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 First Quarter Earnings Conference Call. [Operator Instructions] I would now like to hand the program over to Tom Kaczynski, Goodyear's Vice President, Treasurer and Investor Relations.

Thank you, Tony, and thank you, all, for joining us for Goodyear's First Quarter 2014 Earnings Call. Joining me today are Rich Kramer, Chairman and Chief Executive Officer; and Laura Thompson, Executive Vice President and Chief Financial Officer. Before we get started, there are a few items we 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 participants on today's call that our 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. Our financial results are presented 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. Today, I will provide an overview of our record first quarter performance and offer my perspective on several factors affecting our business and the tire industry overall. Also I'll talk about a few industry trends that continued in the quarter and how these trends aligned with our strengths. Then I'll turn the call over to Laura for more detail on our first quarter results and to provide our outlook for the remainder of the year. Now in the quarter, we delivered record segment operating income of $373 million, an increase of 24% over last year's strong first quarter result. This is a great result for us and a great start to the year. While our global presence exposes us to significant foreign currency fluctuation, along with other economic volatility, the strength of our North American and European businesses more than offset several headwinds in our emerging markets, including the impact of Venezuela on our Latin American business. Our North American business was a major contributor to our success, delivering a record quarter with $156 million in segment operating income, a 23% increase over last year. Our Europe, Middle East, Africa business generated segment operating income of $110 million, more than 3x last year's first quarter, as our profit improvement plan in the region continued to gain traction. Now as we discussed in our September Investor Meeting, our target of 10% to 15% annual increase in segment operating income is based on a balanced plan of growth and cost. With that in mind, I'll first address our volume in the quarter and then discuss our progress on cost as well. Now as I comment on our volumes, I'd like to draw your attention to Slide 5. Our volume in the quarter increased by 1%,…

Thank you, Rich, and good morning, everyone. First, I'll start with a review of the first quarter, and then I'll provide an update on 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 income statement. As Rich stated, we are pleased with the start of the year. In the quarter, segment operating income increased 24% versus a year ago, which is a great way to start the year. I'll go into more detail later on each of the businesses, but strong performance from our more developed markets in North America and Europe offset weakness in emerging markets in Latin America and Asia. For the quarter, revenue was down 8% or $384 million and is primarily due to 2 items: first, lower non-tire-related revenue of $202 million, driven by lower third-party chemical sales in North America; and second, the impact from unfavorable foreign currency exchange of $126 million, driven primarily by the weakening of the Brazilian real, Venezuelan bolivar and Australian dollar. We generated gross margin of 21.3%, an improvement of 250 basis points versus the prior year. SAG increased by $22 million. This increase reflects higher incentive compensation cost, primarily driven by improved operating results and our higher stock price, which has more than doubled since March 31, 2013. We achieved $373 million in segment operating income and 8.3% in SOI margin. This marks the fourth consecutive quarter where SOI margin has exceeded 8%. Excluding the significant items listed on Slide 21, our first quarter tax rate as a percentage of foreign segment operating income was about 16%. Our earnings per share on a diluted basis for the quarter was a net loss of $0.23. Our results were impacted by certain significant items, including…

[Operator Instructions] We'll take our first question from Itay Michaeli with Citi.

Just a couple of questions. One, maybe you alluded to this just now, Laura, a few minutes ago, but on the financing fee of $60 million, that seems like it's a new item for the full year. Does that relate to this capital structure announcement you're planning for late May or is that something different?

No, it does not relate to that in any way. It has always been an expense for us. It's in addition to the interest expense we show you on the outlook pages, but it's always about $15 million a quarter, and we really just gave it to give more transparency. We'd gotten some questions on it in the past.

Okay. So it's not like a new headwind but just a little bit more detail on the detail. Okay.

Itay, just to be clear -- it's Tom. Those are financing fees that are amortized, the debt issuance fees and also factoring fees. And they run $14 million to $15 million a quarter. So we've always had that in other expense, but we wanted to provide just a little bit more transparency on that.

