Good morning. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to The Goodyear Tire & Rubber Company Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to hand the program over to Christina Zamarro, Goodyear's Vice President, Investor Relations.

Thank you, Keith and thank you everyone for joining us for Goodyear's third quarter 2015 earnings conference call. Joining me today are Rich Kramer, Chairman and Chief Executive Officer and Laura Thompson Executive Vice President and Chief Operating 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 two. I would 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 will now turn the call over to Rich.

Thank you, Christine and good morning, everyone. This morning I will review our record third quarter results including our continued success in North America and provide examples of how we are executing our strategy in both robust and challenging markets. As always, Laura will follow with the financial review of our businesses before we take your questions. I am extremely pleased with our third quarter's record results including the sequential improvement from our record second quarter results. Our consistently strong financial performance in both the volatile global economy and tire industry is a testament to our strategy and more importantly our execution. We delivered outstanding earnings growth in the quarter, a record 599 million in segment operating income. When excluding the impact of currency on our results, our segment operating income grew 25% which is a clear indication that we executed against our strategy. Also we delivered segment operating margin of more than 14%, the highest in more than 15 years, despite ongoing macroeconomic challenges in some of our key international markets. Each of our global businesses had segment operating margin of 11% or higher. By executing on a strategy roadmap, we are doing the right things to deliver strong quarterly results now while building capabilities for profitable growth. Our strong performance in North America continued in the third quarter. The business grew its segment operating margin to more than 16% and achieved a 54% year-over-year increase in earnings driven by strong demand for our high value-added products. Its 323 million in segment operating income is a record for any quarter. Demand for our tires, particularly our premium HVA products remain strong in North America as overall volume increased about 3% in the quarter. The consistent strength of our North American business is the result of our unwavering commitment to…

Thank you, Rich and good morning, everyone. My remarks today will start with a review of our third-quarter results including points from each of our four strategic business units. I will then cover updates to our full-year Outlook for 2015 before we open the call up for your questions. Turning to slide eight, I'd like to highlight a few items on our income statement. In the quarter, we grew segment operating income by 15%. Our strong performance in a challenging international environment was driven by a combination of volume growth and margin expansion. Segment operating income was $599 million and our SOI margin expanded to 14.3%. Unit volumes increased 1% in the quarter driven by solid growth in Latin America and North America, partially offset by a decline in EMEA and Asia was essentially flat. The decline in our net sales for the quarter is fully explained by the strengthening of the U.S. dollar and reduced sales in other tire related businesses, primarily due to the effect of lower commodity prices impacting our third-party chemical sales in North America. Strong performance on price mix versus raw materials improved our gross margin by 3.8 points to 28.3%. Our earnings per share on a diluted basis was $0.99. The results were influenced by certain significant items which are listed in the appendix of today's presentation. After adjusting for these items, our earnings per share was also $0.99 as the adjustments collectively offset each other. As a result of the release of our U.S. tax valuation allowances at year end 2014, our U.S. tax expense increased significantly year-over-year. Consistent with our approach in the previous quarters for year-over-year comparison purposes, we have provided an adjusted EPS excluding this incremental non-cash tax expense. For the quarter, the adjusted EPS on that basis is $1.29…

And at this time if you would like to ask a question. [Operating Instruction] And we can take our first question from Itay Michaeli with Citi. Please go ahead.

Great. Thank you, good morning. Good morning and congrats.

Good morning, thanks.

I may have missed this but just on the price mix versus Raws being revised at $40 million. Can you maybe talk a little bit about what pumped that revisions, is that mostly on the mix size, because I think Laura you mentioned the raw material Outlook is consistent still for the year. And to that you have an early look given the lack of roughly maybe where raw materials may be in the early part of 2016?

Yes sure Itay a couple of things. So first I’ll start with the second question first. Related to 2016, really based on where we sit today current spot rates and currency rates as well. We do see I guess at this point low single digits excuse me low single digits positive as we go into the 2016 versus the 2015 on raw materials. The changes that we made in the Outlook are a couple of things. It primarily relates to where we are at year-to-date and including our Outlook for Venezuela.

