (16) - (7) (3) 40 Pre-tax Income $ 299 $ - $ 16 $ 15 $ 7 $ Taxes 100 (47) Minority Interest Goodyear Net Income $ 161 $ 47 $ 16 $ 9 $ 6 $ 3 $ 242 EPS (Diluted) $ 0.58 $ 0.17 $ 0.06 $ 0.03 $ 0.02 $ 0.01 $

37 Third Quarter 2013 Significant Items (After Tax and Minority Interest) $ in millions (except EPS) As Reported Rationalizations, Asset Write-offs, and Accelerated Depreciation Charges Net Gains on Asset Sales As Adjusted Net Sales $ 5,002 $ - $ - $ 5,002 Cost of Goods Sold 3,946 (5) - 3,941 Gross Margin $ 1,056 $ 5 $ - 1,061 SAG 686 $ - $ Rationalizations 21 (21) - - Interest Expense Other Expense Pre-tax Income $ 249 $ 26 $ (3) 272 Taxes 54 4 (1) 57 Minority Interest Goodyear Net Income $ 173 $ 19 $ (2) $ 190 EPS (Diluted) $ 0.62 $ 0.07 $ (0.01) $

38 Reconciliation for Segment Operating Income / Margin $ In millions Three Months Ended September 30, Twelve Months Ended September 30, Nine Months Ended September 30, Twelve Months Ended December 31, Total Segment Operating Income $ 520 $ 431 $ 1,772 $ 1,353 $ 1,161 $ 1,580 $ 1,248 $ 1,368 $ 917 $ 372 Rationalizations (15) (21) (97) (80) (41) (58) (175) (103) (240) (227) Interest expense (108) (100) (420) (315) (287) (392) (357) (330) (316) (311) Other expense (66) - (227) (242) (112) (97) (139) (73) (186) (40) Asset write-offs & accelerated depreciation - (5) (11) (3) (15) (23) (20) (50) (15) (43) Corporate incentive compensation plans (23) (34) (98) (69) (79) (108) (69) (70) (71) (41) Corporate pension curtailments/settlements - - (33) (33) (15) - - Intercompany profit elimination 5 (5) 5 (4) (5) 4 (1) (5) (14) (13) Retained expenses of divested operations (4) (7) (18) (11) (17) (24) (14) (29) (20) (17) Other (10) (10) (54) (35) (50) (69) (34) (75) (47) (37) Income (Loss) before Income Taxes $ 299 $ 249 $ 819 $ 561 $ 555 $ 813 $ 440 $ 618 $ 8 $ (357) United States and Foreign Taxes Less: Minority Shareholders Net Income Goodyear Net Income (Loss) $ 161 $ 173 $ 558 $ 323 $ 394 $ 629 $ 212 $ 343 $ (216) $ (375) Sales $4,657 $5,002 $18,573 $13,782 $14,749 $19,540 $20,992 $22,767 $18,832 $16,301 Return on Sales 3.5% 3.5% 3.0% 2.3% 2.7% 3.2% 1.0% 1.5% (1.1)% (2.3)% Total Segment Operating Margin 11.2% 8.6% 9.5% 9.8% 7.9% 8.1% 5.9% 6.0% 4.9% 2.3% 38

39 Reconciliation for Total Debt and Net Debt $ In millions September 30, June 30, December 31, September 30, Long term debt and capital leases $ 6,719 $ 6,677 $ 6,162 $ 6,366 Notes payable and overdrafts Long term debt and capital leases due within one year Total debt $ 6,855 $ 6,762 $ 6,249 $ 6,542 Less: Cash and cash equivalents 1,744 1,637 2,996 2,500 Net debt $ 5,111 $ 5,125 $ 3,253 $ 4,042 39

40 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 pension-related note in the Notes to Consolidated Financial Statements. ($ in millions) Sept. 30, 2014 Three Months Ended Sept. 30, 2013 Trailing Twelve Months Ended Year Ended December 31, Sept. 30, Net Income (Loss) $ 199 $ 195 $ 649 $ 675 $ 237 $ 417 $ (164) Depreciation and Amortization Change in Working Capital (a) (362) (284) (50) (650) 52 Pension Expense (b) Other (c) Capital Expenditures (193) (241) (1,068) (1,168) (1,127) (1,043) (944) Free Cash Flow from Operations (non-gaap) $ 87 $ 19 $ 792 $ 1,004 $ 701 $ 166 $ 442 Capital Expenditures ,068 1,168 1,127 1, Pension Contributions & Direct Payments (35) (79) (1,382) (1,162) (684) (294) (405) Rationalization Payments (50) (17) (181) (72) (106) (142) (57) Cash Flow from Operating Activities (GAAP) $ 195 $ 164 $ 297 $ 938 $ 1,038 $ 773 $ 924 a) Working capital represents total changes in accounts receivable, inventories and accounts payable trade. b) 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. c) Other includes amortization and write-off of debt issuance costs, deferred income taxes, net pension curtailments and settlements, net rationalization charges, net (gains) losses on asset sales, net Venezuela currency remeasurement loss, customer prepayments and government grants, insurance proceeds, compensation and benefits less pension expense, other current liabilities, and other assets and liabilities. 40

41 EBITDAP, Adjusted Debt & Leverage Ratio Reconciliations $ In millions Year Ended December 31, Net Income (Loss) $675 $237 $417 ($164) Interest Expense Income Tax Expense Depreciation and Amortization Net Periodic Pension Cost (a) Other (b) EBITDAP, as adjusted $2,367 $2,105 $2,105 $1, Notes Payable and Overdrafts Long Term Debt / Capital Leases due Within a Year Long Term Debt and Capital Leases 6,162 4,888 4,789 4,319 Total Debt $6,249 $5,086 $5,201 $4,745 Unfunded Pension Liability $1,855 $3,522 $3,097 $2,549 Adjusted Debt $8,104 $8,608 $8,298 $7,294 Adjusted Debt/EBITDAP 3.42x 4.09x 3.94x 4.29x a) Net periodic pension cost excludes curtailments/settlements and termination benefits. b) Other includes rationalization charges and other (income) and expense. 41

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