2012 KeyBanc Industrial, Automotive and Transportation Conference

Transcription

1 2012 KeyBanc Industrial, Automotive and Transportation Conference Roy Armes - Chief Executive Officer Brad Hughes - CFO Brad Hughes CFO 1 May 30, 2012

2 Safe Harbor Statement This presentation contains strategic goals and other forward-looking statements related to future financial results and business operations for Cooper Tire & Rubber Company. Actual results may differ materially from the goals and from current management forecasts and projections as a result of factors over which the Company may have limited or no control. Information on certain of these risk factors and additional information on forward-looking statements are included in the Company s reports on file with the Securities and Exchange Commission and are set forth at the end of this presentation. Q results are scheduled to be released on August 9, 2012 See Coopertire.com for details. 2

3 Available Information Our internet address is We webcast our earnings calls and certain events we participate in or host on the investor relations portion of our website, We also make available on our website free of charge a variety of information for investors. Our goal is to maintain the investor relations portion of the website as a portal through which investors can easily find or navigate to pertinent information about us, including: our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically ll file that material with or furnish it to the Securities and Exchange Commission ( SEC ); information on our business strategies, financial results and selected key performance indicators; announcements of our participation p at investor conferences and other events; press releases on quarterly earnings, product and service announcements and legal developments; corporate governance information; and other news and announcements that t we may post from time to time that t investors might find useful or interesting. The content of our website is not intended to be incorporated by reference into this presentation or in any report or document we file with or furnish to the SEC, and any references to our website is intended to be inactive textual references only. 3

4 Agenda Recent News Company Background Q results Raw Materials Strategic Plan and Current Tactics Balance Sheet and Investments Changing Industry Factors Other Items Risks 4

5 Recent news December 2011 Implemented a price increase in the U.S. of up to 5% with in-line adjustments effective Dec. 1, 2011 January 2012 Finalized purchase of tire plant in Kruševac, Serbia January 2012 United Steelworkers Local 752L ratify 4 year labor contract at the Texarkana plant February United Steelworkers Local 207L ratify 5 year labor contract at the Findlay plant 5

6 A leader in the tire industry 2011 Sales by Segment 30% North America 70% International 9 th largest global tire manufacturer and 4 th largest in the U.S revenue of $3.9 billion 13% market share in the U.S. light vehicle replacement tire market Limited O E presence Rapidly growing international segment 5% Sales by Product* Limited O.E. presence 5% 5% Passenger 20% Light Truck 50% Commercial Truck Winter 20% Specialty 2011 unit sales 47 million tires 6 *based on an approximation of recent years net sales, primarily in the replacement market

7 With a global network and presence g p Note: Operations in Rongcheng City, China, and Guadalajara, Mexico are not wholly owned. Assets from the operation in Kruševac, Serbia were acquired in early

8 A flexible and cost effective manufacturing network Findlay, OH (mfg, R&D, Corp HQ) Texarkana, AR (mfg) Tupelo, MS (mfg) Pearsall, TX (test track) Occidente, Guadalajara, Mexico (mfg) Stow, OH (Mickey Thomson HQ) Clarksdale, MS (rubber mixing) Cooper Chengshan Tire (CCT), Rongcheng g City, China (mfg) Cooper Kunshan Tire (CKT), Kunshan, China (mfg) Asia Technical Center (ATC) and HQ, Shanghai, h China (R&D) Melksham, England (mfg, R&D, European HQ) Cooper Tire Serbia (mfg) Kruševac, Serbia Cooper's sourcing alternatives are used to maximize cost effectiveness using high quality, near source operations. Note: Operations in Rongcheng City, China, and Guadalajara, Mexico are not wholly owned. 8

9 A strong, diverse brand portfolio House Brands Private Brand Distributors and National Retailers 9

10 A historically resilient industry in the U.S. Millions of tires Light vehicle replacement tire industry shipments Passenger Light Truck In four decades only once has there been a period of two consecutive years of decline Light Truck Passenger is based on RMA estimates released December 2, 2011

