Goodyear Reports Record Sales for First Quarter
AKRON, Ohio, April 27, 2012 /PRNewswire/ — The Goodyear Tire & Rubber Company (NYSE: GT) today reported record sales for the first quarter of 2012.
“I’m pleased with our results as our businesses posted solid operating income,” said Richard J. Kramer, chairman and chief executive officer. “Our teams delivered these results in the face of a difficult volume environment and high raw material costs, with a strong focus on price/mix.
“Favorable results in North America, in spite of the weak industry environment, are a clear indication of our success in delivering innovation, targeting profitable market segments and driving operational excellence. As expected, Europe, Middle East & Africa’s results were affected by weak economic conditions, which remain uncertain, and warm winter weather,” he said.
“Our first quarter results demonstrated a consistent focus on our global Strategy Roadmap,” Kramer added. “We have positive momentum and I remain confident that we will reach our 2013 targets.”
Goodyear’s first quarter 2012 sales were $5.5 billion, up 2 percent from the 2011 quarter and a first quarter record. Tire unit volumes totaled 43 million, down 8 percent from 2011, reflecting weak industry demand in many markets. This compares to first quarter 2011 volumes that were up almost 7 percent from 2010.
First quarter sales reflect strong price/mix performance, which drove revenue per tire up 16 percent year-over-year, excluding the impact of foreign currency translation. Unfavorable unit volume and foreign currency translation reduced sales by $345 million and $108 million, respectively.
The company had segment operating income of $292 million in the first quarter of 2012, down $35 million from the year-ago quarter. Segment operating income reflected improved price/mix of $525 million, which more than offset $482 million in higher raw material costs ($420 million net of raw material cost reduction actions).
Segment operating income was negatively impacted by $54 million in lower volume and higher under-absorbed fixed costs of approximately $6 million. Cost inflation along with inefficiencies related to a plant closing in North America and poor productivity at factories in France more than offset the benefit of cost saving programs.
Goodyear’s first quarter 2012 net loss available to common shareholders was $11 million (5 cents per share), compared with net income of $103 million (42 cents per share) in the 2011 quarter. All per share amounts are diluted.
The 2012 first quarter included $86 million (35 cents per share) in charges resulting from the early redemption of senior notes; $14 million (6 cents per share) in rationalizations, asset write-offs and accelerated depreciation; $3 million (1 cent per share) in discrete tax charges; and gains of $5 million (2 cents per share) from the net impact of insurance recoveries related to the Thailand flood and $3 million (1 cent per share) from asset sales. 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 2012 and 2011 quarters.
2012 Financing Actions
Goodyear successfully completed financing actions totaling $3.9 billion during 2012.
In February, the company issued $700 million in 7.0% senior notes due 2022. The proceeds were used to redeem all of its outstanding $650 million 10.5% senior notes due 2016.
In April, it refinanced $3.2 billion in credit facilities by amending and restating its principal U.S. credit facilities. The credit available under the company’s asset-based revolving credit facility was increased to $2.0 billion and its maturity extended until 2017. The maturity of the company’s $1.2 billion second lien term loan was extended until 2019.
First Quarter Business Segment Results
See the note at the end of this release for further explanation and a segment operating income reconciliation table.
North American Tire
First Quarter (in millions) 2012 2011 Tire Units 15.8 17.1 Sales $2,497 $2,307 Segment Operating Income $80 $40 Segment Operating Margin 3.2% 1.7%
North American Tire’s first quarter 2012 sales increased 8 percent from last year to $2.5 billion, a first quarter record. Sales reflect an 8 percent decrease in tire unit volume and improved price/mix, which drove a 21 percent increase in revenue per tire, excluding the impact of foreign currency translation, compared to 2011′s first quarter. Original equipment unit volume increased 11 percent. Replacement tire shipments were down 14 percent, reflecting weak industry demand and strong sales growth for Goodyear in the year-ago quarter.
First quarter 2012 segment operating income of $80 million was a $40 million improvement over the prior year. Improved price/mix of $246 million more than offset $184 million of higher raw material costs. Segment operating income benefitted from $13 million of higher earnings in other tire-related businesses. It was negatively impacted by $13 million of lower volume and $24 million in higher conversion costs due to inflation and by transition costs related to a plant closure.
Europe, Middle East and Africa Tire
First Quarter (in millions) 2012 2011 Tire Units 18.0 19.7 Sales $1,938 $1,959 Segment Operating Income $90 $153 Segment Operating Margin 4.6% 7.8%
Europe, Middle East and Africa Tire’s first quarter sales decreased 1 percent from last year to $1.9 billion. Sales reflect a 9 percent decrease in tire unit volume, strong price/mix performance and unfavorable foreign currency translation. Original equipment unit volume was flat. Replacement tire shipments were down 11 percent, reflecting lower industry demand. Revenue per tire increased 16 percent in 2012 compared to 2011, excluding the impact of foreign currency translation.