Great. And then just hoping you could talk about the cadence for the rest of the year, both for SOI and also, particularly, for volume, given the shortfall, the headwinds in Venezuela because of labor disruptions, I think you mentioned maybe that was a point of volume, and the catch-up in weather. Should we think about the second quarter volume maybe at the higher end of the 2% to 3% or above? Just hoping you can help us kind of better model the cadence for volume. And any thoughts on the cadence for SOI as well would be helpful.

Yes, Itay, I'll start on volume. Laura can jump in on SOI as well. I would say the first quarter was, as we said, a pause. It had a number of anomalies in it. Most significant were the weather, particularly the January weather in North America, which we tried to depict for you in the slide included in the deck. That was really an anomaly that really impacted the full quarter but really wasn't reflective of or indicative of the trend that we saw, particularly in consumer replacement. So I think, number one, first quarter for North America, really you have to look at the trend coming out of February and March. And maybe to add even a little bit more color to that, we gave you sort of total reportable units on Slide 5 in the deck. If I take that back to consumer replacement, January was actually more severe. It was down higher than the 9%, about 11%. And February and March were actually stronger than the total in consumer replacement, we're up 3% in February and up 7% in March. So with the volume we had, I think it makes our North America earnings really very impressive in terms of what the team put forward. But I think if you look at those run rates, I think it gets us back to the expected run rates of 2% to 3%. In terms of Venezuela, we will see second quarter units come back after we've got the team working back there in the factory. I mean, we literally have people stacked up at our stores to buy tires. So Q2 volume will improve in Venezuela. The Brazil OE volumes that Laura mentioned, those will continue to be an issue for them -- for us probably for the balance of the year. You're very familiar with what's happening with the OEMs down there. And I might add even a little bit more color to China. In China, what we're seeing -- again, we believe in it, long term, for certain, but what we're really seeing there is a combination of sort of a little bit weaker economy. We see a bit of tightening credit for reasons I think everyone on the call is familiar with. And we see dealers holding back a bit because of decreasing natural rubber, which flows through their inventory faster than other parts of the world. So as we look to the balance of the year, we think that China will also improve from a volume perspective. In terms of the 2% to 3% trend moving ahead, I think that we really aren't going to get any more specific in terms of the high end or low end of the range. There are so many things that we have to factor into it. I think we're happy saying 2% to 3% is the best guidance we want to give on that.

And as for the SOI cadence for the year, we are really pleased with the first quarter performance. But as we look out, right, you've heard us talk about the headwinds, really, for us, all we can say is that the SOI are -- what we've reaffirmed, our target today is that, for the year, SOI will be up 10% to 15%.

Perfect. Just last question. Good to see that the price/mix versus raws was revised to slightly positive for the year. The spread in Q1 was $17 million. Laura, is that a good way to think about -- is $17 million a good way to kind of model what the -- what slightly positive would mean on a go-forward basis for the full year? Or there's other puts and takes that maybe suggest Q1 might not be an indicative run rate for the full year?

Well, so to answer your direct question, Q1 would be indicative of how to look at the balance of the year. And included in that outlook is a sizable negative impact from our OTR business on mix. But what we did in the first quarter is a good way to look at the balance of the year.

Our next question comes from Patrick Archambault with Goldman Sachs.

I guess the Slide 5 was very helpful, and I'm very glad that you presented that. It helps us think about what sort of the undistorted run rate is. But I guess, the question is, in aggregate, right, for North America, you were down a little bit because January was so weak. Can you just help us understand like how that contrasts to some of the quarterly data that comes out from things like the RMA and, I guess, Michelin also. I mean, I understand that those are not perfect metrics. They may poll only certain members, and have some timing differences, but maybe just a little color on that would be helpful.

