Investor Presentation - Credit Suisse US Small/Mid Cap Conference, New York, NY September 15, 2016 Ginger Jones, SVP & Chief Financial Officer ...
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Investor Presentation Credit Suisse US Small/Mid Cap Conference, New York, NY September 15, 2016 Ginger Jones, SVP & Chief Financial Officer Jerry Bialek, Director, Investor Relations and Strategic Planning
Safe Harbor Statement
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 SEC and at
the end of this presentation.
1
Leading Global Tire Company
• 100+ year history
• 5th largest tire manufacturer in the U.S. and 12th largest worldwide
(based on sales)
• Organized across four business segments: North America, Latin
America, Europe and Asia. Externally report two regions, Americas and
International Operations.
• Over 9,100 employees across four continents
• Focus on Replacement Passenger Car Radial (PCR), Light Truck (LT),
SUV and Truck & Bus Radial (TBR) Tires, and a growing OE business in
Asia.
• Middle innings of business transformation:
– Build Competitive Cost Position Investing in Automation,
Reduction in procurement spend and other operating improvements.
– Drive Topline Growth Mix Enhancement and Investing in R&D,
Technology and New Products
– Build Capabilities & Enablers to Support Strategy Key
investments in Cooper Production System (CPS), OE, TBR,
Technical & Business Development
2
Business Overview 3
Our Value Proposition
Be Our
Customers' Best
Service/Value Supplier
Great Great Great
Products Service Value
4
Strong and Expanding Global Manufacturing Footprint
• January 2016 • November 2015
signed LOI signed with
agreement to FATE to
acquire 65% distribute
ownership Cooper
• Adds capacity products and
near Qingdao, opportunity to
China explore other
opportunities
• Site will
ultimately • Facility in San
produce 2.5 to Fernando,
3.0 million in Argentina
TBR tires • FATE produces
annually passenger, light
• Deal expected truck, and SUV
to close in 2H and TBR tires
2016
5
2015 At A Glance – A Year of Successful Execution
2014 2015
Volume Growth
(2014 ‐ 2015) Net Sales $2.9B* $3.0B
6.4%
4.3% Operating Margin 8.8% 11.9%
EPS (diluted)
Excluding gain of sale of $2.53 $3.69
subsidiary
Americas International*
* 2014 Excluding divested JV entity in China (CCT)
6
H1 2016 At A Glance – Margin Enhancement Continues
H1 2015 H1 2016
Volume Growth
(H1 2015 ‐ H1 2016) Net Sales $1.4B $1.4B
3.5%
Operating Margin 12.0% 14.5%
EPS (diluted) $1.72 $2.32
‐1.2%
Americas International
7
Middle Innings of Strategic Transformation
TRANSFORMATION TIMELINE – A Track Record of Successful Execution
Phase I (Progress to-date) Phase II (Medium-term) Phase III (Long-term)
• Improve Manufacturing Cost Base and
• Drive mix and margin enhancement
Footprint:
• Continue transition to HVA/Premium
• Opened, acquired and grew plants
Brand products in North America • Achieve $5-6B in net
in Mexico, China and Serbia
• New product launches across global sales
• Invested in automation and plant
footprint
modernization
• Achieve 8 – 10% OP Margin
• Reduced product complexity
• Continued global expansion in key
• Enhance Technical Capabilities:
target markets through established
• Relocated and expanded Asia footprint:
technical center and refocused R&D
• Leverage LATAM footprint to grow in
agenda to market needs • Achieve 10+%
region
• Established global technical operating margin on a
• Organic and acquisitive growth in
center consistent basis
PCR/TBR segments in China
• Reduced product development
• Penetrate China OE market
cycle time to launch more products
at faster pace • Leverage global sourcing for growth
in Europe
• Built technical capabilities to
penetrate and win in OE, TBR and • Continued focus on plant optimization and cost management
premium PCR segments across the global footprint
8
Why Invest in Cooper?
