preload

Goodyear Reports Higher Third Quarter Earnings

30 Oct 13

AKRON, Ohio, October 29, 2013 – The Goodyear Tyre & Rubber Company today reported higher earnings for the third quarter of 2013.

“Our third quarter results, announced just weeks after our recent Investor Day, demonstrate continued sustainable earnings growth and the type of disciplined execution needed to deliver on our targets in 2013 and beyond,” said Richard J. Kramer, chairman and chief executive officer.

“As the industry continues to recover, we see strong volume growth in the segments we are targeting,” he added. “While we continue to be disciplined in our approach, we are seeing growth in unit volumes, including in our North America business, driven by the Goodyear brand.”

All four of Goodyear’s regional businesses achieved higher operating income in the quarter compared to the year-ago period, with North America posting record third quarter operating income. Three businesses posted higher tyre unit volumes than last year.

“We now expect to see record segment operating income of more than $1.5 billion in 2013, and continue to target 10 percent to 15 percent annual growth in segment operating income through 2016. As previously announced, we will take the first steps in our capital allocation plan in the fourth quarter with our reinstated quarterly dividend,” Kramer said. Additionally, the company continues to target positive cash flow, excluding pension pre-funding, through 2016.

Goodyear’s third quarter 2013 sales were $5.0 billion, compared to $5.3 billion a year ago. Third quarter 2013 sales reflect $82 million in higher tyre unit volumes, more than offset by $178 million in lower sales in other tyre-related businesses, most notably a decrease in the price and volume of third-party chemical sales; $89 million in lower price/mix, despite continued favorable mix; and $77 million in unfavorable foreign currency translation. Tyre unit volumes totaled 42.6 million, up 2 percent from 2012.

The company reported segment operating income of $431 million in the third quarter of 2013. This was up 24 percent from the year-ago quarter, reflecting favorable price/mix net of raw materials of $87 million (excluding raw material cost savings), lower unabsorbed overhead of $18 million due to higher production levels and $14 million in higher tyre unit volumes, partially offset by $40 million in higher SAG expenses and $10 million in unfavorable foreign currency translation. See the note at the end of this release for further explanation and a segment operating income reconciliation table.

Goodyear’s third quarter 2013 net income available to common shareholders was $166 million (62 cents per share), a third quarter record and up 51 percent from $110 million (41 cents per share) in the 2012 quarter. All per share amounts are diluted.

The 2013 third quarter included total charges of $19 million (7 cents per share) due to rationalizations, asset write-offs and accelerated depreciation and gains of $2 million (1 cent per share) on asset sales. All amounts are after taxes and minority interest.

The 2012 third quarter included total charges of $32 million (12 cents per share) due to rationalizations, asset write-offs and accelerated depreciation; $6 million (2 cents per share) due to pension settlements in the United Kingdom; and $3 million (1 cent per share) due to discrete tax charges; and gains of $5 million (2 cents per share) from asset sales; and $4 million (1 cent per share) in insurance recoveries related to flooding in Thailand. All amounts are after taxes and minority interest.

See the table at the end of this release for a list of significant items impacting the 2013 and 2012 quarters.

Business Segment Results

North America

Third QuarterNine Months
(in millions)2013201220132012
Tyre Units15.815.645.446.8
Sales$ 2,186$ 2,404$ 6,553$ 7,352
Segment Operating Income161130492398
Segment Operating Margin7.4%5.4%7.5%5.4%

North America’s third quarter 2013 sales decreased 9 percent from last year to $2.2 billion. Sales reflect a $170 million decline in sales in other tyre-related businesses, most notably a decrease in the price and volume of third-party chemical sales. The impact of increased tyre unit volumes was more than offset by lower price/mix. Original equipment unit volume was up 5 percent. Replacement tyre shipments were flat.

Third quarter 2013 segment operating income of $161 million was a 24 percent improvement over the prior year and a third quarter record. Segment operating income was positively impacted by favorable price/mix net of raw materials of $36 million, decreased conversion costs of $7 million and increased tyre volume of $2 million. This was partially offset by $15 million in higher SAG expenses.

