Good morning, my name is Tony, and I'll be your conference operator today. At this time, I'd like to welcome everyone to The Goodyear Tire & Rubber Company Fourth Quarter Earnings Conference Call. [Operator Instructions] Thank you. I'd now like to hand the program over to Tom Kaczynski, Goodyear's Vice President, Treasurer and Investor Relations.

Thank you, Tony, and good morning, everyone. Welcome to Goodyear's fourth quarter 2013 conference call. Joining me today are Rich Kramer, Chairman and Chief Executive Officer; and Laura Thompson, Executive Vice President and Chief Financial Officer. On today's call, Rich and Laura will discuss our fourth quarter results, along with the outlook for 2014. However, before we get started, there are a few items I need to cover. To begin, the supporting slide presentation for today's call can be found on our website at investor.goodyear.com, and a replay of this call will be available later today. Replay instructions were included in our earnings release issued earlier this morning. If I could now draw your attention to the Safe Harbor statement on Slide 2. I'd like to remind you that today's presentation includes some forward-looking statements about Goodyear's future performance. Actual results could differ materially from those suggested by our comments today. The most significant factors that could affect future results are outlined in Goodyear's filings with the SEC and in our earnings release. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The financial results presented are on a GAAP basis and in some cases, a non-GAAP basis. The non-GAAP financial measures discussed on the call are reconciled to the U.S. GAAP equivalent as part of the appendix to the slide presentation. And with that, I'll now turn the call over to Rich.

Great. Thanks, Tom, and good morning, everyone. Before we get started, I'd like to take a moment to welcome Laura Thompson to her first conference call as CFO. A few of you may know her from her role as Investor Relations Director about 12 years ago, and I'm sure some of you have had a chance to meet or talk with her over the past 2 months. Laura's made a seamless transition into the CFO role, and I have complete confidence in her ability to help us execute our strategic plan and keep us on our current path. So officially, welcome, Laura. Now this morning, I'll provide a few highlights of the quarter and discuss some key actions we've taken already in 2014. Then I'll touch on highlights from our 4 businesses before turning the call over to Laura to review the financials in detail and review our outlook. As you saw in our news release this morning, the fourth quarter was an outstanding conclusion to our record-setting year. Our segment operating income in the quarter was $419 million, up 54% from last year. For the full year, segment operating income was up 27% to $1.6 billion, exceeding our October guidance and the highest ever achieved in Goodyear's 115 years of existence. It's also the third consecutive year we've delivered more than $1.2 billion in segment operating income, another first in our history. This outstanding performance contributed to free cash flow from operations that reached $1 billion for 2013. Now as pleased as I am to report these results, I believe it's more important to view this as evidence of the soundness of our strategy, our ability to execute against that strategy and outstanding performance by our teams across the globe. Slide 4 summarizes the progress we've made executing our…

Thank you, Rich, and good morning, everyone. It is a pleasure to be here in my new role, taking over for Darren Wells, who occupied this chair for more than 40 consecutive quarterly conference calls before becoming President of our Europe, Middle East and Africa region last December. While I have had many roles at Goodyear, I have particularly enjoyed those where I have interacted with the investment community. I'm looking forward to working with all of you more in my new position. I'm very proud of the many accomplishments we've achieved at Goodyear over the last several years, and I'm looking forward to continuing to execute on our strategy and achieving our target. Today, I will cover our fourth quarter results, which conclude a record-setting year, and provide some specifics regarding our outlook for 2014. We'll then open the call for your questions. Let's turn to Slide 11 and review a few key items on the fourth quarter income statement. Volume in the quarter was up 2%, with the North America, EMEA and Asia business units showing increases year-over-year. The growth we achieved was the right volume growth, that is, focused in the right segments and generating good returns. This marks the third consecutive quarter of volume growth for the company and supports our belief that volumes have stabilized and have begun to recover. For the quarter, revenue was down 5% or $254 million and is more than accounted for by 2 items. First, lower non-tire-related sales of $178 million, which is driven primarily by lower third-party chemical sales, which decline as raw material prices decline. And second, the impact from unfavorable foreign currency exchange of $102 million. We generated gross margin of 23%, an improvement of 430 basis points versus the prior year. Selling, administrative and general expense…

[Operator Instructions] We'll take our first question from Itay Michaeli calling from Citigroup.