• Chairman, President & CEO Roy V. Armes to retire August 31, 2016
• Brad Hughes, current COO, to succeed Mr. Armes. Hughes with Cooper
Experienced Management Team
over six years in roles of CFO, President of International Operations, and
with Proven Track Record
COO
• Management successfully executed transformation after challenging 2013
• Positive outlook for global tire demand – CAGR approximately 4.1%
• Majority of growth led by emerging markets, China in particular, where
Macro Environment Supportive
Cooper is expanding its presence and has most opportunity for
of Strategic Growth Objectives
growth relative to peers
• Balanced supply and demand and stable pricing environment
• Focus on replacement tires (not OE) in the US
• Capacity additions and manufacturing upgrades make for strong
Middle Innings of Exciting manufacturing footprint that Cooper is able to leverage globally
Transformation • New product development, shift to premium/HVA products in key markets
enhance top line performance
• Company already achieving key profitability targets
• Strong balance sheet with $412 million in cash and cash equivalents as of
end June 30, 2016 and low debt profile provide financial flexibility to pursue
Financial Strength/Discipline & growth opportunities
Commitment to Returning
• Disciplined and trusted management team are good stewards of
Value to Shareholders
capital - ROIC average 15% over past seven years
• Company committed to dividend and share repurchase
9Macro-Economic Environment 10
Global Tire Demand Continues Positive Trajectory
China Leads Overall Market Growth
China U.S. & Canada Western Europe Latin America
500
442
1.0%
400 7.6%
364 1.4%
36% 348 339
307 310 319 317
20%
M units
300 20% 22%
15% 22% 22%
234
40%
4.7%
200 173
42%
80% 137 28%
64% 85% 80% 78% 121
78% 78% 26%
100 60% 29%
58% 72%
71% 74%
0
2010 2015 2020E 2010 2015 2020E 2010 2015 2020E 2010 2015 2020E
• Robust overall market growth • Conservative market growth • Moderate overall market growth • Solid overall market growth
estimate • Replacement makes up 74% of
• OE makes up 40% of total demand • Replacement makes up 78% of
• Replacement makes up 80% of volume volume
• Replacement growing faster
volume • OE growing faster than
• OE and Replacement growing at Replacement due to increase in
similar rate new vehicle sales
Projected Market Growth Original Equipment Replacement
OE
Replacement China 6% 9%
U.S. & Canada 1% 1%
PCR, LT, and TBR Western Europe 2% 1%
Latin America 6% 4%
Source: LMC Data (Mar, 2016), RMA (Mar, 2016), TRAC (Mar, 2016)
11Passenger Tires Shifting with Global Trends
In the mature U.S. & European replacement markets the shift to H rated and above continues…
2015-2020 2015-2020
CAGR CAGR
100% 100%
26% TR -3.5% 27% 21% TR -1.5%
80% 38% 80% 33%
50%
60% 60%
HR+ 3.5%
40% 74% HR+ 3.0% 40% 79%
67% 73%
62%
50%
20% 20%
0% 0%
2010 2015 2020E 2010 2015 2020E
…while in emerging markets significant mix transition is projected in Mexico with China’s current OE & future
replacement market dominated by H rated & above
2015-2020 2015-2020
CAGR CAGR
100% TR 4% 9.7%
80% TR -1.5%
53%
66% 63%
60%
HR+ 96%
40%
HR+ 6.0%
20% 47%
34% 37%
0%
2010 2015 2020E Source: RMA, IHS, JATO, ETRMA, Solidiance, Internal Cooper analysis
12Raw Material Pricing
Raw Material Price Index ‐ The Americas 2002‐2016
300
250
200 *Expect
Q3 2016
Increase
150
100
50
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
• Business currently benefitting from downward trend in raw materials.
• Business well positioned for change in raw material trend:
• Global operational structure centered around succeeding within an increasingly competitive
environment
• Pricing posture market-facing to remain competitive
13TBR Dynamics
Pending TBR Tariff Background Cooper Diversifying TBR Sourcing
• United Steel Workers petitioned ITC seeking import
duties on TBR tire imports from China in January 2016
• DOC and ITC are investigating raising duties – the • Cooper executed first step in diversification
potential impact on industry could be significant
of TBR sourcing through GRT investment in
• About 50% of U.S. TBR tires are imported China:
• China produces about 45% of the world’s TBR • GRT facility will ultimately produce approx. 2.5 – 3.0
tires million TBR tires annually
• China is largest growth market in the world – own
• DOC announced its preliminary CVD tariff rate on June sourcing critical
28, 2016. The rate that applies to Cooper/GRT is
20.22%, effective July 5, 2016.