Pat, I think it's actually a very good question. I tried to allude to this in my remarks as well. So as we look at it, and I'll focus on consumer replacement specifically, we would say the industry grew about 1% in the quarter. I think you're right to point out there's different views to that -- excuse me, 3% in the quarter, not 1%. But there's rightly different views on that as you look at others. So we would say consumer replacement, up 3%. Our volumes, obviously, didn't keep pace. And in particular, I would tell you that we were impacted more significantly by the January weather than the overall industry, and that's by and large because we have -- both our OE and our replacement large retail customers are really serviced in sort of a real-time basis, focused on sellout rather than stacking inventory, if you will. So when they get impacted by weather, it impacts us more significantly than others. And let me give you maybe a couple of quick examples, and I'll start with OE because I think it's a model everyone's familiar with. We ship, really, to a just-in-time cadence there, which our OEM customers obviously take our tires and put them on cars as they use them for sale or they put them out for sale immediately. When they shut down, which they did in the quarter because of -- or they slowed down also in the quarter because of the weather as well, we stopped shipping until they start again, and there's no inventory buildup. And again, I think you understand that model. So while this isn't going to be a perfect analog, a similar situation happens to us with certain of our large retail customers because, to a significant degree, we ship…

Yes, that's definitely helpful. On Slide 7, my follow-up question was just on Europe and, specifically, what you're seeing for the summer tire season. I think you had said that in the past, sort of last year, you weren't as well positioned competitively. On your Slide 7, you highlight a couple of new products there. So maybe can you address, a, like what -- how you feel you're positioned for this year ahead of the summer season; and also, if you can give us some color on the level of inventories within EMEA for summer, that would be helpful as well.

Sure. I would say -- I was -- in fact, I was just over there a couple weeks ago. And I would tell you, in terms of our preparation for the summer selling season, our team over there, including many of the people that have been with our company for a long period of time, would say unequivocally that we have the best summer product lineup that they've had in their long-tenured careers at Goodyear. This gets to a combination of the industry-leading label grade portfolio that we have, as well as some of the new products that are out being rated by the summer magazines. As I've pointed out, we won -- Goodyear and the Dunlop brand won #1 and #2 spot in a very important German magazine test. And remember, we had -- those tests are rated more than just the label but on numerous other performance characteristics as well. So as we head into the season, absolutely well prepared to do that. Pat, I would tell you that we referred to in the prior year, let's say, some customer service issues where we weren't as sharp on. And I would tell you we have made very significant improvements in our customer service. Our advantaged supply chain is working better -- much better for us over there. In fact, it's why we tried to highlight one of the examples in my remarks earlier. So I do think we're well positioned. I think Europe inventories are generally in pretty good shape over there, so I think we're -- we should be in good shape going into the quarter -- into the summer selling season. We feel very good about it, and I would tell you we're also already, as odd as it seems, getting ready for the winter season as well. And as you can imagine, we're putting a lot of effort to make sure we're well prepared for that come into 2014.

And our next question will come from Rod Lache with Deutsche Bank.

A couple things. One is it sounds like you're saying that the North American volume performance or market share this quarter was an aberration. So just to clarify, going forward, would you expect the demand for Goodyear to track more closely to the industry? And just broadly speaking, obviously, we're seeing better data on replacement demand in North America and Europe, both for light vehicle and commercial tires. Is there -- has there been any change associated with that in the level of discounting in the market or specials in the market just as it would seem that the capacity utilization would begin to tighten up?

Rod, I guess, the first thing is, as we came out of North America in the last few months, as we look at this, we had very growth -- very strong growth in our targeted market segments, and we had an increase in our Goodyear branded share. And I think those are 2 things to point out as we ask our volumes relative to the rest of the industry. Remember, we are focused on those parts of the market where we can add the best value for our customers, for our consumers and for ourselves. And I think that's absolutely the path that we're going to continue to go on. We look at the market. I agree with you, the market environment in North America remains very good. The underlying demand for our tires is very strong and should even get better as we look at the introduction of the Assurance All-Season into our new product line. And our customer service continues to improve and be very good. So I think we're -- we feel very positive about how we'll fare versus the industry for the balance of the year. And relative to the notion of the supply-demand equation in North America, I would tell you -- maybe the best way to continue to say this is we still see the demand and growth for HVA tires in many cases, particularly when you bring OE into the picture, being a bit tight for those tires in terms of the supply. So supply and demand probably are not equal yet in terms of where HVA growth is. And we don't think, as we look for the long term, that's going to balance itself out on a global basis. I think that's true a bit in North America. I think you'll see points in time where that may change, but over the long term, I think the growth in HVA will still be very significant.

