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Goodyear reports fourth quarter, full-year 2016 results

09 Feb 17

Goodyear today reported results for the fourth quarter and full-year of 2016.

“We delivered solid net income and record core segment operating income in 2016, driven by strong performance in our Americas and Asia Pacific consumer tire businesses,” said Chairman Rich Kramer. “Our results demonstrate continued sustainable earnings growth and disciplined execution of our strategy.

“While we expect raw material inflation to be a significant headwind in 2017, the combination of Goodyear’s innovation leadership, award-winning products and strong global brand creates an industry-leading value proposition and competitive advantage,” Kramer said. “We’ve demonstrated that we have been able to successfully offset raw material inflation over time.

“We remain confident in our strategy of capturing profitable growth in key segments of the market and in delivering our 2020 targets.”

Goodyear’s fourth quarter 2016 sales were $3.7 billion, down from $4.1 billion a year ago, with the decrease driven by the deconsolidation of the company’s subsidiary in Venezuela.

Tire unit volumes totaled 41.1 million, down 2 percent from 2015. Replacement tire shipments were down 1 percent. Original equipment unit volume was down 7 percent, driven in part due to weakness in the U.S. commercial truck market.

Goodyear’s fourth quarter 2016 net income was $561 million ($2.14 per share), compared to a net loss of $380 million ($1.42 per share) in the year-ago quarter. The prior year was negatively impacted by a charge to deconsolidate Venezuela. Fourth quarter 2016 adjusted net income was $249 million (95 cents per share), compared to $257 million (93 cents per share) in 2015. Per share amounts are diluted.

The company reported fourth quarter segment operating income of $479 million in 2016, compared to $480 million a year ago. Segment operating income in 2016 benefited from net cost savings, which was more than offset by lower price/mix net of raw material costs, lower volume and the deconsolidation of Venezuela. Core segment operating income, which excludes Venezuela, was $458 million in the year-ago quarter.

Full-Year Results

Goodyear’s 2016 sales were $15.2 billion, down 8 percent from 2015, primarily reflecting the deconsolidation of Venezuela and unfavorable foreign currency translation.

Tire unit volumes totaled 166.1 million, essentially unchanged from 2015. Replacement tire shipments were up 2 percent. Original equipment unit volume was down 4 percent. Excluding the impact of the deconsolidation of Venezuela, unit volumes increased 1 percent.

Goodyear’s 2016 net income of $1.3 billion ($4.74 per share) is up from $307 million ($1.12 per share) in 2015. The increase was driven by a charge in 2015 to deconsolidate Venezuela and a decrease in 2016 income tax expense due to the release of foreign tax valuation allowances. Full-year adjusted net income was $1.1 billion ($4.00 per share), up from $906 million ($3.32 per share) in 2015. Per share amounts are diluted.

The company reported 2016 segment operating income of $2.0 billion, down 2 percent from a year ago. The decrease was more than explained by the deconsolidation of Venezuela. Core segment operating income, which excludes Venezuela, was $1.9 billion in 2015.

Business Segment Results

Americas

  Forth QuarterTwelve Months  
    (in millions)2016201520162015
    Tire Units 18.719.674.179.1
    Sales$ 2,061$ 2,313$ 8,172$ 9,370
    Segment Operating Income2952841,1511,266
    Segment Operating Margin14.3%12.3%14.1%13.5%

 

Americas’ fourth quarter 2016 sales decreased 11 percent from last year to $2.1 billion. Sales reflect a 5 percent decrease in tire unit volume and the deconsolidation of Venezuela. Replacement tire shipments were down 3 percent. Original equipment unit volume was down 12 percent. Excluding the impact of the deconsolidation of Venezuela, unit volume decreased 3 percent.

Fourth quarter 2016 segment operating income of $295 million was up 4 percent from the prior year and a record. The increase was driven by strong performance in the consumer tire business, which was partially offset by weakness in the commercial truck tire business and the deconsolidation of Venezuela. Cost reduction actions and strong price/mix net of raw material costs were partially offset by the impacts of lower volume.

The deconsolidation of Venezuela negatively impacted fourth quarter volumes by 0.3 million units, sales by $167 million and segment operating income by $22 million.

Europe, Middle East and Africa

  Forth QuarterTwelve Months  
    (in millions)2016201520162015
    Tire Units14.114.261.161.1
    Sales$ 1,132$ 1,191$ 4,880$ 5,115
    Segment Operating Income81100461435
    Segment Operating Margin7.2%8.4%9.4%8.5%

 

Europe, Middle East and Africa’s fourth quarter sales of $1.1 billion were down 5 percent from the prior year reflecting unfavorable currency translation and a 1 percent decrease in sales volume. Replacement tire shipments were up 1 percent. Original equipment unit volume was down 5 percent.

Fourth quarter 2016 segment operating income of $81 million was 19 percent below the prior year driven by lower price/mix net of raw materials, foreign currency translation and the impact of lower volume.

Asia Pacific

  Forth QuarterTwelve Months  
    (in millions)2016201520162015
    Tire Units8.48.330.926.0
    Sales$ 548$ 559$ 2,106$ 1,958
    Segment Operating Income10396373319
    Segment Operating Margin18.8%17.2%17.7%16.3%

 

Asia Pacific’s fourth quarter 2016 sales decreased 2 percent from last year to $548 million. Sales reflect unfavorable foreign currency translation, which more than offset a 1 percent increase in tire unit volume. Replacement tire shipments were up 3 percent. Original equipment unit volume was down 2 percent.

Fourth quarter 2016 segment operating income of $103 million was up 7 percent from last year and a record, driven by lower conversion costs and higher volume, which were partially offset by lower price/mix net of raw material costs.

Financial Targets

As a result of the continued escalation of raw material costs and the timing of the corresponding contractual adjustments to pricing with certain of its customers, the company expects flat year-over-year segment operating income in 2017 compared to 2016.

The company has confirmed its 2020 financial targets and capital allocation plan, which were announced on September 15, 2016.

Shareholder Return Program

As a part of its previously announced $1.1 billion share repurchase program, the company repurchased 9.8 million shares of its common stock for $300 million during 2016’s fourth quarter. For the full year, the company repurchased 16.7 million shares for $500 million.

Since 2014, purchases under the program total 31.2 million shares for $913 million.

On February 2, 2017, the Board of Directors authorized a $1.0 billion increase in the share repurchase program, bringing the total authorization to $2.1 billion.