• Preliminary AD tariff rate expected to be announced on • Cooper devoted to evaluating other options
August 26, 2016
for additional TBR supply, inside and
• Estimated tariff impact is included in Cooper’s 2016 full outside of China
year guidance
• Final decision likely in early 2017
14Transformation 15
Transformation – Bold Aspirations for the Future
Long-term
$5-6B 10+%
operating
net sales
margin
8-10%
operating margin on a
consistent basis
2014
$3.4B 8.8%
operating
net sales
margin
16Investment in R&D and Technology: New Product Launches
• Reduced product development cycle time to launch new products at a faster
Emphasis on Investing in R&D and pace
Technology = Award Winning • Relocated and expanded Asia technical center and refocused R&D agenda
Products and Increased Technical on market needs
Capabilities • Built technical capabilities to penetrate and win in OE, TBR, and premium
PCR segments
The Cooper Zeon RS3‐G1 is an exciting new all‐
The Cooper Discoverer SRX and The Cooper Zeon ECO C1 was season passenger car tire for high performance
Discoverer A/TW received awarded the “Best Energy Saving Tire vehicles and drivers. Alongside a sleek race‐
for 2016” at the Auto Magazine and
“recommended buy” from A Car awards ceremony. inspired sidewall, the tire’s tread compound
Consumer Reports December 2015 and design deliver a host of leading innovative
April 2015 features to create grip, stability and durability.
Recommended The product has been given the name G1
by another because it holds up to 1g on corners!
leading
consumer
magazine The Cooper Discoverer STT Pro &
Cooper Discoverer SRX tires won the
2015 GOOD DESIGN™ Award from the
Chicago Museum of Architecture and
The Discoverer A/TW Design and the European Centre for
received Innovator of the Architecture Art Design and Urban
Year award from Canadian Studies.
Cooper Zeon RS3‐A a Tire. December 2015
Consumers Digest Best September 2015
Buy … again!
January 2015 The Cooper Discoverer UTS & Cooper
Weather Master Ice 100 tires won the 2015
GOOD DESIGN™ Award from the Chicago
Museum of Architecture and Design and the
Vendor Innovation European Centre for Architecture Art Design
Award and Urban Studies.
December 2015
CONFIDENTIAL
COMPETITIVE COMMERCIAL INFORMATION:
17 Access limited to authorized personnel. Copyright ©
UnpublishedCost Structure & Footprint Provide Foundation for Growth
Americas Tire Operations International Tire Operations
North America
Mix and Margin Pursue OE Grow in China Penetrate
Asia
Enhancement Business PCR/TBR China OE
HVA Mix Selectively Segments Market
Leverage Leverage
Europe
Grow in Profitable
LATAM
Footprint to Sourcing for
Commercial Growth in
Grow in Growth in
Vehicles Western
LATAM Eastern
Europe
Europe
Product Portfolio
Global Sourcing Automation Cost Effectiveness
Management
Globally Competitive Cost Structure on Every Tire Produced
18Financial Strength
&
Returning Value to Shareholders
19Strong Balance Sheet Provides Financial Flexibility
Ample Financing Flexibility
Healthy Balance Sheet
Cash and cash equivalents ($M) $400M
Cash flow facility
+46%
$150M
Accounts receivable
securitization program
Q4 ’07 Q4 ‘15
Credit lines at Global
Operations
Debt/Enterprise value1
38
40
-22
20 16 Recent Credit Rating Upgrades
0
2008 2015
Moody’s to Ba3
1. Debt is short-term debt, current portion of long-term debt and long-term debt
S&P to BB
20Balanced Approach to Capital Allocation
CapEx M&A Share Repurchases Dividend
ROIC1 Weighted Average ROIC = 15%
$22
25%
$tbd
20% $26
$24 $92
15% GRT
$200 $109
10% 22% $27
17% 18%
16% $210‐
12% 13%
5% 11% $240
$180 $183
$145
0%
2009 2010 2011 2012 2013 2014 2015
2013 2014 2015 2016E*
* 2016 guidance as communicated on August 4, 2016.
1.Return on Invested Capital, including non-controlling equity. Numbers in graph in millions (000,000)
Non-GAAP Measure: refer to appendix for definition and reconciliation to GAAP.
Investing for Growth Share Repurchases Dividend
• Capital to support organic growth and • Completed $372 million in share
margin improvement - plant optimization and repurchases from August 2014 through • Announced 178th consecutive dividend
operational efficiency August 3, 2016 (17% of outstanding) payment on August 3, 2016
• Track record of efficiently deploying capital • Additional $152 million remaining and • Continued commitment to quarterly dividend
to return value to shareholders authorized through December 31, 2017
21Why Invest in Cooper?