Europe, Middle East and Africa

Third QuarterNine Months
(in millions)2013201220132012
Tyre Units16.716.346.448.5
Sales$ 1,752$ 1,748$ 4,936$ 5,282
Segment Operating Income115105197214
Segment Operating Margin6.6%6.0%4.0%4.1%

Europe, Middle East and Africa’s third quarter sales increased $4 million from last year to $1.8 billion. Sales reflect a 3 percent increase in tyre unit volume and favorable foreign currency translation of $42 million, which was partially offset by lower price/mix. Original equipment unit volume was up 11 percent. Replacement tyre shipments were flat.

Third quarter 2013 segment operating income of $115 million was 10 percent above the prior year. Higher tyre unit volumes of $8 million, favorable price/mix net of raw materials of $8 million and $7 million in favorable foreign currency translation more than offset $8 million in higher SAG expenses, the $3 million impact of higher conversion costs and $3 million in lower earnings in other tyre-related businesses.

Latin America

Third QuarterNine Months
(in millions)2013201220132012
Tyre Units4.54.713.513.3
Sales$ 527$ 520$ 1,571$1,544
Segment Operation Income8949231162
Segment Operating Margin16.9%9.4%14.7%10.5%

Latin America’s third quarter sales increased 1 percent from last year to $527 million. Sales reflect improved price/mix and higher sales in other tyre-related businesses of $11 million partially offset by $75 million in unfavorable foreign currency translation and a 4 percent decrease in tyre unit volume. Original equipment unit volume was down 21 percent, reflecting the company’s selective fitment strategy. Replacement tyre shipments were up 6 percent.

Third quarter segment operating income of $89 million was up 82 percent from a year ago. Price/mix improvements of $79 million, including a favorable shift from original equipment to replacement volumes, positively impacted segment operating income and lower raw material costs added $8 million. Segment operating income was negatively impacted by higher conversion costs of $27 million, $10 million in unfavorable currency translation, $10 million in higher SAG expenses and $4 million in lower tyre unit volume.

Asia Pacific

Third QuarterNine Months
(in millions)2013201220132012
Tyre Units5.65.216.315.4
Sales$ 537$ 592$ 1,689$ 1,769
Segment Operating Income6664241202
Segmeent Operating Margin12.3%10.8%14.3%11.4%

Asia Pacific’s third quarter sales decreased $55 million from last year to $537 million. Sales reflect an 8 percent increase in tyre unit volume, offset by reduced price/mix, $39 million in unfavorable foreign currency translation and $12 million in lower sales in other tyre-related businesses. Original equipment unit volume was up 11 percent. Replacement tyre shipments were up 5 percent.

Third quarter segment operating income of $66 million was up 3 percent from last year. Segment operating income was positively impacted by favorable price/mix net of raw materials of $15 million, lower factory start-up costs of $13 million and $8 million in higher tyre unit volumes, which more than offset $7 million in higher SAG expenses, $6 million in unfavorable foreign currency translation, $5 million in higher conversion costs and $4 million in lower earnings from other tyre-related businesses.

Year-to-Date Results

Goodyear’s sales for the first nine months of 2013 were $14.8 billion, down 8 percent from the 2012 period. Sales reflect $487 million in lower sales in other tyre-related businesses, most notably third party chemical sales in North America; $252 million in unfavorable foreign currency translation; $230 million in lower tyre unit volumes; and $170 million in lower price/mix. Tyre unit volumes totaled 121.6 million, down 2 percent from 2012.

The company’s nine-month segment operating income of $1.2 billion was up 19 percent from last year. Compared to the prior year, year-to-date segment operating income reflects favorable price/mix net of raw materials of $338 million (excluding raw material cost savings), which more than offset $107 million in higher unabsorbed overhead costs resulting from lower production; $39 million in unfavorable foreign currency translation; and $35 million in lower tyre volume. Goodyear’s year-to-date net income available to common shareholders of $372 million ($1.43 per share) is up from $183 million (73 cents per share) in 2012’s first nine months. All per share amounts are diluted.

Outlook

For the full year of 2013 in North America, Goodyear’s industry outlook is unchanged. It expects consumer replacement as well as commercial replacement and commercial original equipment volumes to be at essentially 2012 levels. It expects consumer original equipment volumes to be up approximately 5 percent.

For the full year in Europe, Middle East and Africa, Goodyear’s industry outlook is unchanged, except for consumer original equipment. The company now expects consumer original equipment volumes to be flat to down 5 percent. It expects consumer replacement to be at essentially 2012 levels. It expects commercial original equipment volumes to be flat to up 5 percent and commercial replacement to be up about 5 percent.