11 A Company that can grow Net Sales, USD Billions Total North America International North America International Eliminations (0.1) (0.1) (0.1) (0.2) (0.2) (0.2) (0.3) (0.5) Total amounts may not add due to rounding

12 Diversifying gprofits 200 Operating Profit, USD millions Total North America International

13 Tire shipments can be impacted by economic factors Percentage change in United States Shipments Q vs Q Full Year 2011 vs Full Year 2010 Total RMA Total RMA Industry Members Cooper Industry Members Cooper Passenger -4.5% -7.7% -6.0% -2.5% -1.7% -1.0% Light Truck -14.0% -14.3% -6.7% -0.1% 1.8% 7.5% Total Light Vehicle -5.8% -8.6% -6.1% -2.2% -1.3% 0.4% Medium Truck -12.9% -16.5% 14.2% 4.6% 1.6% 34.8% Shipments have been strongest in the UHP and light truckproduct lines, while broadline and value tires continued to be the most impacted by the economic environment. April 2012 total industry shipments were down 5.1% for replacement light vehicle and down 5.7% year to date. 13 Data Source: RMA and Cooper Tire

14 Q Related information including an operating profit walk from the prior year is available at Coopertire.com under the Investor Relations page. (millions USD, except EPS) Net Sales by Segment Q Q Change from Prior Year North American Tire $ 698 $ % International Tire % Eliminations (118) (105) 11.7% Total Company $ 984 $ % Operating Profit by Segment OP % OP % North American Tire $ % $ % $ 1 International Tire % % 13 Eliminations (1) (2) 1 Corporate (7) (8) 0 Total Company $ % $ % $ 16 Earnings Per Share (diluted) from continuing operations attributable to * common stockholders $ 0.34 $ 0.25 $ 0.09 Cash and Cash Equivalents $ 258 $ 188 $ 69 14

15 Tires are a complex product Input % of CoGS Raw Materials 50-55% Labor 20-30% Other 15-30% Raw Material Breakdown % of RM Natural Rubber 20-25% Synthetic Rubbers 25-30% Carbon Black 10-15% Reinforcing Fabrics 10-15% 15% Steel 10-15% Other Raw Materials 10-15% 15 Note: These costs are historical estimates of typical costs and are based on production in what would traditionally be considered a high cost country. Raw material in Q1, 2012 was approximately 63% of CoGS for the total Company.

16 Raw material cost volatility is a challenge Cooper's Raw Material Index Q = 251 Q % 7% 16 Q2, 2012 is an estimate.

17 Successful new product launches support growth Cooper Zeon RS3 UHP tire and the Cooper Discoverer AT3 recognized by a prominent consumer testing organization as best available on the market. Media Recognition Brand Embedment Exciting Products 17 Significant product launches including commercial tires are occurring around the globe.

18 A solid balance sheet and available liquidity millions USD 3/31/2012 Cash & cash equivalents $258 Parent Company Credit Lines $275 to $375 $533 to $633 Liquidity Items for Consideration Capital expenditures between $180 and $210 million in 2012 Depreciation approximately $130 million in 2012 Lowest level of cash needed = $75 million Additional $222 million of credit available in China 3/31/ /31/2011 Parent Company 8% unsecured notes due December 2019 $ 174 $ % unsecured notes due March Capitalized leases and other Corporate Debt Ratings: Moody's B1, Stable S&P BB-, Stable Subsidiaries Total debt Less current maturities $ 335 $

19 Investment decisions focus on creating shareholder value Funding Considerations Sustaining basic operations Dividends Strategic investments Profitable growth Cost reductions Additional pension funding Optimize WACC, long-term capital structure, and credit rating Opportunistic capital structure changes Other shareholder-friendly actions Cash & Cash Equivalents (millions USD) at 12/ $ $ $ $ $ $ $234 Analysis includes a review of returns and the anticipated future business environment. Priorities can change based on those expectations