Excellent, great. And if I may just sneak in one on cash flow, it does seem that the EBIT with CapEx year-to-date you probably have a significant increase just to get to the low end of the range. And I think you should have a working capital benefit in the fourth quarter. I was wondering about capital allocation and maybe an acceleration and some of the buyback activity in the fourth quarter as cash flow should see some tailwinds it looks like…

Yes, so Italy as we think about remember for us -- historically just the way our business flows, essentially all of our cash flow is generated in the fourth quarter. So when you think about our three-year plan -- our capital allocation plan that is it about 2014, 2015 and 16, we're really only about one year through our three-year plan in that sense. Now I get it the fourth quarter is coming and soon we will have two years into that plan. We have we said that any increases to that shareholder return program, you will remember our capital allocation plan has a range on it right now. It is 0.6 to 1.25 billion and again we feel good about results and where we are at, but as we generate that that cash in the fourth quarter, we will look to take another look at where we are at in our authorization. We have $313 million of the share repurchases of that $450 million through the third quarter and we are very committed to that shareholder return program, okay. Now we did also increase the dividend in the fourth quarter so you see us continuing to make product us as we deliver the results.

Terrific, that’s very helpful. Thanks so much.

Thank you Itay.

And we’ll take our next question from David Tamberrino with Goldman Sachs

Good morning, David.

Good morning and congrats on the quarter. My first question is really just around the 2.0 billion SOI tracking number that you put out. Really in relation to kind of last year, we're still tracking similarly to the top end or above of that 10% to 15 % those three quarters now. Just wondering what really gave you the confidence to come out and put out that number of $2 billion, which is 17% year-over-year increase and above that 15%. Is it order levels, what you seeing in that channel that gave you the confidence?

David I think it’s just confidence in the strategy that we have been executing, the changes that we've made to the business model is what you are seeing in the results that we’re delivering. And also you're seeing that particularly in the strength of our North American business. And I think when we look at what we see in that business, the improvements that we are making there and we look also at some of the other elements around the world, that gave us the confidence to make that statement to say that we are tracking to that range.

Okay. That’s fair. And winter tire inventories in Europe obviously we’ve seen the selling has been poor, I think it was on top of a pretty high single digit selling last year. Where do you think the inventories are now as it relates to potentially cold winter here. Do think that easy comp from last year is going to set up for a particularly strong quarter in the event that we do see a little bit more been normalized winter in Europe?

David it's a good question. If I just maybe take a step back for one second, the winter market is important to the industry there. It's roundabout 30% of the tires we sell. It’s typically high-end tires and it's a very good mix so forth. So it's very important to us and as you know we are leaders in winter technology. The situation that we're seeing is coming off of three warm winters in a row. As Laura mentioned, and I think as we said in the past, we have kind of planned for that sort of pre-winter even though we've seen some snow at this point. And part of what goes into our thinking is, excuse me is pretty much in line with what you're saying. You could almost call it the sort of the animal spirits of the winter or the channel in Europe right now particularly in Germany, they do have higher inventory in the channel right now. And on top of that, you've had these three warm winters, so there is little motivation to go stock up and go long on tires. The industry is typically round 100 million units or something like that if you do the math. We would say that that with higher inventory in the channel that's obviously still a question as to whether we can even reach that level. It’s clearly been much higher than that as we go back to the light winters of 2011. It was actually much higher than what I am saying. So as we look at it, we are going to continue to sort of stay in a cautious view. We think, we are very well prepared for it. I went through on my remarks, our winter line up our UltraGrip performance tire, our Dunlop winter sport five, our Vector 4Season for those that want to move to Offseason, that’s a small market. But we have top-tier winning podium products and all of those categories right now so were ready -- I think what would give us a boost, what would give the industry a boost frankly is cold weather and snow as we head into November here.

Okay. So just to summarize that it sounds as is there is upside to the $2 billion if there is in fact a colder and normalized winter in Europe?

I think unequivocally we could say that and it's kind of, as we look at the winter, it's kind of like interest rates. We think they are going to go up and they don't. We think its’ going to snow and it hasn't. So if we got to wait for the event to happen, and then we will see what happens? But clearly, if it snows, there's absolutely a virtuous effect in that.

Yes.

Understood. And then maybe just one more for me. For the online sales channel, we've seen a little bit of a small arms race here as Michelin has bought a few in Europe, they have also rolled out and on-demand service in the U.S. And then Bridgestone more recently bought some distribution channels both brick-and-mortar as well as online over this past weekend. How do you see that online e-commerce distribution channel evolving over the coming couple of years really for the global Big Three?