• Chairman, President & CEO Roy V. Armes to retire August 31, 2016
• Brad Hughes, current COO, to succeed Mr. Armes. Hughes with Cooper
Experienced Management Team
over six years in roles of CFO, President of International Operations, and
with Proven Track Record
COO
• Management successfully executed transformation after challenging 2013
• Positive outlook for global tire demand – CAGR approximately 4.1%
• Majority of growth led by emerging markets, China in particular, where
Macro Environment Supportive
Cooper is expanding its presence and has most opportunity for
of Strategic Growth Objectives
growth relative to peers
• Balanced supply and demand and stable pricing environment
• Focus on replacement tires (not OE) in the US
• Capacity additions and manufacturing upgrades make for strong
Middle Innings of Exciting manufacturing footprint that Cooper is able to leverage globally
Transformation • New product development, shift to premium/HVA products in key markets
enhance top line performance
• Company already achieving key profitability targets
• Strong balance sheet with $412 million in cash and cash equivalents as of
end June 30, 2016 and low debt profile provide financial flexibility to pursue
Financial Strength/Discipline & growth opportunities
Commitment to Returning
• Disciplined and trusted management team are good stewards of
Value to Shareholders
capital - ROIC average 15% over past seven years
• Company committed to dividend and share repurchase
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 or 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 to tariffs or the imposition of new tariffs or trade restrictions, including changes related to the anti-dumping and countervailing duties for passenger car and light truck
tires imported into the United States from China; and any duties from the recent open investigation into truck and bus tires imported into the United States from China;
• changes in economic and business conditions in the world;
• 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 terminated Apollo merger as well as product 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;
• 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;
• 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;
• failure to implement information technologies or related systems, including failure by the company to successfully implement an ERP system;
• 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;
• 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;
• any unforeseen circumstances that arise that cause the Board of Directors to alter its succession plans for the leadership of the company;
• risks relating to acquisitions, such as the proposed acquisition of a majority interest in China based Qingdao Ge Rui Da Rubber Co., Ltd., including the failure to successfully
complete acquisitions or integrate them 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 the production of Cooper-branded products by CCT, the
company’s former joint venture in China;
• the ability to find alternative sources for products supplied by CCT;
• 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.
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.
24Appendix 25
North America: Mix Shift to Premium Products
Drivers of Premium Mix Shift Operating profits for “premium segments" 2 to 10 times
higher than T & below rated tires
% of Cooper volume
• Increasing pace of branded new product
development with focus on premium
segments
• Accelerating capacity conversion to Premium segments
support premium unit growth (Winter, UHP, H, V,
and SUV)
• Growing our branded PCR and SUV
share in underpenetrated channels
• Continuing Mickey Thompson growth in
the specialty segment
T & below
• Raising brand awareness through
targeted advertising spend Next level
2009 2011 2013 2015
(by 2017)
1. Winter, UHP, V‐rated, H‐rated and SUV
Source: Cooper internal data
26Financial Performance
Six Months Ended June 30, 2016
(millions USD, except EPS)
(millions USD, except EPS)
6 Months Ended 6 Months Ended Change from Prior
Net Sales by Segment June 30, 2016 June 30, 2015 Year
Americas Tire $ 1,234 $ 1,272 -2.9%
International Tire 227 232 -2.2%
Eliminations (71) (88) 19.9%
Total Company $ 1,390 $ 1,415 -1.8%
Operating Profit by Segment OP % OP %
Americas Tire $ 222 18.0 $ 199 15.6 $ 24
International Tire 1 0.6 (6) -2.8 8
Corporate (22) (25) 3
Eliminations (1) 2 (3)
Total Company $ 201 14.5 $ 170 12.0 $ 31
Earnings Per Share (diluted) from continuing
operations attributable to common
stockholders $ 2.32 $ 1.72 $ 0.60
Cash and Cash Equivalents $ 412 $ 408 $ 4
Amounts are unaudited and may not add due to rounding.
27USW Petition for Tariff on TBR Tires from China
The United Steelworkers (USW) union filed a petition on January 29, 2016 with the ITC
seeking import duties on TBR tire imports from China
The U.S. AD law imposes special tariffs to counteract imports that are sold in the United
States at less than “normal value”
The U.S. CVD law imposes a different set of special tariffs to counteract imports that
benefit from unfair foreign government subsidies
For both AD and CVD duties to be imposed, the U.S. government must determine not
only that dumping and/or subsidization is occurring, but also that there is “material
injury” (or threat thereof) by reason of the dumped and/or subsidized imports
DoC announced its preliminary CVD tariff rate on June 28, 2016. The rate that applies
to Cooper/GRT is 20.22%, effective July 5, 2016.
