Deutsche Bank Global Auto Industry Conference - January 13, 2015
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Deutsche Bank Global Auto Industry Conference January 13, 2015
Safe Harbor This presentation contains what the Company believes are forward-looking statements related to future financial results and business operations for Cooper Tire & Rubber Company. Actual results may differ materially 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 set forth at the end of this presentation. 244844-64 - CTB investor day - 15Apr14 - V17 (Roy script).pptx Draft—for discussion only 1 1
Our Value Proposition
To be our
customers' best
service/value supplier
Great Great Great
Products Price Service
244844-64 - CTB investor day - 15Apr14 - V17 (Roy script).pptx Draft—for discussion only 2
Winning Formula for Operational Excellence
Vision Globally competitive cost structure on every tire we produce
1 2 3 44
Cost Product Portfolio
Global Sourcing Automation
Effectiveness Management
Optimize production Reduce total Invest in U.S. plant Reduce
across global production cost per automation manufacturing
footprint tire • Reduce labor cost complexity
Strategic • Material • Decrease variation
Near-sourcing • Conversion and scrap Improve cost
Focus strategy • Scrap • Improve quality competitiveness
Areas • Distribution
Product family
consolidation
5
All cost initiatives pursued while maintaining and elevating
quality, safety and sustainability
244844-64 - CTB investor day - 15Apr14 - V17 (Roy script).pptx Draft—for discussion only 3
Americas Tire Operations Business Overview
• 4th largest manufacturer • Established in 2007 • Max-Trac Tire Co., Inc.
in North America1 dba Mickey Thompson
• One manufacturing Performance Tires &
• Three tire manufacturing facility near Wheels; wholly-owned
facilities (Findlay, Tupelo Guadalajara with our Cooper subsidiary
and Texarkana) JV partner • Acquired in 2003
• Premium brand,
• ~4,900 employees • ~1,100 total performance positioning
employees including • ~75 employees
JV partner
Cooper Cooper CS5 Cooper Deegan 38
Discoverer AT3 Ultra Touring Classic
1. Based on production capacity. Source: Tire Business 2013 Global Tire Report
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 4 4
Americas 2013 Unit Sales Breakdown
Replacement Focus Diversified Product Mix Principally Branded
Replacement Market
99%
Light
20% Truck House Private
Passenger 74% 69% 31%
brands label
1% TBR
3% Winter
1%
2% Specialty
OE Market
increasing exposure to the fastest growing and most attractive
segments with a strong portfolio of house brands
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 5 5
Winning Formula for Americas Tire Operations
Diversify and grow in the most attractive segments
Vision to be our customers' best service/value supplier
1 2 3 4
Become an Grow in Leverage
Mix and margin
established OE Commercial footprint to grow
enhancement
supplier Vehicles in Latin America
Continue product launch Grow OE segment Recover and grow Expand Mexico
successes Roadmaster share manufacturing
No more than 10% of
Strategic Focus on growth of the
Cooper brand
business Grow in OE segment Continue success in
Mexico and Central
Focus Enter car dealer Enter fleet replacement America
Convert capacity to grow replacement channel channel
Areas more premium units Leverage footprint to
Further advance grow in the rest of Latin
Grow in underpenetrated Cooper technology America
channels
Deemphasize wholesale
private-label business
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 6 6
1 Mix & margin enhancement
We Have Been Successfully Shifting Our Mix Toward
Premium Segments…
Cooper PCR / SUV mix Several Drivers of Premium Mix Shift
% of Cooper volume • Increasing pace of branded new product
development with focus on premium
segments
• Accelerating capacity conversion to
Premium segments
(Winter, UHP, H, V, support premium unit growth
and SUV)
• Growing our branded PCR and SUV share
in underpenetrated channels
• Continuing Mickey Thompson growth in the
T & below specialty segment
• Raising brand awareness through targeted
2009 2011 2013 Next level advertising spend
(by 2017)
Operating profits for “premium segments" 5 to 15 times
higher than T & below rated tires
1. Winter, UHP, V-rated, H-rated and SUV
Source: Cooper internal data
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 7 7
2 Become an established OE supplier
Cooper Pursuing Becoming an Established OE Supplier in
North America
OE Growing Twice as Fast as We Have a Strong Rationale for
Replacement Market1 in North America2 Entering the OE Business Now
Million units
OE is a faster-growing segment and
500 market conditions for OE profitability
have improved
CAGR
2.6%
368 '13-17
We have the right technology and
333
23% OE 4% products
21%
250 OE generates pull for replacement market,
increases penetration in car dealership
channels
79% 77% Replacement 2%
Also enhances brand awareness
0 Ultimately, it compels us to always get better!
2013 2017E
We expect to maintain focus on the replacement segment
while pursuing OE business.
1. Includes PCR and LT. 2. United States, Canada, and Mexico.
Source: LMC Automotive
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 8 8
3 Grow in Commercial Vehicles
We Are Increasing Our TBR Market Share in North
America...