Okay. And can you just clarify what you're thinking in terms of the outlook for raw materials going forward? There's obviously a lag between what we see in the spot markets and your P&L. Are you expecting some greater benefit on that line in Q2? And maybe also comment on the outlook for the other tire-related businesses, which are obviously dragging down the results a bit in the first quarter? How should we be thinking about that for the rest of the year?

Okay. So I'll take the first one on raw materials first. So in the first quarter, as expected, our raw material costs declined 6% year-over-year. And based on current spot rates, we do expect that to continue for the balance of the year fairly evenly across the quarters. And then as for the other tire-related businesses, we have a neutral outlook, as we've put on Page 16 of the presentation. The impact of the unabsorbed overhead for OTR tires is already built into the unabsorbed overhead outlook on that same chart.

Okay. So you're saying down 6% per quarter for the rest of the year for the raw materials, and then neutral year-over-year for the chemicals business, just to clarify?

Yes, exactly.

And the last thing. I didn't hear you comment at all on the commercial truck tire business, which, obviously, is a much higher margin business for everybody. Seems like that business has been pretty strong here both in North America and Europe. Is that a meaningful tailwind for you at this point?

Rod, I think you're right to point out both things. One, we didn't focus on it as much in our remarks today, but both in Europe and North America, coming out of '13, we've done very well in the truck business. And I would say we have -- it is a bit of a tailwind, and I think part of that's driven by our product portfolio that is in very high demand, as well as our service model, particularly in North America. In fact, you see more and more companies trying to get into that service model, sort of fleet solutions business that we're in as well. And that's really driving volumes in the replacement market, as we've put together a cradle-to-grave value proposition that our fleets are really putting value on, where they're looking at us to not just provide a tire but to keep their uptime moving, and that's been very successful for us. From an OE perspective, we also see that the demand for new trucks continues to be strong, and I would say that's a benefit to us as we look ahead as well. In summary, Rod, I think the truck business is something that's been going very well for us in our mature markets. And as we look at the introduction of our truck products in China, we continue to see very good growth there. Remember, we're a fairly small player, but we've put in the equipment to make those truck tires. We introduced multiple new products there. It's working very well for us. And finally, in Latin America, we have a significant truck presence there as well. And those markets, even in tougher economies, particularly in Brazil, our truck products are still moving very well.

But the benefit from that, not quite as large as the negative from the OTR, is that why you focused on the OTR in your comments?

Yes. I mean, Rod, as an item, OTR, clearly, given the mix that comes in from those OTR tires. Remember, our revenue per tire for an OTR tire can be anywhere from a couple thousand bucks to $50,000 or $60,000. So as you lose some of those 57-, 63-inch tires there, they're fairly significant to the mix item. We thought that's something that we needed to point out.

And our final question will come from Brett Hoselton with KeyBanc Capital.

I was hoping to ask you just kind of a conceptual question about Europe, which would be -- with the assignment of Darren over to Europe, there's been some speculation, I think, in the investment community that you might make some additional plans or announcements with regards to your strategy in Europe kind of over and above what you've already discussed. Is that a possibility or should we consider that assignment as just an execution on what your current plans or stated plans are at this point?

Yes, Brett, I would say, from our strategic direction, I would point you back to what we talked about at the September Investor Meeting. There's been no changes from that. We're -- we've been trying to be very clear about that. We're committed to that. Our team across the globe, in all the business units, each have their role as well as their functions in delivering that plan. And I would say that's where Darren's focused as part of his assignment as well. So it's really about us delivering the plan and, frankly, setting ourselves up for future growth beyond that. Okay. Thanks, everyone. We appreciate it, and thanks for your attention today.

Thank you.

Thank you. This does conclude today's conference. You may disconnect at any time, and have a great day.