One -- number one, I think it's really confirmation of the strategy that we rolled out earlier in the year. And I think that's important. That’s what we saw coming. It's why we did what we did. And I would tell you we took a long time in getting there, building up what you've heard me say, our brand, and building up search our brand where the number one search tire brand, tire manufacturer in the U.S. rivaling some other big online tire sellers right now and doing that as a manufacturer. We are significantly ahead of others let’s just say. And we did that very consciously to create the demand in the market place. Then we pulled together, signing up our partners dealers and also putting the distribution capabilities in place. And then marrying the technology to be able to make that work, so customer has a good experience as are doing this really to make the tire buying process easier for the consumer. What I said, I said very simply, but it's a very complex problem. And it's one of those things that sort of bolt ons don't necessarily make the process have that much less friction in it because you have to hook up all kinds of things in the back. So this is not an easy thing to do to get you know the SKU explosion to get the right tire to the right place at the right time when consumers are going online to buy their tires. This is not an easy process, and it's why were being very methodical and having a good success as we go at this point. Having said that, I do think -- like most other products and particularly around millennial being the consumers with $1 trillion of buying power or some 80 million millennials out there that this will be an absolute way to buy tires and expected way to buy tires because that is how that group does commerce to a large degree. So having a formula that works out there and being able to marry it with the brand and importantly, the distribution both retailers and aligned distributors to get the tires there is going to be what wins. And that's how we are thinking about it sort of building it from the bottom up to be able to deliver in that value promise. So far we feel very good about it. But there's no question it will be a way that consumers want to shop. And Goodyear and its partner dealers are getting ready for that.

Okay. That’s helpful. I will turn it over. Thank you.

Thank you.

[Operator Instructions] We can go next to Rod Lache with Deutsche Bank. Please go ahead.

Good morning everyone. It’s actually Pat Nolan for Rod.

Yes, good morning, Pat.

Hey Pat.

Two quick questions on North America. First on the supply issues you alluded to in Q3, is that something you see being near term, in other words will you be able to perform in line with the industry over the next couple of quarters or do think the supply issues constrain your EBITD there? And secondly, maybe Rich if you could expand on your view on the sustainability of this North American margin performance I mean, it's a multiple of what the historic level has been. Maybe if you could just expand on how sustainable you think these margins are?

Sure. So the first question on the way to catch up on supply -- I would tell you, this is a point that we’ve been making relative to supplying those high-end HVA complex tires. I think the larger end diameter S view tires in particular or performance tires. And those are tires that remain high in demand, the capacity for those tires on a broad basis still I would say is behind the demand for those tires. And that is something that we are working to continue to make more of and doing by getting more tires out of our existing factories, investing in our North American factories, and also, using our sort of lower demands around the world to import some of those tires in. So in the near term that is how we are trying to catch up and continue to be a better supplier. Over the long-term, that's also why we embarked on the Americas plan that we talked on in the past. So that’s something that will take some time to put in place. It also is going to be a function of the demand that is out there as well. We think the demand will be there and we are going to work -- we are working feverishly to do that keeping our factories running full to be able to supply those tires. I would also say though -- just to put it in perspective that part of the market continues to grow. The other parts of the market as we said are always subject to these imports coming in. Remember we had these big gyrations because buying ahead of tariffs and the like and you have to remember as that drives the market or has an impact on the market, it had it impacts…

And when you add on the continued operational excellence initiatives, that drive the cost that’s not fully rolled out through all of our factories even in North America, through all the work stations. And then I probably say maybe to the earlier question, we live it every day. But don't forget about how complex these tires are. Right, the complexity that’s part of the equation. I would say that we are seeing probably demand higher than our expectations for the really highly complex tires. The performance and the SUV tires as well. And that continues to really put pressure on supply as we go.

That’s very helpful. If I could just sneak in just one housekeeping item. What are you incorporating in the guidance as far as Venezuela profitability in Q4?

About $20 million of SOI

Thanks very much. I’ll get back in the queue.

We’ll take our next question from Ryan Brinkman with JPMorgan. Please go ahead.

Hi. This is actually Samik on for Ryan. And I apologize if I missed a part of the call, so if these questions have already been answered. But just wanted to touch firstly on the guidance on the raw material price mix spread here. I remember earlier you were guiding to 3Q probably looking like more like the peak benefit in the year on that front and now it looks like you sort of looking at 4Q being a similar benefit. Now when I’m -- I guess with sort of the lag that you see in sport prices flowing through the P&L, how should we think about 1Q, does it look like it's going to frail [ph] off or does it look similarly strong for Q4?

I guess I would say for raw materials year-over-year in 2016, we do see overall low single digits improvement. I think as we look at it today, based on current spot rates and the currency rates that that would be a little better than that in the first half of the year versus the second half of the year. But we will like I said we will keep watching this and give you a full update on the fourth quarter call.

Got it. Got it. And just my last question on the North America segment, I see on the global SOI walk you had a small headwind from price mix. But could you help me with what that was for North America and how is pricing environment in North America?