Just a little bit more color, perhaps on the price mix outlook for 2014. Maybe if -- Laura, if it -- maybe talk about what you're see, both on the raw material side and assumptions for price mix. And then, what kind of selling margins should we be assuming on your global volume outlook for growth of 2% to 3%?

Okay, sure. So first of all, as we've -- you've seen from our results, we have demonstrated consistently the ability to manage price mix versus raw, whether raw materials are increasing or decreasing. We have a very disciplined strategy on pricing, and we price for the value proposition that we bring. The goal is to get paid for the value of our products, whether it's product performance, service, brand pool or technology. Over time, we still expect raw material prices to increase as global tire volumes increase. In fact, you've seen natural rubber quite low recently. But lately, butadiene has inched up and is up, I think, 10% since the beginning of the year. Nonetheless, at current spot rates, raw materials on an income statement basis for us for the first half of the year would be down by approximately 6%. And that would be -- directly impact parts of the business, and some of which are contractual obligations, that have these raw material indexes, OEs, OTRs and in our fleet business. But we remained focused on our very disciplined strategy on pricing for that value proposition. And certainly, all of this is taken into account as we stick to those 10% to 15% SOI target.

That's very helpful. And then just 2 kind of cash flow balance sheet questions. I mean, it looks like with the pension funding being done with cash, that you may even be able to get to your 2.5x leverage target a bit sooner. I also noticed that in the cash slide, you no longer call out $1 billion of kind of minimum cash. Has anything changed there? And maybe talk about kind of as you delever the balance sheet over the next couple of years, what are the other uses of cash potentially as you get to that target?

Itay, it's a good question. I'm going to hand it over to Tom Kaczynski here to talk about that as well. Tom, why don't you go ahead and respond?

Yes, Itay. I think the way to think about that is we still do require about $1 billion on the balance sheet to run the operations day to day. We had about $6 billion of liquidity at the end of the year, and then you obviously have to subtract the $1.1 billion that we put into the pension. So that really gets us back to historic liquidity levels. We've been running about $4.7 billion over the last 5 years. So that's the way to think about, I think, the day-to-day cash required.

Perfect. Just lastly, any guidance on cash restructuring in 2014? I think it was about $72 million last year.

Go ahead, Laura.

$200 million, I think, yes, for 2014, primarily related to that Amiens, France facility.

Right. Is there an actual number that you can guide to or...

Yes, I'm sorry. About $200 million.

And Itay, the way to think about it, we've been very pleased to see the progress we've made in Amiens. I can't understate that, I guess. The -- as we wrap that up in the actual cash flow timings, we'll continue to update you as we go. And over the long term, I would bring it back to the capital allocation plan we talked about in September. And we did -- as we think about the future, we also have money in our plan, if you will, set aside for future restructuring as well. I know that's not the particular question. But it's good to keep in mind as we think about other high-cost facilities around the globe, as we look to the future, we'll continue to be very disciplined in our approach to that as well.

And next, we'll move to Rod Lache with Deutsche Bank.

Just a few clarifying things. The pension, $50 million savings was not listed on Slide 18. Is that baked into one of those numbers? Or is that something that's separate?

Actually, I think it's baked into the Slide 19. So see the $150 million to $200 million pension expense in 2014.

Okay. And that number, I mean, if your pension expense was $285 million, I mean, it seems like maybe that number might be more than a $50 million decline on a year-over-year basis. Am I missing something there or am I reading it wrong?

No, that's exactly right. Right now, we're saying $150 million $200 million for 2014 versus the $285 million. About half of it -- half of that reduction, or if you use the range $85 million to $135 million, about $50 million of that is for the pension prefunding of the hourly plan.

Okay, all right. So that was in addition. The $50 million was only part of the savings?

That's right. The rest is the discount rate.

Okay. And I was wondering, just from a high level, volumes in certain markets like North America are running a little bit below what we would see from RMA or some of the broader industry sources. Is that something that is -- maybe some competitors becoming a little bit more aggressive in taking share? Or is that something that's harder for us to see, imports from China and things like that that you guys wouldn't really be affected by?

