Goodyear Reports Second Quarter, First Half 2019 Results

July 26, 2019

- U.S. consumer replacement tire shipments increased 4% in the quarter; 5% year to date

- U.S. and European consumer replacement businesses gained share in the quarter

- Americas and EMEA commercial truck tire volume growth outpaced industry in the first half

- First half revenue per tire up 4%, excluding foreign exchange

- New consumer OE fitments to drive significant future volume growth
 

AKRON, Ohio, July 26, 2019 – The Goodyear Tire & Rubber Company today reported results for the second quarter and first half of 2019.

“Our U.S. consumer replacement and commercial businesses continued to perform well in a challenging environment, aided by recent product launches,” said Richard J. Kramer, chairman, chief executive officer and president. “We have continued our focus on strengthening our business by investing in premium supply and enhancing our OE pipeline and cost competitiveness,” he added. “I am encouraged that several of the external factors that have impacted our business in recent quarters are beginning to moderate, positioning us to deliver stronger results going forward,” said Kramer.

Goodyear’s second quarter 2019 sales were $3.6 billion, down 5% from a year ago, driven by unfavorable currency translation, lower volume, and reduced sales from other tire-related businesses. These effects were partially offset by improvements in price/mix.

Tire unit volumes totaled 37.4 million, a 4% decrease from 2018. Replacement tire shipments declined less than 1%. Original equipment unit volume was down 11%, reflecting lower global vehicle production and strategic fitment choices.

Goodyear’s second quarter 2019 net income was $54 million (23 cents per share), down from $157 million (65 cents per share) a year ago. Second quarter 2019 adjusted net income was $58 million (25 cents per share), compared to $150 million (62 cents per share) in 2018. Per share amounts are diluted.

The company reported second quarter segment operating income of $219 million in 2019, down from $324 million a year ago. The decrease reflects higher raw material costs, lower volume, weaker results from other tire-related businesses and adverse currency, partially offset by favorable price/mix, improved overhead absorption from higher Americas production in prior quarters, and net cost savings.

Year-to-Date Results

Goodyear’s sales for the first six months of 2019 were $7.2 billion, a 6% decline from the 2018 period due to unfavorable foreign currency translation, lower volume and reduced sales from other tire-related businesses. These factors were partially offset by improvements in price/mix.

Tire unit volumes totaled 75.4 million, down 3% from 2018. Replacement tire shipments decreased less than 1% from the prior year’s period. Original equipment volume declined 9%, driven by weaker consumer OE industry demand, reflecting lower global vehicle production, and strategic fitment choices.

Goodyear’s net loss was $7 million for the first six months of 2019 (3 cents per share) compared to net income of $232 million (96 cents per share) in the prior year’s period. The first half of 2019 included several significant items, most notably $107 million in rationalization charges, primarily related to the previously announced plan to modernize two of our tire manufacturing facilities in Germany. First half 2019 adjusted net income was $103 million (44 cents per share) compared to $272 million ($1.12 per share) in the prior year’s period. Per share amounts are diluted.

The company reported first half segment operating income of $409 million in 2019, down from $605 million a year ago. The decrease was primarily due to higher raw material costs.

Reconciliation of Non-GAAP Financial Measures

See the note at the end of this release for further explanation and reconciliation tables for Segment Operating Income and Margin; Adjusted Net Income; and Adjusted Diluted Earnings per Share, reflecting the impact of certain significant items on the 2019 and 2018 periods.

Business Segment Results

Americas

  Second Quarter Six Months
(in millions) 2019 2018 2019 2018
Tire Units 17.1 17.3 33.8 34.0
Sales $1,971 $2,018
$3,847 $3,947
Segment Operating Income
134 154 223 281
Segment Operating Margin 6.8% 7.6% 5.8% 7.1%

 

Americas’ second quarter 2019 sales decreased 2% to $2.0 billion, reflecting unfavorable foreign currency translation, lower third-party chemical sales and reduced volume, partially offset by improved price/mix. Replacement tire shipments rose 1%. U.S. consumer replacement volume increased 4% over the prior year, led by above-industry growth in the 17-inch-and-greater category.  Original equipment unit volume was down 9%, entirely attributable to a 12% decrease in consumer OE due to lower vehicle production and strategic fitment choices.

Second quarter 2019 segment operating income of $134 million was down 13% from the prior year. The decrease reflects higher raw material costs and reduced earnings from our chemical business, partially offset by improved overhead absorption.  
 

Europe, Middle East and Africa

  Second Quarter Six Months
(in millions) 2019 2018 2019 2018
Tire Units 13.3 14.2 27.6 28.9
Sales $1,141 $1,260 $2,362 $2,590
Segment Operating Income 44 100 98 178
Segment Operating Margin 3.9% 7.9% 4.1% 6.9%


Europe, Middle East and Africa’s second quarter 2019 sales decreased 9% from last year to $1.1 billion, primarily attributable to unfavorable foreign currency translation and lower volume. Replacement tire shipments were down 3%, reflecting weaker industry demand. Original equipment unit volume declined 13% due to lower consumer OE industry demand and strategic fitment choices.

Second quarter 2019 segment operating income of $44 million was 56% lower than the prior year. The decrease was driven by lower volume, increased raw material costs and unfavorable foreign currency translation, partially offset by improved price/mix.

 

Asia Pacific

  Second Quarter Six Months
(in millions) 2019 2018 2019 2018
Tire Units 7.0 7.5 14.0 15.1
Sales $520 $563 $1,021 $1,134
Segment Operating Income
41 70 88 146
Segment Operating Margin 7.9% 12.4% 8.6% 12.9%


Asia Pacific’s second quarter 2019 sales decreased 8% from last year to $520 million, driven by lower volume and unfavorable foreign currency translation. Replacement tire shipments were down 1%, reflecting soft demand in China.  Original equipment unit volume declined 12%, driven by lower vehicle production in China and India.

Second quarter 2019 segment operating income of $41 million was down 41% from last year, reflecting lower volume, higher raw material costs and higher conversion costs, primarily due to lower factory utilization.

New OE Fitments

Goodyear’s OE win rates over the last 18 months have increased significantly compared to recent history, reflecting industry trends toward vehicles with more complex tire constructions, as well as Goodyear’s success in bringing advanced new technology to OE platforms. Based on these higher win rates, Goodyear expects OE volume growth of approximately 20% between 2019 and 2022 based on current third-party industry projections for auto production. These new fitments are at a higher average revenue per tire than existing volume and include a significant percentage of high-value electric vehicle fitments.

Common Stock Dividend

The company declared a quarterly dividend of 16 cents per share of common stock on July 12, 2019, payable on September 3, 2019 to shareholders of record on August 1, 2019. The payout represents an annual rate of 64 cents per share.

Conference Call

Goodyear will hold an investor conference call at 9:30 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 website: http://investor.goodyear.com.

Participating in the conference call will be Richard J. Kramer, chairman, chief executive officer and president; and Darren R. Wells, executive vice president and chief financial officer.

Investors, members of the media and other interested persons can access the conference call on the website or via telephone by calling either (800) 895-3361 or (785) 424-1062 before 9:25 a.m. and providing the conference ID “Goodyear.” A taped replay will be available by calling (800) 839-5103 or (402) 220-2687. The replay will also remain available on the website.

Goodyear is one of the world’s largest tire companies. It employs about 64,000 people and manufactures its products in 47 facilities in 21 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 www.goodyear.com/corporate.  GT-FN

Certain information contained in this press release constitutes 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 our 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; foreign currency translation and transaction risks; 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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