Preliminary AD tariff rate was announced on August 29, 2016. The rate (net of offset)
that applies to Cooper/GRT is 20.46%, and is effective September 5, 2016 and
retroactive to June 8, 2016.
The preliminary AD is in addition to the preliminary CVD announced at the end of June.
Most likely timing for final ITC decision is mid February 2017.
28 ConfidentialPCR Tariffs
Tariffs on Chinese PCR Tires Imported to U.S.
Finalized August 2015
CVD AD Offsets Total*
Cooper Tire 20.7% 25.8% -14.7% 31.9%
GITI 36.8% 30.7% -15.4% 52.1%
Sailun 30.6% 14.4% -14.4% 30.6%
Other - separate
30.6% 25.8% -17.1% 39.3%
rate
Other - PRC-wide
30.6% 88.0% -11.5% 107.1%
rate
*In addition to the regular 4% tariff
29Preliminary TBR Tariffs
Preliminary Tariffs on Chinese TBR Tires Imported to U.S.
To be finalized Mid February 2017
CVD AD** Offsets Total
GRT 20.22% 20.87% -0.41% 40.68%
PCT 20.22% 20.87% -0.41% 40.68%
Guizhou Tyre* 23.80% 20.87% -0.41% 44.26%
Double Coin 17.06% 22.57% -0.41% 39.22%
Aeolus 20.22% 22.57% -0.41% 42.38%
Other - separate
20.22% 20.87% -0.41% 40.68%
rate
Other - PRC-wide
20.22% 22.57% -0.41% 42.38%
rate
*Only company for which the preliminary CVD is retroactive.
**Preliminary AD retroactive for all companies.
30Long-term Growth Opportunity in Latin America
Agreement:
• Signed a letter of intent (LOI) in November, 2015 to work with Fate, a highly
respected and quality-focused tire company with extensive reach in Argentina
and throughout South America
• Fate produces passenger, light truck, and SUV tires as well as truck
and bus radial (TBR) tires at its facility in San Fernando, Argentina
• Initially, Fate will become a distributor of Cooper branded passenger, light truck
and sport utility vehicle (SUV) radial tires in Argentina, complementing Fate’s
existing product portfolio.
• Over time, the two companies may also work together on a variety of potential
cooperative ventures including tire production, offtake arrangements, and
possible cooperation on research and development activities.
Strategic Rationale:
• Fate will become a distributor of Cooper branded passenger, light truck and
sport utility vehicle (SUV) radial tires in Argentina
• Complements and expands Cooper’s growing Latin America presence
• Opportunity for a strategic partnership
31Agreement to Acquire Majority Interest in China JV
Announced January 6, 2016
Agreement:
• Cooper to acquire 65 percent of Qingdao Ge Rui Da Rubber (GRT)
– 600 million RMB (approximately $92 million) consideration including acquisition
costs and initial investments in operation
• Transaction expected to close in by year end 2016 pending certain permits and approvals
by the Chinese government
Strategic Rationale:
• GRT is expected to serve as a global source of Truck and Bus Radial (TBR) tires
• Passenger tires may also be manufactured in the future
• Meets Cooper’s goal of finding a new source of high quality, cost-competitive TBR tires for
global markets
• Supports Cooper’s strategic growth plans
• Good strategic fit within existing manufacturing network; further optimizes Cooper’s global
footprint
32Fast Facts: Qingdao Ge Rui Da Rubber (GRT)
• Established in 2014 after Qingdao
Yiyuan Investment purchased the
assets of the then idle facility
• Employs approximately 600 workers
• Existing 1 million-square-foot
manufacturing facility
• Estimated full production capacity of
facility:
– 2.5 to 3 million TBR tires
annually
– Nearly same number of
passenger car tires
• Land at the site for further
expansion, if needed GRT is located in north Qingdao, which is in
northeast China
33Non-GAAP Measures
Non‐GAAP financial measures should be considered in addition to, not as a substitute for, net earnings,
earnings per share, total debt or other financial measures prepared in accordance with generally
accepted accounting principles (“GAAP”). The Company’s methods of determining these non‐GAAP
financial measures may differ from the methods used by other companies for these or similar non‐GAAP
financial measures. Accordingly, these non‐GAAP financial measures may not be comparable to
measures used by other companies.
Pursuant to the requirements of SEC Regulation G, detailed reconciliations between the Company’s
GAAP and non‐GAAP financial results were posted by incorporation within the appendix to this
presentation. Investors are advised to carefully review and consider this information as well as the GAAP
financial results that are disclosed in the Company’s earnings releases and annual and quarterly SEC
filings.