Yes. Rod, I think it's the trend that we've been seeing. And maybe I'll just say one thing before I talk to that specifically. As a broad comment, not just in North America but around the globe, we've seen volume increases, but we've seen the volume increases we're trying to get in the right segments with the right brands and generating the right returns. And as you know, you've been following us long enough, it's a C state [ph] change to where we were where sold a lot of tires in the past but at minimal profit and even losses, as you know. So we'll stick. We are sticking to that disciplined approach, and I think thing that's what you're seeing. If you look to North America in particular, what you saw, again, really driven by the third quarter was that that year-over-year change of the tariffs coming off. You saw a lot of low-end Asia tires, Chinese tires coming in. You still saw some of that in the fourth quarter. So as you look at the industry, the low end drove those gross volume numbers. But that said, as we look in the markets where we competed, as you know, that's not where we compete. I can tell you, I'm very, very pleased with the performance of the Goodyear brand, the performance of our new products, the demand for those new products and the profitability of them. So I don't have a general concern in terms of having the market go up in those parts of the -- those segments that really don't impact how we're driving the business. I will add that -- I mentioned in my remarks that we, at our dealer conference, released a new product, the Assurance All-Season, to round out the Assurance family of tires. The All-Season goes in the Commuter Touring mid-tier segment. It's a refresh for us. That's about 1/3 of the total -- a little under 1/3 of the total volume as you segment North America. That tire was really accepted extremely well from our dealers. We got great orders out of the box. The price point is great. So in addition to staying at the Assurance family of tires, the TripleTred, the ComforTred, the Eagle family, the high-end Wranglers that were out there, putting the All-Season in that, refreshing the Commuter Touring mid-tier is -- you can think of it as even expanding a little bit back into a part of the market, the high end of that market where we want to play. So I would say I feel pretty good about our volumes in North America. And we're going to grow, as Laura mentioned, the numbers. But I'm feeling pretty good where we are.

And just 2 quick data points. Can you just give us what you would expect your global weighted average tax rate to look like if you were to experience that revaluation? And in the quarter, was there a -- you mentioned 3 million unit increase in production and obviously, the shipment increase was less. Was production and shipments more or less in line? Is it more of a comparison issue? Are you building kind of finished goods in advance of stronger demand expected ahead?

That'll happen more in Q1, Rod. I mean, Q4, there's a bit more balance, I would tell you. But in Q1, as you know, from a seasonality perspective, we build more than we ship there. So we built, year-over-year, about 3 million more units in Q4. That'll bring in the incremental unabsorbed overhead into Q1, the -- about -- run about $50 million of the $75 million to $100 million that Laura talked about. But in Q1, you will see us building more than we're selling. But that's not an anomaly. That's pretty much how the business runs, as you know.

Right. And then from your income tax rate, Rod, 25% for 2014 of the international SOI.

Right. But once you would go through that revaluation, what would be the global weighted average?

Yes. You know what, Rod, we have not gone out that far in our analysis. There'll be a lot of moving parts then. And as we get closer and closer to that, we'll let you know.

Would it be reasonable to expect something like 35% on the North America part?

Yes. Again, nothing related to 2014, and that may be in the ballpark. But again, we'll keep you up to speed as we go.

And next, we'll move to Patrick Archambault with Goldman Sachs.

I guess, on Slide 15, you may have said this. It's just that there was a lot of information here. Just on Asia Pacific, so your units were up, but your net sales were -- the revenue was down. Can you just kind of tell us how that works? Maybe it's an accounting thing. And then the other aspect is just a little bit more color on -- despite the fact that net sales were down, obviously, you had a pretty substantial margin improvement there, and I just wanted to get a little bit more detail on that.

Yes. Pat, on the first point, in Asia, our volume is driven largely by the growth we're seeing in China in general. I would say that drives our volume also. We saw growth in places like India and certain of the ASEAN countries in the quarter as well. Volume, obviously, we still have headwinds in Australia. But when you look at the volume numbers versus the sale numbers, it's basically the foreign exchange impact. I mean, you know the numbers. If you go look at what happened to the Indian currency, some of the ASEAN currencies, I think that basically explains it. There's not a whole lot going on -- not a whole -- excuse me, not a lot else going on other than that. And again, for us, Asia is a growth market. We're growing faster than the market in China. And we see good traction in some of the other countries as well. Australia is the headwind for us in the region. We've taken some restructuring actions there. I'm happy to say our share position is actually very good, but it's a tough market right now. And I think it will be in 2014 as well. And of course, we've seen the devaluation of the Aussie dollar as well.

Okay. And then just on the -- I mean, can you just go and -- go ahead and kind of give us a little bit more on the margin improvement, which was considerable?