First quarter 2012 segment operating income of $90 million was $63 million below the prior year. Improved price/mix of $209 million more than offset $177 million of higher raw material costs. Segment operating income was negatively impacted by $65 million due to lower volume and higher conversion costs and by $26 million in higher SAG expenses, including increased warehousing costs related to higher inventory levels versus 2011.
Latin American Tire
First Quarter (in millions) 2012 2011 Tire Units 4.3 4.9 Sales $521 $585 Segment Operating Income $55 $67 Segment Operating Margin 10.6% 11.5%
Latin American Tire’s first quarter sales decreased 11 percent from last year to $521 million. Original equipment unit volume decreased 11 percent. Replacement tire shipments were down 12 percent. The decrease in volume was primarily due to weaker industry demand and increased competition. Revenue per tire increased 4 percent in 2012 compared to 2011, excluding the impact of foreign currency translation.
First quarter segment operating income of $55 million was down $12 million from a year ago. Price/mix improvements of $41 million more than offset $37 million in raw material cost increases. Segment operating income was negatively impacted by lower volume of $12 million and $4 million due to the sale of the farm tire business in April 2011.
Asia Pacific Tire
First Quarter (in millions) 2012 2011 Tire Units 4.9 5.1 Sales $577 $551 Segment Operating Income $67 $67 Segment Operating Margin 11.6% 12.2%
Asia Pacific Tire’s first quarter sales increased 5 percent from last year to $577 million, a first quarter record. Original equipment unit volume was up 7 percent. Replacement tire shipments were down 11 percent. The impact of flooding in Thailand and softer consumer replacement demand in many parts of Asia more than offset growth in China. Revenue per tire increased 9 percent in 2012 compared to 2011, excluding the impact of foreign currency translation. Favorable foreign currency translation increased sales by $7 million.
First quarter segment operating income of $67 million was even with last year. The 2012 quarter was impacted by improved price/mix of $29 million, which more than offset $22 million of higher raw material costs. Segment operating income was also impacted by $7 million in costs related to the planned start up of a new factory in China.
Insurance recoveries offset costs resulting from the temporary closure of the company’s factory in Thailand due to flooding. The net impact on Asia Pacific Tire’s first quarter segment operating income was $3 million favorable. The factory has resumed production and is expected to return to full operating levels in the second quarter of 2012, improving the supply of both aviation and passenger tires.
Goodyear expects long-term growth in the global tire industry to continue, but at a slower pace than previously forecast due to continued economic weakness in multiple markets. Due to the weaker than expected first quarter volumes, the company expects that its full-year tire unit volume for 2012 will be approximately 2 percent below 2011.
For the full year of 2012 in North America, Goodyear expects the consumer replacement market to be down between 1 percent and 3 percent, consumer original equipment up between 2 percent and 7 percent, commercial replacement to be between down 2 percent and up 2 percent and commercial original equipment up between 10 percent and 15 percent.
For the full year in Europe, the consumer replacement industry is expected to be down between 3 percent and 5 percent, consumer original equipment down between 5 percent and 9 percent, commercial replacement down between 3 percent and 8 percent and commercial original equipment down between 10 percent and 15 percent.
Goodyear anticipates its raw material costs for the second quarter of 2012 will increase approximately 12 percent over the prior year. For the second half of 2012, the company expects raw material costs to be about equal with the second half of 2011. For the full year of 2012, Goodyear expects its raw material costs will increase approximately 9 percent compared with 2011.
Goodyear will hold an investor conference call at 8:30 a.m. today. Approximately 45 minutes 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 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 Web site or via telephone by calling (706) 645-4847 before 8:25 a.m. A taped replay will be available later in the day by calling (404) 537-3406, Conference ID 71823188. The replay will also remain available on the Web site.
Goodyear is one of the world’s largest tire companies. It employs about 72,000 people and manufactures its products in 53 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.
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 realize anticipated savings and operational benefits from our cost reduction initiatives or to implement successfully other strategic initiatives; increases in the prices paid for raw materials and energy; pension plan funding obligations; actions and initiatives taken by both current and potential competitors; 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; a labor strike, work stoppage or other similar event; 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.