34Non-GAAP Measures
Return on Invested Capital (ROIC)
Management is using non‐GAAP financial measures in this document because it considers them to be important supplemental
measures of the Company’s performance. Management also believes that these non‐GAAP financial measures provide
additional insight for analysts and investors in evaluating the Company’s financial and operating performance.
The Company defines ROIC as the trailing four quarters’ net income from continuing operations before interest, after tax,
divided by the total invested capital, which is the average of ending debt and equity for the last five quarters. The Company
believes ROIC is a useful measure of how effectively the Company uses capital to generate profits.
Return on Invested Capital
2015 2014 2013 2012 2011 2010 2009
Operating profit $ 354 $ 300 $ 241 $ 397 $ 163 $ 188 $ 156
Provision for income taxes, net
of valuation allowance release (118) (112) (79) (116) (32) (20) 0
Net interest tax effect (8) (9) (10) (8) (8) (4) 0
Net operating profit after tax $ 229 $ 180 $ 151 $ 272 $ 124 $ 164 $ 157
Total invested capital $ 1,272 $ 1,421 $ 1,392 $ 1,265 $ 1,019 $ 942 $ 963
Return on invested capital 18% 13% 11% 22% 12% 17% 16%
35Non-GAAP Measures
Net Interest Tax Effect
2015 2014 2013 2012 2011 2010 2009
Income from continuing operations before
income taxes $ 334 $ 349 $ 213 $ 368 $ 134 $ 160 $ 116
Provision for income taxes (118) (112) (79) (116) 135 (20) 0
Valuation allowance release - - - - 167 - -
Provision for income taxes, net of valuation
allowance release $ (118) $ (112) $ (79) $ (116) $ (32) $ (20) $ 0
Effective income tax rate 35.4% 32.0% 37.3% 31.5% 23.7% 12.5% -0.2%
Interest expense $ (24) $ (28) $ (28) $ (30) $ (36) $ (37) $ (47)
Interest income 2 2 1 3 3 5 5
Net interest expense $ (22) $ (27) $ (27) $ (27) $ (33) $ (31) $ (42)
Net interest tax effect $ (8) $ (9) $ (10) $ (8) $ (8) $ (4) $ 0
Total Invested Capital
2015 2014 2013 2012
March
Dec. 31 Sep. 30 June 30 March 31 Dec. 31 Sep. 30 June 30 31 Dec. 31 Sep. 30 June 30 March 31 Dec. 31 Sep. 30 June 30 March 31
Equity $ 1,018 $ 965 $ 947 $ 927 $ 884 $ 935 $ 1,088 $ 1,050 $ 1,158 $ 1,027 $ 1,015 $ 968 $ 908 $ 878 $ 786 $ 968
Long-term debt 296 297 298 298 298 326 326 328 321 326 327 335 336 337 337 335
Current portion of long-term debt 1 1 2 2 2 16 16 19 18 18 21 17 2 2 7 17
Short-term notes payable 12 18 15 16 65 185 24 25 22 27 48 34 33 48 119 34
Total invested capital $ 1,327 $ 1,280 $ 1,261 $ 1,243 $ 1,249 $ 1,461 $ 1,455 $ 1,422 $ 1,519 $ 1,398 $ 1,411 $ 1,353 $ 1,280 $ 1,264 $ 1,249 $ 1,353
2011 2010 2009 2008
March
Dec. 31 Sep. 30 June 30 March 31 Dec. 31 Sep. 30 June 30 31 Dec. 31 Sep. 30 June 30 March 31 Dec. 31 Sep. 30 June 30 March 31
Equity $ 698 $ 517 $ 494 $ 471 $ 523 $ 523 $ 470 $ 404 $ 381 $ 433 $ 350 $ 353 $ 318 $ 707 $ 768 $ 785
Long-term debt 329 330 324 317 321 326 327 327 331 330 325 328 326 412 419 436
Current portion of long-term debt 21 27 21 17 6 5 5 5 16 107 119 141 148 51 39 17
Short-term notes payable 132 139 136 127 147 138 156 145 157 144 161 163 185 169 155 127
Total invested capital $ 1,180 $ 1,012 $ 976 $ 932 $ 997 $ 991 $ 958 $ 882 $ 884 $ 1,014 $ 955 $ 986 $ 977 $ 1,339 $ 1,381 $ 1,365
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