Pat, I think if you look at what we're doing, number one, it's -- if you look at the walk, certainly, we did another disciplined job of managing price mix versus raw materials. But I would also tell you that we're focusing on our cost. We talked about it, the -- at the Investor Meeting in September, and you've heard me talk about it in the past. It's driving our operational excellence initiatives, particularly around things in the procurement area and material substitutions, as well as the initiatives we're taking in, the plans on conversion cost and a more efficient supply chain across the business. So as we're growing volume, we're growing in the targeted marketing segments, but we're also driving efficiencies in our business across the board. And you're seeing some of that come through in the margin as well.

Okay. And that commentary was, I mean, probably true everywhere. But the question was Asia specifically, right?

Sure. And for Asia, to get a little more specific, a lot of the same things Rich talked about, but positive price mix, net of raw material cost, the higher volume and then the lower startup expenses related to our new facility in China.

Okay, that's helpful. One other one for me. I just noticed that your free cash flow language just changed a little bit from the -- what you've provided at the Analyst Day. I think there, you had said free cash flow positive, excluding pension and contributions. And here, you've referred specifically to just operating cash flow being positive. Just on an apples to -- I mean, I understand probably some of that has to do with impact of the refi, which takes pension contributions out of operating. But on an apples-to-apples basis, has sort of anything changed on the margin?

Yes, not at all, nothing has changed. And really, it is not about operating cash flow. For 2014 to 2016, as we described cash flow back in September at our Investor Day. Really, as we got to this conference call, just wanted to make sure it was clear what cash flow we were talking about. And right, it is and remains free cash flow from operations.

And just -- I'm being silly here. But free cash flow from operations, then as cash flow from operations minus CapEx?

Yes, pension is excluded from free cash flow. Rationalizations or restructuring charges and any asset sales, which are very small for us is regardless. And if you look at -- I think it's Page 14 in the deck. I think that'll walk you through it.

Okay. So it's that exact definition then?

That's exactly right. That's right.

Okay. Yes, that's helpful. The -- and then just my last one is, I know that you've talk about this a little bit, but in terms of capacity plans that you guys have, that your competitors have, now that you kind of have a read on volume of 2% to 3% for this year, how do you see this sort of utilization environment playing out for the industry and for yourselves just given that unit increase you're contemplating?

So Patrick, I would say, from a global -- from an industry perspective, I think what you're referring to is a lot of the capacity coming online, particularly what we might call HVA capacity. And similar to the view we had in the past, when we look at the growth of HVA tires, which is not a specific debt defined term amongst all the companies, but call it those higher-end bigger rim diameter, higher performance type tires, we continue to see that the growth in demand for those will exceed the capacity coming on in a macro basis. Now you might have points in time or locations where my comments don't fully come true, but by and large, we certainly still see demand being ahead of the supply of those tires. In particular, when we look at our plan, we think 2% to 3% volume growth, sort of that 3 million to 5 million unit growth per year, when we look at that, we're fairly comfortable in terms of meeting that demand, given that the existing HVA capacity we still have in our factories, particularly in Europe. We look at investments we've already made and having those come online, such as the Americana modernization as we look ahead to that coming in. In addition, the -- as I mentioned a bit earlier, the productivity coming from some of the operational excellence initiatives that we put in place. And finally, again, if we go back to the September Investor Day meeting, part of that use of cash we identified was growth capital initiatives that would be ultimately identified as adding capacity in the right places at the right times. So we feel like we're in good shape, certainly, to meet our plan and to grow in the places that we want to.

And we'll take our final question from Emmanuel Rosner with CLSA.

A few -- just a few points of clarification first on the SOI walk on your Slide 18. Just to be completely clear, we spoke about your pension expense going down potentially by $100 million or so at the midpoint, but it's not on the SOI slide. So is that something that would come incremental to your net cost savings that are neutral? Or is that a benefit that helps you get your neutral net cost savings?

You know what, Emmanuel, if you would go to the next chart, which is Slide 19 -- and we kind of put both the pension expense and the cash piece of that together. So for 2014, we would expect pension expense of between $150 million to $200 million. And again, that's versus the $285 million that we had in 2013.

I appreciate that. But is that incorporated as part of your other bucket on Slide 18 of net cost savings being neutral? Or is that something that you could do net cost savings neutral, and then on top of that, you will get cost savings from the pension expense going down?

