Goodyear Reports Fourth Quarter, Full Year Results

February 16, 2015

- Record full-year segment operating income of $1.7 billion
- Full-year free cash flow from operations of $1.0 billion
- North America sets earnings records for fourth quarter, full year
- Completed $150 million in share repurchases in fourth quarter
- Company releases $2.2 billion U.S. tax valuation allowance, no change to cash taxes
- Company reaffirms 2015 earnings growth target of 10%-15% above 2014 results

AKRON, Ohio, February 17, 2015 – The Goodyear Tire & Rubber Company today reported results for the fourth quarter and full year of 2014.

“We delivered record full-year segment operating income, successfully navigating a challenging global economic environment,” said Richard J. Kramer, chairman and chief executive officer.

“While industry conditions led to mixed results globally, we achieved record fourth quarter segment operating income in North America as well as in Asia Pacific. Our continued performance validates the successful execution of our strategy,” he added.

“The release of our $2.2 billion U.S. tax valuation allowance after 12 years is a major milestone for Goodyear. It marks the completion of the successful turnaround of our North America business,” Kramer said.

The release of the tax valuation allowance represents a one-time, non-cash benefit to earnings in 2014. While the company will record charges for income taxes in future periods, it does not expect to pay cash taxes in the U.S. for approximately five years.

“Led by our momentum in North America, we are on target to achieve 2015 segment operating income growth of 10 percent to 15 percent above our record setting $1.7 billion in 2014, despite severe headwinds from the increasing strength of the U.S. dollar,” Kramer said.

Goodyear’s fourth quarter 2014 sales were $4.4 billion, compared to $4.8 billion a year ago. Sales were impacted by $256 million in unfavorable foreign currency translation and $181 million in lower sales volume in Europe, Middle East and Africa.

Tire unit volumes totaled 39.5 million for the fourth quarter of 2014. Original equipment unit volume was down 1 percent, primarily due to continued industry weakness in Latin America. Replacement tire shipments were down 4 percent, due to lower sales of winter tires in Europe resulting from one of the warmest winters on record.

The company reported segment operating income of $359 million in the fourth quarter of 2014, compared to $419 million a year ago. The decline in segment operating income was driven by reduced price/mix and lower volume, which more than offset the benefits of lower raw material costs and other cost savings actions.

Goodyear’s fourth quarter 2014 net income available to common shareholders was $2.1 billion ($7.68 per share). Excluding certain significant items, adjusted net income was $166 million (59 cents per share).

For the fourth quarter of 2013, net income available to common shareholders was $228 million (84 cents per share). Excluding certain significant items, adjusted net income was $209 million (74 cents per share). Per share amounts are diluted.

Full-Year Results

Goodyear’s 2014 sales were $18.1 billion, compared to $19.5 billion in 2013. Sales were impacted by $571 million in unfavorable foreign currency translation. Tire unit volumes totaled 162 million. Replacement tire shipments were up 1 percent. Original equipment unit volume was down 3 percent.

The company’s segment operating income of $1.7 billion was up 8 percent from last year. Compared to the prior year, the significant increase in segment operating income reflects lower raw material and conversion costs partially offset by lower price/mix and unfavorable foreign currency translation.

Goodyear’s 2014 net income available to common shareholders was $2.4 billion ($8.78 per share). Excluding certain significant items, adjusted net income was $790 million ($2.83 per share).

Net income available to common shareholders was $600 million ($2.28 per share) in 2013. Excluding certain significant items, adjusted net income was $725 million ($2.63 per share). All per share amounts are diluted.

See the note at the end of this release for further explanation and reconciliation tables for Segment Operating Income and Margin; Free Cash Flow from Operations; Adjusted Net Income; and Adjusted Diluted Earnings per Share, reflecting the impact of certain significant items on the 2014 and 2013 periods.

Business Segment Results

 

North America Fourth Quarter    Twelve Months
(in millions) 2014 2013 2014 2013
Tire Units 16.0 16.3 61.1 61.7
Sales   $2,105   $2,131   $8,085   $8,684
Segment Operating Income    229 199 803 691
Segment Operating Margin 10.9% 9.3% 9.9% 8.0%


 

North America’s fourth quarter 2014 sales decreased 1 percent from last year to $2.1 billion. Sales reflect a 1 percent decrease in tire unit volume and unfavorable foreign currency translation, partially offset by improved price/mix. Replacement tire shipments were down 1 percent. Original equipment unit volume was flat.

Fourth quarter 2014 segment operating income of $229 million was a 15 percent improvement over the prior year and a record for any quarter. The improvement was driven primarily by lower raw material costs and lower pension expense.

 

Europe, Middle East and Africa    Fourth Quarter    Twelve Months
(in millions) 2014 2013 2014 2013
Tire Units 12.8 14.4 60.5 60.8
Sales $1,306 $1,631 $6,180 $6,567
Segment Operating Income    30 101 438 298
Segment Operating Margin 2.3% 6.2% 7.1% 4.5%


 

Europe, Middle East and Africa’s fourth quarter sales decreased 20 percent from last year to $1.3 billion. Sales reflect a 12 percent decrease in tire unit volume, unfavorable foreign currency translation and lower price/mix. Replacement tire shipments were down 15 percent, primarily due to lower winter tire sales resulting from one of the warmest winters on record. Original equipment unit volume was down 5 percent.