(financial statements follow)
The Goodyear Tire & Rubber Company and Subsidiaries Consolidated Statement of Operations (unaudited) (In millions, except per share Three Months amounts) Ended March 31, 2012 2011 ---- ---- NET SALES $5,533 $5,402 Cost of Goods Sold 4,607 4,461 Selling, Administrative and General Expense 662 668 Rationalizations 15 9 Interest Expense 101 74 Other Expense 92 4 --- --- Income before Income Taxes 56 186 United States and Foreign Taxes 48 62 --- --- Net Income 8 124 Less: Minority Shareholders' Net Income 12 21 --- --- Goodyear Net (Loss) Income (4) 103 Less: Preferred Stock Dividends 7 -- --- --- Goodyear Net (Loss) Income Available to $(11) $103 Common Shareholders Goodyear Net (Loss) Income Available to Common Shareholders -Per Share of Common Stock Basic $(0.05) $0.42 ====== ===== Weighted Average Shares Outstanding 244 243 Diluted $(0.05) $0.42 ====== ===== Weighted Average Shares Outstanding 244 246
The Goodyear Tire & Rubber Company and Subsidiaries Consolidated Balance Sheets(unaudited) (In millions, except share data) March 31, December 31, 2012 2011 ---- ---- Assets: Current Assets: Cash and Cash Equivalents $2,083 $2,772 Accounts Receivable, less Allowance -$106 ($97 in 2011) 3,530 2,849 Inventories: Raw Materials 904 937 Work in Process 207 186 Finished Products 2,858 2,733 ----- ----- 3,969 3,856 Prepaid Expenses and Other Current Assets 406 335 --- --- Total Current Assets 9,988 9,812 Goodwill 672 654 Intangible Assets 157 157 Deferred Income Taxes 148 145 Other Assets 497 486 Property, Plant and Equipment 6,528 6,375 less Accumulated Depreciation -$8,835 ($8,629 in 2011) Total Assets $17,990 $17,629 ======= ======= Liabilities: Current Liabilities: Accounts Payable-Trade $3,571 $3,668 Compensation and Benefits 766 799 Other Current Liabilities 1,099 1,050 Notes Payable and Overdrafts 291 256 Long Term Debt and Capital Leases due Within One Year 154 156 --- --- Total Current Liabilities 5,881 5,929 Long Term Debt and Capital Leases 5,186 4,789 Compensation and Benefits 3,885 4,002 Deferred and Other Noncurrent Income Taxes 253 244 Other Long Term Liabilities 1,008 1,041 ----- ----- Total Liabilities 16,213 16,005 Commitments and Contingent Liabilities Minority Shareholders' Equity 626 607 Shareholders' Equity: Goodyear Shareholders' Equity: Preferred Stock, no par value: Authorized, 50 million shares, Outstanding shares - 10 million (10 million in 2011), 500 500 liquidation preference $50 per share Common Stock, no par value: Authorized, 450 million shares, Outstanding shares - 245 million (245 million in 2011) 245 245 after deducting 6 million treasury shares (6 million in 2011) Capital Surplus 2,809 2,808 Retained Earnings 1,176 1,187 Accumulated Other Comprehensive Loss (3,867) (3,991) ------ ------ Goodyear Shareholders' Equity 863 749 Minority Shareholders' Equity - Nonredeemable 288 268 --- --- Total Shareholders' Equity 1,151 1,017 ----- ----- Total Liabilities and Shareholders' Equity $17,990 $17,629 ======= =======
Non-GAAP Financial Measures
This earnings release presents total segment operating income, which is an important financial measure for the company but is not a financial measure defined by U.S. GAAP.
Total segment operating income is the sum of the individual strategic business units’ segment operating income as determined in accordance with U.S. GAAP. Management believes that total segment operating income is useful because it represents the aggregate value of income created by the company’s SBUs and excludes items not directly related to the SBUs for performance evaluation purposes. See the table below for the reconciliation of total segment operating income.
Total Segment Operating Income Reconciliation Table Three Months Ended March 31, (unaudited) (In millions) 2012 2011 ---- ---- Segment Operating Income $292 $327 Rationalizations (15) (9) Interest expense (101) (74) Other expense (92) (4) Asset write-offs and accelerated depreciation (2) (9) Corporate incentive compensation plans (7) (14) Intercompany profit elimination (10) (9) Retained expenses of divested operations (4) (5) Other (5) (17) --- --- Income before Income Taxes $56 $186 === ====
First Quarter Significant Items (after tax and minority interest)
- Charges resulting from the early redemption of senior notes, $86 million (35 cents per share).
- Rationalizations, asset write-offs and accelerated depreciation charges, $14 million (6 cents per share).
- Discrete tax charges, $3 million (1 cent per share).
- Net insurance recoveries resulting from impact of Thailand flood, $5 million (2 cents per share).
- Net gains on asset sales, $3 million (1 cent per share).
- Rationalizations and accelerated depreciation charges, $18 million (7 cents per share).
- Discrete tax charges, $6 million (2 cents per share).
SOURCE The Goodyear Tire & Rubber Company