20 421 Tariff Impact Preparing for a changing gindustry Additional Tire Labeling tariff of 30% on Chinese tires will reduce 421 Tariff Cooper to 25% supports in Sep, to the extent 2011 it and 0% at Sep Additional tariff of 30% on Chinese tires will enhance consumers' reduced d to 25% in September 2011 and may understanding Companies of tires have in a increased imports be 0% in from September countries reasonable other than manner. Companies have increased imports from China. countries other than China. Regulations are still being Cooper is well-positioned to deal with either refined, Cooper implementation is well ti positioned begins in to deal scenario with (tariff either continuing or scenario expiring) in Europe. Enhanced competiveness at U.S. (tariff continuing or expiring). plants Cooper continues to be engaged Supply from Mexico and will Enhanced use our strengths competiveness to at U.S. Flexibility plants at Cooper Kunshan Tire (can benefit as the regulations are sell into China starting in 2012) finalized. Supply from Mexico Flexibility at Cooper Kunshan Tire Rolling Resistance and Fuel Efficiency Cooper launched a "green tire" the GFE, in Investments in related technology will continue. Future products will include this technology to drive value for the consumer

21 Other Items Products liability charges for the full year of 2012 higher following the long term trend of expenses and costs associated with an active trial docket. Pension funding and expense in 2012 should be in the range of $40 million to $50 million. UK pension plan frozen effective April 6, 2012 (curtailment gain approximately $7 million in Q Effective tax rates for the full year 2012 in the range of 26% to 34%. Capital expenditures in 2012 in the range of $180 million to $210 million

22 We have delivered on our long term strategy Benefits More details on Cooper's Strategic Plan are available at Coopertire.com. Continued investment in our business in China, Mexico, Eastern & Central Europe Investing in high quality well recognized products such as Cooper Zeon RS3 & Discoverer A/T3 Continued trend of 161 consecutive quarterly dividends Total shareholder return of 36% from 2008 thru 2011 (top quartile of the S&P) 22

23 Questions? 23 23

24 Risks It is possible that actual results may differ materially from those projections or expectations due to a variety of factors, including but not limited to: the failure to achieve expected sales levels; volatility in raw material and energy prices, including those of rubber, steel, petroleum based products and natural gas and the unavailability of such raw materials or energy sources; the inability to obtain and maintain price increases to offset higher production or material costs; the impact of labor problems, including a labor disruptions at the Company or at one or more of its large customers or suppliers; the failure of the Company s suppliers to timely deliver products in accordance with contract specifications; changes in economic and business conditions in the world; changes in interest or foreign exchange rates; increased competitive activity including actions by larger competitors or lower cost producers; consolidation among the Company's competitors or customers; changes in the Company s customer relationships, including loss of particular business for competitive or other reasons; litigation brought against the Company including products liability claims, which could result in material damages against the Company, as well as potential increase in legal fees due to a more active trial docket in the coming year; volatility in the capital and financial markets or changes to the credit markets and/or access to those markets; an adverse change in the Company s credit ratings, which could increase its borrowing costs and/or hamper its access to the credit markets; changes in pension expense and/or funding resulting from investment performance of the Company s pension plan assets and changes in discount rate, salary increase rate, and expected return on plan assets assumptions, or changes to related accounting regulations; changes to tariffs on certain tires imported into the United States from the People's l' Republic of China or the imposition of new tariffs or trade restrictions; government regulatory and legislative initiatives including environmental and healthcare matters; the failure to develop technologies, processes or products needed to support consumer demand; technology advancements; failure to implement information technologies or related systems including failure to successfully implement an ERP system; the risks associated with doing business outside of the United States; failure to attract or retain key personnel; inaccurate assumptions used in developing the Company s strategic plan or operating plans or the inability or failure to successfully implement such plans; failure to successfully integrate acquisitions into operations or their related financings may impact liquidity and capital resources; changes in the Company s relationship with joint venture partners; the inability to recover the costs to develop and test new products or processes; inability to adequately protect the Company s intellectual property rights; and inability to use deferred tax assets