Fourth quarter 2014 segment operating income of $30 million was 70 percent below the prior year primarily due to reduced price/mix, lower volume and higher marketing expenses, partially offset by lower raw material costs and cost savings actions including savings from the closure of a tire plant in France.

 

Latin America  Fourth Quarter    Twelve Months
(in millions) 2014 2013 2014 2013
Tire Units 4.7 4.4 17.4 17.9
Sales $434 $492 $1,796 $2,063
Segment Operating Income    20 52 170 283
Segment Operating Margin 4.6% 10.6% 9.5% 13.7%


 

Latin America’s fourth quarter sales decreased 12 percent from last year to $434 million. Sales reflect an 8 percent increase in tire unit volume more than offset by unfavorable foreign currency translation. Replacement tire shipments were up 20 percent. Original equipment unit volume was down 24 percent, primarily in Brazil.

Fourth quarter segment operating income of $20 million was down 62 percent from a year ago primarily due to higher conversion costs, unfavorable foreign currency translation and an unfavorable tax claim.

 

Asia Pacific Fourth Quarter    Twelve Months   
(in millions) 2014 2013 2014 2013
Tire Units 6.0 5.6 23.0 21.9
Sales $511 $537 $2,077 $2,226
Segment Operating Income    80 67 301 308
Segment Operating Margin 15.7% 12.5% 14.5% 13.8% 


 

Asia Pacific’s fourth quarter sales decreased 5 percent from last year to $511 million. Sales reflect a 7 percent increase in tire unit volume, which was more than offset by reduced price/mix and unfavorable foreign currency translation. Replacement tire shipments were flat. Original equipment unit volume was up 15 percent.

Fourth quarter segment operating income of $80 million was up 19 percent from last year and a record, driven by lower raw material costs and higher volume.

Outlook

The company reaffirmed its 2015-2016 financial targets, which include:
- Segment Operating Income growth of between 10 percent and 15 percent per year;
- Annual positive Free Cash Flow from Operations and,
- An Adjusted Debt to EBITDAP ratio of 2.0x to 2.1x.

Shareholder Return Program

The company paid a quarterly dividend of 6 cents per share of common stock on December 1, 2014. Directors have declared a quarterly dividend of 6 cents per share payable March 2, 2015, to shareholders of record on February 2, 2015.

As a part of its previously announced $450 million share repurchase program, the company repurchased 5.7 million shares of its common stock for $150 million during the fourth quarter. For the full year of 2014, Goodyear repurchased 8.9 million shares of its common stock for $233 million.

E-Commerce Platform Launched

At its 2015 Dealer Conference on January 26, Goodyear’s North America business announced that, driven by consumer demand, it is launching an e-commerce platform later this year to enable consumers to buy tires online at Goodyear.com and have them installed locally at an authorized Goodyear retailer of their choice. Goodyear will be the first major tire manufacturer to offer online consumer tire purchasing.

Conference Call

Goodyear will hold an investor conference call at 9 a.m. today. Prior to the commencement of the call, the company will post the financial and other related information that will be presented on its investor relations Web site: http://corporate.goodyear.com/en-US/investors.html.

Participating in the conference call will be Richard J. Kramer, chairman and chief executive officer, and Laura K. Thompson, executive vice president and chief financial officer.

Investors, members of the media and other interested persons can access the conference call on the Web site or via telephone by calling either 800-895-1085 or 785-424-1055 before 8:55 a.m. and providing the Conference ID “Goodyear.” A taped replay will be available by calling 800-839-2485 or 402-220-7222. The replay will also remain available on the Web site.

Goodyear is one of the world’s largest tire companies. It employs about 67,000 people and manufactures its products in 50 facilities in 22 countries around the world. Its two Innovation Centers in Akron, Ohio and Colmar-Berg, Luxembourg strive to develop state-of-the-art products and services that set the technology and performance standard for the industry. For more information about Goodyear and its products, go to http://corporate.goodyear.com. GT-FN

Certain information contained in this press release may constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors, many of which are beyond our control, that affect our operations, performance, business strategy and results and could cause our actual results and experience to differ materially from the assumptions, expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to: our ability to implement successfully strategic initiatives; actions and initiatives taken by both current and potential competitors; increases in the prices paid for raw materials and energy; a labor strike, work stoppage or other similar event; deteriorating economic conditions or an inability to access capital markets; work stoppages, financial difficulties or supply disruptions at our suppliers or customers; the adequacy of our capital expenditures; our failure to comply with a material covenant in our debt obligations; potential adverse consequences of litigation involving the company; as well as the effects of more general factors such as changes in general market, economic or political conditions or in legislation, regulation or public policy. Additional factors are discussed in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

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