Focused on Recuperating
Roadmaster Share… … and Growth in Fleet and OE
TBR unit sales Significant growth opportunity for
-46%
Cooper, and currently building in-
+33% CAGR house expertise and capabilities:
• National Accounts Program
• 24/7 Fleet Emergency Service
• Fleet Engineer team
Success in fleets also a pull-through
2008 2010 2012 2013
in OE segment
Supply issue resolved Increased investments in sales and
marketing
Began delivering Roadmaster products in Q1 2014
Winning back positions with key customers
Our TBR margins ~2–3 times higher than PCR/LT margins
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 9 94 Leverage footprint to grow in Latin America
...And Growing in Mexico, Brazil and Latin America by
Leveraging Mexico LCC Manufacturing
Leveraging Strong Asset in Mexico… ...To Grow in Latin America
Low cost, near-sourced manufacturing facility Colombia 2017F
(Millions)
• Lower labor and distribution cost
Population 48
• Faster response to market demand changes Replacement
7
tire demand1
Mexico 2017F
Reduced duties for major Latin American (Millions)
markets Population 128
Replacement
27
Opportunity to raise capacity by 50% to tire demand1
accelerate LT and PCR production
Brazil 2017F
(Millions)
Chile 2017F Population 206
Cooper tire (Millions) Replacement
47
manufacturing Population 18 tire demand1
facility near Replacement
5
Guadalajara tire demand1
1. Annual replacement unit demand for PCR, LT and TBR
Source: LMC Automotive
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 10 10International Tire Operations Business Overview
Cooper Tire Asia Cooper Tire Europe
~1,100 employees ~1,400 employees
Established operations in 2006 Acquired operations in 1997
One manufacturing facility in China: Two manufacturing facilities in Europe:
Kunshan (CKT) Melksham (U.K.) and Krusevac (Serbia)
Asia Technical Center opened in 2008, European Technical Center opened in 2007
moved to new facility in 2014
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 11 11Winning Formula for International Tire Operations
Vision Achieve profitable, sustainable growth in our International segment sales
1 2 3 4
Profitable Leverage our
PCR / TBR Penetrate
growth in sourcing for growth
growth in China China OE market
Western Europe in Eastern Europe
Increase pace of new Expand our OE Clarify and strengthen Improve service
product launches to position in China product offering to through local sourcing
meet customer needs customers
Strategic Generate consumer Improve manufacturing
Improve PCR/TBR pull via increased Improve Cooper brand cost competitiveness
Focus distribution channels brand recognition awareness and growth
Areas Grow in high potential
Grow profitably in key Eastern European
markets (U.K., countries and Russia
Germany)
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 12 12CCT Ownership Decision
Independent
valuation firm
determined the fair
market value of the
joint venture
Cooper Buys CCT Cooper Sells CCT
• Well-built asset with a great track • Cooper maintains supply via offtake
record rights for at least three years
• Likely to continue to look at other • Several options available, e.g.
growth opportunities, e.g. M&A acquisitions, brown or greenfield
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 13 132 Penetrate China OE market
OE Presence is Vital to Win in China
In China, OE Accounts for ~40%
of total PCR and LT demand Growth in OE is Vital to Win in China
Million units OE segment for PCR and LT make up ~40% of
500 market demand in China and growing rapidly
at ~11% per year
12% 375 Consumers have a strong sense of brand in
China and OE fittings drive consumer pull for
40% 11% replacement tires
250 235 • High preference for OE brand in first and
second replacements
43%
OE presence also important to raise brand
60% 13%
awareness and consideration
57%
0
2013 2017E
OE Replacement
Note: Figures include demand for PCR and Light Truck
Source: LMC Automotive
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 14 143 Profitable growth in Western Europe
We Are Focused on Growing our Solid Position in the U.K.
and Capturing Profitable Growth in Germany
United Kingdom
Total replacement
demand (M units) • Cooper one of the top 5 players
60 with well established brands and
1%
distribution footprint
40 33 35 • Melksham production facility to
serve local demand
20 • Profitable niche and premium
strategy (e.g. UHP, motorcycle,
0 racing tires)
2013 2017F
United
Germany Kingdom Germany
Total replacement
demand (M units) • Largest market in Europe
100
• Increased market share in 2013
3% with strong growth in W,Y,Z rated
64
58 PCR and SUV segments
50 • Leveraging new product
successes to grow Cooper brand
0
awareness
2013 2017F
Note: Figures include demand for PCR, light truck and TBR
Source: LMC Automotive
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 15 154 Leverage our sourcing for growth in Eastern Europe
Plans to Expand Presence in High Potential Countries in
Eastern Europe
Eastern Europe (including Russia)
Total demand (units)
200
6%
163
150 129
100
Estonia
Russia 50
Latvia
Lithuania 0
Belarus 2013 2017F
Poland
Czech
Ukraine • Fastest growing markets in Europe
Rep. Slovakia
Hungary Romania
• Leverage manufacturing presence in Serbia
Serbia
Bulgaria
– LCC cost advantage
– Duty free into both EU & Russia
• Plans to increase sales force and resources
in Eastern Europe
Note: Figures include OE and replacement demand for PCR, light truck and TBR
Source: LMC Automotive
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 16 16Financial Update
9 Months 2014 Results*
*9 months 2013 includes the impact of labor actions at Cooper’s Chinese joint venture, the impact of inefficiencies related to an ERP installation, and costs related to a then-pending merger which was
Subsequently terminated. YOY comparisons are not necessarily representative of the business under normal circumstances.