That's right. It is on top of that, on top of the cost savings, so in addition to the cost savings.

Okay, perfect. Now for more -- fundamentally, can you please comment on the environment you're seeing in the U.S. for replacement pricing? Obviously, in terms of your own fundamental operating performance, you're doing a great job at mitigating pricing pressure with raw materials. But just focusing nominally on the price, without the raw materials piece, have you seen some improvement in the pricing of tires the way it was suggested by the December CPI?

Emmanuel, I'll tell you what. How we look at the environment that we have to play in, number one, clearly, we look at -- I don't want to make it a raw materials discussion, but certainly look at the input cost that we have related to raw material. But for us, as we look at the market, we also really focus on the value proposition that we're bringing to the market, our brand pool [ph], the technology that we're bringing in our products, the product performance, the service levels, which are even more important and marketing support as well to make sure that our dealers are really competitive with the right products that they have in the marketplace. We'll continually and do periodically go back and look at that value proposition and adjust it to make sure that we're going to be competitive in the marketplace, and that's what we're doing. I would also point out that we've had a very disciplined approach to managing price and mix over many, many years now. And I would say, that's what you can expect us as -- from us as we go forward. Raw materials, as Laura mentioned earlier, we see them going a bit down in the near term. It's what you're seeing. We also see those other raw materials or other input costs going up. And I emphasize again that, over the long term, particularly as the industry recovers, our view is that raw materials are going to increase. And I think those are the sort of the data points I would give you in terms of how we think about price in the marketplace. Yes, we take into consideration what's happening, but we also look at the value we're bringing to the market as well in our long-term view. So that -- I think that's that color I'd give you.

I appreciate that. And then just on the volume -- your volume assumptions for 2014, 2% to 3% growth. That's clearly in line with your sort of long-term plan. Now the long-term plan though, from memory, was obviously massively overweight in the emerging markets, and then only 1% in the developed market. When you look at what in the environment is right now, would that -- for 2014, would that be weighted somewhat differently in which maybe some more growth out of the developed markets as we sort of start this -- what seems to be a recovery and then maybe somewhat less from the emerging? So would it be the same overall, but maybe a bit more of it from the developed regions?

Emmanuel, I think it's actually an excellent question. And if I go back to the guidance we gave, you're exactly right. Over the long term, we see that the emerging markets are going to be the driver of the global tire industry going forward. But we also sort of gave the broad guidance over the periods to take into account what is an industry that has a lot of cyclicality and volatility to it. And I think we're experiencing some of that right now. So I think your point is correct. Long term, more emerging markets. Near term, as we look into 2014, the North America markets and the European markets, particularly the Western European markets, the recovery in Europe in particular are driving some of the growth that we see. We remain optimistic on the emerging markets, but I do think, as we look into '14, we'll see a little bit of an inversion of that. But again, I'll say it, that when we looked and we put our strategy forward and we put the goals out, particularly the 10% to 15% we said through the cycle, we wanted to deliver those right, those results -- excuse me, we will deliver those results in view of the volatility that we're going to see in the industry, and I think 2014 starts out with some of it already.

I appreciate all this color. And then just a final one, really, for me. The -- would you care to comment about these news headlines this morning of Sumitomo saying that you're seeking to dissolve an alliance? I'm not fully familiar with what they're actually talking about, but is that something that we should be looking into?

Okay, sure. Let me go through that a little bit. And many of you who have followed us for a long time have seen our disclosures related to our relationship with Sumitomo. So we have a global alliance with Sumitomo Rubber Industries or SRI, and we've had that since 1999. Among other agreements, many other agreements, we own 75% and SRI owns 25% of 2 companies: Goodyear Dunlop Tires Europe and Goodyear Dunlop Tires North America. We have learned that SRI has engaged in anticompetitive conduct in violation of applicable antitrust laws. We concluded that warrants the dissolution of this global alliance. And on January 10 of this year, we began arbitration proceedings seeking the dissolution of that global alliance, damages and all the lease that goes along with it. We don't believe the dissolution will have any material adverse impact on our customers, our operations or our liquidity. But as you know, arbitration proceedings are to be kept confidential. So you'll see what I've said in a little more in our 10-K that comes out, but we really can't comment on anything more than that.

And I think that wraps up the call. As usual, we very much appreciate your attention today. Thank you.

Thank you.