Yes. I mean the price mix for North America continues to be strong right? The new product line up, the high demand for the very complex tires very positive results in North America. I think is mix is very strong. A very significant positive for us in the quarter. And we expect based on our demand that to continue. Now when it comes to price for North America, the only thing is, is our OE contracts right? Those have our RMIs included in them and some of the commercial fleets as well. And that comes into play in the pricing equation in North America. But things are strong and the results…

I would echo Laura's comments on mix. I think as we look at the results we're very pleased with the whole price mix equation for North American business.

Great. And just a follow-up on that front. Since the tariff kicked in, in early August has there been any change on that front? Has there been like a greater benefit to mix and pricing coming through after that?

You meant from the tariffs coming? The tariffs coming in.

Yes.

I would say that that's really by in large part of the market that’s not where we have a significant presence. So our situation really revolves around our value proposition, the new products we are bring to market in our ability to do that our new Wrangler All-Terrain Adventure, our Wrangler DuraTrac, the whole Kelly Edge power line up all these things are really what’s driving our increases in my the marketplace.

Got it. Great. Thanks for taking my questions. Thank you.

Thank you.

And we’ll take a follow up from David Tamberrino with Goldman Sachs. Please go ahead.

Hi thank you. Just a few more for me. I think Latin America is, one of the concerns here is specifically Venezuela, it sounds as if you guys have continued to be able to transact at one of the favorable sick add rates. How much longer do you think that continues and you'll be able to get U.S. dollars to buy raw materials down there because, just thinking about the core of the year in Venezuela has been a meaningful contributor to earnings and I guess a thought going forward is how much longer can that continue in your view?

Yes David just a quick comment on Latin America in general. Very difficult environment down there particularly in Brazil, I know your question’s on Venezuela. But I will just take the opportunity that our teams have been executing well down there, in light of consumer OE business and truck business there that’s down, 20% plus and you see from our numbers we grew volume above 20% in consumer replacement volume above 20% in virtually all of our key countries down there. So the team is executing well there in what is a very difficult environment around currency and inflation and evaluation in general excluding Venezuela. So we are pleased with how we're doing but we clearly see the headwinds going on there. And Venezuela is clearly one of them and I will have Laura address your questions in particular.

Yes, sure, David. So when you think about it for us, and for tires. Tires are being treated as a priority good. Right now there's very few forms of transportation in the country. And we continue to, to have access to U.S. dollars to buy those raw materials as I mentioned. We just received $15 million in the third quarter. Now line of sight is limited. Each company facts and circumstances are very different. But we continue to, to make and sell tires and they are in high demand. We certainly have a tremendous amount of disclosure related to Venezuela and all of our cues and case. For us we continue to operate the business under normal course and really predicting kind of the future is very difficult for Venezuela.

Okay that's fair. And I guess, may be on that topic when you think about the hyperinflation down there, how conservative have you been in your updated outlook and kind of SOI walk for inflation? Could it be something that gets again for the fourth quarter comes in a little bit higher and ends up really eating into and making the cost savings minus inflation are negative or do think you've been accurate on your estimates for 4Q?

Yes, I mean for us that about $20 million in the fourth quarter takes into consideration the December elections and that historically -- and I think everyone would expect that to create even more volatility as we go then was in the third quarter. So for us, we see it as a balance estimate for the fourth quarter.

Yes and David I would say from your question on cost savings, I mean, we still if you exclude Venezuela, which we've tried to do pretty much on our sort of forecast for cost savings is not actually exceeding it. So if you strip Venezuela out and it certainly does sort of complicate things, but when you take it away, I would say we're executing very well against those cost savings if that was an underlying question -- we feel pretty good about the core business.

Yes. And we have been able to work through the inflation increases even if we have some impact further in our cost savings versus inflation. It tends to be offset in the price mix versus raw for Venezuela.

Okay. And that is helpful. And then just lastly, in your analogy earlier you were talking about the potential rising interest rates that revolving were kind of waiting to see here. Is there kind of any update when you think about your balance sheet and the structure in terms of timing may be coming to the market and looking at refinancing some of that higher coupon debt that's out there. I know a couple of them become callable or one has become callable in a more in the next year?

So we all always are monitoring our capital structure and we take a very proactive approach to managing our interest expense. And we will continue to do that. Now we obviously can talk about or comment when we would be in the market or not. But that is our history and you have seen it recently right? In May we amended and restated our European revolving credit facility and I think a 75 basis point reduction, June we amended the U.S. second term loan and lower that by about a 100 basis points. So that's kind of been our MO of the past.

And it appears we have no further questions, so I will return the call to Goodyear for closing comments.

I just want to thank everyone for joining us today. We had a great quarter and we felt very good about finishing off the year. So thank you very much.

Yes. Thank you.