244844-64 - CTB investor day - 15Apr14 - V17 (Roy script).pptx Draft—for discussion only 18 18A Strong Balance Sheet Gives us Financial Flexibility
Healthy Balance Sheet... ...With Ample Financing Flexibility
Cash and cash equivalents ($M)
600 +15%
398
400 346
$200M
200 Asset backed revolving
credit facility
0
Q4 ’07 Q4 ’13
Debt/Enterprise value1
40
38 $175M
Accounts receivable
-22 securitization program
20 16
0
2008 2013
1. Debt is short-term debt, current portion of long-term debt and long-term debt
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 19 19We Carefully Consider How to Best Allocate Capital to High
Shareholder Return Opportunities
Different Alternatives for In the Last Five Years,
Using Excess Cash We Efficiently Deployed Capital
Fund maintenance projects
Pursue high ROIC projects ROIC1 ROIC weighted average
• E.g. U.S. plant automation, product mix change in last five years = 16%
30
Expand capacity to support growth 20
• Within current plant footprint ...
• ... or beyond, e.g., Serbia 10 22
16 16 14
11
8
Maintain strong balance sheet including 0
pension funding
-14
-10
Return capital to shareholders:
• Regular dividends (set based on ability to -20
maintain through recessions)
2007 2008 2009 2010 2011 2012 2013
• Buybacks or special dividend
1. Return on Invested Capital, including non-controlling equity
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 20 20We Expect to Further Grow Cash to Fund the Business and Other Uses DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 21
We Have Set Bold Aspirations for the Future
Long-term
$5-6B 10+%
operating
net sales
margin
8-10%
operating margin on a
consistent basis
2013
$3.4B 7%
operating
net sales
margin
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 22 22Risks
It is possible that actual results may differ materially from projections or expectations due to a variety of factors, including but not limited to:
• 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 failure of the Company’s suppliers to timely deliver products in accordance with contract specifications;
• changes in economic and business conditions in the world;
• failure to implement information technologies or related systems, including failure by the Company to successfully implement an ERP system;
• increased competitive activity including actions by larger competitors or lower-cost producers;
• the failure to achieve expected sales levels;
• changes in the Company’s customer relationships, including loss of particular business for competitive or other reasons;
• the ultimate outcome of litigation brought against the Company, including stockholders lawsuits relating to the Apollo merger as well as products liability claims, in each case which
could result in commitment of significant resources and time to defend and possible material damages against the Company or other unfavorable outcomes;
• changes to tariffs or the imposition of new tariffs or trade restrictions;
• 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;
• government regulatory and legislative initiatives including environmental and healthcare matters;
• volatility in the capital and financial markets or changes to the credit markets and/or access to those markets;
• changes in interest or foreign exchange rates;
• an adverse change in the Company’s credit ratings, which could increase borrowing costs and/or hamper access to the credit markets;
• the risks associated with doing business outside of the United States;
• the failure to develop technologies, processes or products needed to support consumer demand;
• technology advancements;
• the inability to recover the costs to develop and test new products or processes;
• a disruption in, or failure of, the Company’s information technology systems, including those related to cyber security, could adversely affect the Company’s business operations and
financial performance;
• the impact of labor problems, including labor disruptions at the Company, its joint venture, or at one or more of its large customers or suppliers;
• failure to attract or retain key personnel;
• consolidation among the Company’s competitors or customers;
• 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 its joint-venture partner or suppliers, including any changes with respect to CCT’s production of Cooper-branded products;
• the inability to obtain and maintain price increases to offset higher production or material costs;
• inability to adequately protect the Company’s intellectual property rights; and
• inability to use deferred tax assets;.
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 23 23Available Information
You can find Cooper Tire on the web at coopertire.com. Our company webcasts earnings calls and
presentations from certain events that we participate in or host on the investor relations portion of our
website (http://coopertire.com/investors.aspx). In addition, we also make available a variety of other
information for investors on the site. 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
Cooper Tire, 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 file that material
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 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 we may post from time to time that investors may find relevant.
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 are
intended to be inactive textual references only.
DB Leverage conf Oct 2014 (3).pptx Draft—for discussion only 24 24You can also read
