Goodyear Reports All-Time Record Segment Operating Income

October 29, 2015

- Record quarterly segment operating income of $599 million, up 15%

- Third quarter Goodyear net income of $271 million, up 68%

- North America earnings of $323 million, up 54% and a record for any quarter

- Third quarter segment operating margin of 14%, North America margin exceeds 16%  

- All business units post segment operating margin above 11%

- 2015 full-year segment operating income tracking to $2 billion

AKRON, Ohio, October 29, 2015 – The Goodyear Tire & Rubber Company today reported record results for the third quarter of 2015.

“We delivered outstanding earnings growth in the quarter and segment operating margin of more than 14 percent, overcoming macroeconomic challenges in some of our key international markets,” said Richard J. Kramer, chairman and chief executive officer.

“Our strong momentum in North America continues. The business grew its segment operating margin to more than 16 percent and achieved a 54 percent year-over-year increase in earnings driven by strong demand for our high-value-added products,” he said.

Kramer added, “Our third quarter results demonstrate continued sustainable earnings growth and our sharp focus on disciplined execution of our strategy in both strong and challenging markets. With our strong year-to-date performance, we now see full-year segment operating income tracking to $2 billion, which would be more than double what we achieved just five years ago.”

Goodyear’s third quarter 2015 sales were $4.2 billion, down from $4.7 billion a year ago, with the decrease largely attributable to unfavorable foreign currency translation of $430 million.

Tire unit volumes totaled 42.5 million for the third quarter of 2015, up 1 percent from last year. Original equipment unit volume was up 4 percent. Replacement tire shipments were flat.

The company reported third quarter segment operating income of $599 million in 2015,
up 15 percent from a year ago and a record for any quarter. The increase was driven by favorable price/mix net of raw materials, partially offset by unfavorable foreign currency translation.

Goodyear’s third quarter 2015 net income was $271 million (99 cents per share). Adjusted net income was also $271 million (99 cents per share). Per share amounts are diluted.

Third quarter 2015 adjusted net income was also impacted by $84 million (30 cents per share) of U.S. tax expense following the release of the company’s U.S. tax valuation allowance in the fourth quarter of 2014. Due to tax credits and prior tax-loss carryforwards, the company does not expect to pay significant cash income taxes in the United States for about five years.

Goodyear’s third quarter 2014 net income was $161 million (58 cents per share). Excluding certain significant items, adjusted net income was $242 million (87 cents per share). Per share amounts are diluted.

Year to Date

Goodyear’s sales for the first nine months of 2015 were $12.4 billion, down 10 percent from the 2014 period, reflecting unfavorable foreign currency translation of $1.2 billion. Tire unit volumes totaled 124.1 million for the first nine months of 2015, up 1 percent from 2014. Original equipment unit volume was up 4 percent. Replacement tire shipments were flat.

The company’s year-to-date segment operating income of $1.5 billion was up 14 percent from last year. Compared to 2014, year-to-date segment operating income reflects the benefits of favorable price/mix net of raw materials and cost reduction actions, which exceeded the impact of unfavorable foreign currency translation and inflation.

Goodyear’s year-to-date net income available to common shareholders of $687 million ($2.51 per share) is up from $316 million ($1.15 per share) in 2014’s first nine months. Excluding certain significant items, 2015 adjusted net income was $649 million ($2.39 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 2015 and 2014 periods.

Business Segment Results

 

North America

 Third Quarter

Nine Months

(in millions)

2015

2014

2015

2014

Tire Units

15.6 15.2

46.2

45.1

Sales

$1,978 $2,057

$5,862

5,980

Segment Operating Income 

323 210

842

574

Segment Operating Margin

16.3%

10.2%

14.4%

9.6%

North America’s third quarter 2015 sales decreased 4 percent from last year. A 3 percent increase in tire unit volume was more than offset by a decrease in other tire-related sales, principally third-party chemical sales. Original equipment unit volume was up 8 percent. Replacement tire volume was up 1 percent.

Third quarter 2015 segment operating income of $323 million was a 54 percent improvement over the prior year and a record for any quarter. The improvement was primarily driven by favorable price/mix net of raw materials, as well as cost reduction actions.

 

Europe, Middle East and Africa

Third Quarter

Nine Months

(in millions)

2015

2014

2015

2014

Tire Units

16.2

16.4

46.9

47.7

Sales

$1,328

$1,618

$3,924

$4,874

Segment Operating Income 

154

181

335

408

Segment Operating Margin

11.6%

11.2%

8.5%

8.4%

Europe, Middle East and Africa’s third quarter sales decreased 18 percent from last year to
$1.3 billion, primarily due to unfavorable foreign currency translation. Sales also reflect a 2 percent decrease in tire unit volume. Original equipment unit volume was up 6 percent. Replacement tire shipments were down 4 percent.

Third quarter 2015 segment operating income of $154 million was 15 percent below the prior year primarily due to unfavorable foreign currency translation.

 

Asia Pacific

Third Quarter

Nine Months

(in millions)

2015

2014

2015

2014

Tire Units

6.0

6.0

17.7

17.0

Sales

$458

$531

$1,399

$1,566

Segment Operating Income 

72

80

 223

 221

Segment Operating Margin

15.7%

15.1%

15.9%

14.1%

Asia Pacific’s third quarter sales decreased 14 percent from last year to $458 million, primarily due to unfavorable foreign currency translation. Tire unit volumes were flat. Original equipment unit volume was up 6 percent. Replacement tire shipments were down 5 percent.

Third quarter 2015 segment operating income of $72 million was down 10 percent from last year, primarily driven by higher SAG expenses and unfavorable foreign currency translation.

 

Latin America

Third Quarter

Nine Months

(in millions)

2015

2014

2015

2014

Tire Units

4.7

4.3

13.3

12.7

Sales

$420

$451

$1,195

$1,362

Segment Operating Income 

50

49

146

150

Segment Operating Margin

11.9%

10.9%

12.2%

11.0%

While Latin America’s third quarter tire unit volumes were up 8 percent, sales decreased
7 percent as volume growth and favorable price/mix were more than offset by unfavorable foreign currency translation. Replacement tire shipments were up 18 percent. Original equipment unit volume was down 21 percent.

Third quarter segment operating income of $50 million was up 2 percent from a year ago primarily due to favorable price/mix net of raw materials, which more than offset the impact of higher inflation.

Operating income in Venezuela was $39 million, up $12 million from 2014’s third quarter. Third quarter 2015 operating income excludes foreign currency exchange losses related to the Venezuelan bolivar fuerte of $8 million.

Outlook

The company reaffirms 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 at year-end 2016.

Shareholder Return Program

The company paid a quarterly dividend of 6 cents per share of common stock on September 1, 2015. The Board of Directors has declared an increased quarterly dividend of 7 cents per share payable December 1, 2015, to shareholders of record on November 2, 2015.

As a part of its previously announced $450 million share repurchase program, the company repurchased 1 million shares of its common stock for $30 million during the third quarter.

Global Alliance

On October 1, the company announced that it has dissolved its global alliance with Sumitomo Rubber Industries, Ltd. The terms and conditions of the transaction were consistent with those outlined when the agreement was announced on June 4, 2015.

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://investor.goodyear.com.

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 66,000 people and manufactures its products in 49 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 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; foreign currency translation and transaction risks; 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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