Goodyear Achieves Record First Quarter Results
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Net income of $147 million, 60 cents per share, up $321 million from last year
International businesses achieve record sales, segment operating income
Substantial segment operating income improvement in all four businesses
Cost savings programs on target, more than $1.2 billion achieved to date
The Goodyear Tire & Rubber Company today reported record first quarter sales and its highest first quarter net income in several years.
Goodyear's first quarter 2008 sales were $4.9 billion, a 10 percent increase compared with the 2007 quarter, offsetting lower volumes with higher prices, a richer product mix and favorable currency translation.
Improved pricing and product mix in all four businesses drove revenue per tire up 7 percent over the 2007 quarter, reflecting the company's successful strategy to focus on high-value-added tires. Lower volume primarily resulted from weak original equipment markets in North America as well as soft consumer replacement demand in North America and Europe, particularly for low-value-added tires.
"Our excellent first quarter results demonstrate the success of our strategies to grow our higher-margin premium product lines, reduce costs and pay down debt," said Robert J. Keegan, chairman and chief executive officer.
"Each of our four businesses improved margins and operating income as we capitalized on attractive growth opportunities in targeted market segments," he said.
"While the economy remains a concern, we continue to be confident about the opportunities we see in the market and our ability to take advantage of them," Keegan said. "Over the last five years, our strategic decisions have better positioned Goodyear to face an economic downturn and to emerge as a stronger competitor."
Goodyear said it made additional progress during the first quarter on its plan to achieve $1.8 billion to $2 billion in gross cost savings by the end of 2009. "We have now achieved more than $1.2 billion in savings since beginning this plan and remain on target to reach our four-year goal," Keegan said.
Segment operating income set a first quarter record at $367 million in 2008, up 62 percent from $226 million in the strike-affected 2007 first quarter. Gross margin was 19.9 percent for the 2008 first quarter compared to 16.8 percent last year.
Segment operating income benefited from improved pricing and product mix of $157 million, which more than offset increased raw material costs of $13 million.
Favorable currency translation positively impacted sales by $341 million and segment operating income by $27 million in the quarter.
First quarter 2008 net income from continuing operations was $147 million (60 cents per share). This compares to a loss from continuing operations of $110 million (61 cents per share) in the year-ago quarter. Including discontinued operations, Goodyear had a net loss of $174 million (96 cents per share) in 2007's first quarter. All per share amounts are diluted.
The 2008 quarter included after-tax financing fees related to debt repayment of $43 million (18 cents per share), $13 million (5 cents per share) in after-tax rationalization charges, an after-tax gain on asset sales of $33 million (13 cents per share) and an after-tax gain on an excise tax settlement in Latin America of $8 million (3 cents per share).
The 2007 quarter was impacted by after-tax charges of $64 million (35 cents per share) due to salaried benefit plan changes, an estimated $34 million (19 cents per share) related to the 2006 United Steelworkers strike and $31 million (17 cents per share) in rationalization and accelerated depreciation charges.
See the table at the end of this release for a list of significant items impacting continuing operations from the 2008 and 2007 quarters.
Business Segments
All three of the company's businesses outside of North America achieved record sales for any quarter during the 2008 first quarter as the emerging markets businesses continued to grow.
Segment operating income increased in all four businesses. Segment operating income for the Latin America and Asia Pacific businesses were records for any quarter. Segment operating income for the Europe, Middle East and Africa business was a first quarter record.
North American Tire's first quarter sales decreased 1 percent from last year. The 2007 quarter included approximately $150 million in sales from T&WA, which was divested in December 2007. Sales in the 2008 quarter were impacted by reduced original equipment volume resulting from lower vehicle production and a decline in the consumer replacement tire market, particularly for low-value-added tires. Sales benefited from strong pricing and product mix as well as market share gains for Goodyear and Dunlop brand tires in the consumer replacement market.
Segment operating income increased $52 million primarily due to improved pricing and product mix of $67 million, which more than offset increased raw material costs of $5 million. Lower selling, administrative and general expenses and structural cost savings, including savings from the 2006 contract with the USW, were partially offset by lower volume and transitional manufacturing costs.
The company estimates the USW strike reduced 2007 first quarter sales by $102 million and segment operating income by $34 million.
Europe, Middle East and Africa Tire's first quarter sales were a record for any quarter and increased 16 percent over last year due to favorable currency translation, improved pricing and product mix and market share gains in the consumer replacement and commercial replacement markets.
Segment operating income was a first quarter record and up 24 percent due to improved pricing and product mix of $40 million, which more than offset increased raw material costs of $4 million. Favorable currency translation and lower selling, administrative and general expenses offset higher manufacturing costs related to ongoing labor issues in France and higher transportation costs.
Latin American Tire's first quarter sales were a record for any quarter and increased 29 percent over 2007 due to improved pricing and product mix and favorable currency translation.
Segment operating income was a record for any quarter, increasing 46 percent compared to the prior year. Improved pricing and product mix of $37 million, a $12 million gain from the settlement of an excise tax case and favorable currency translation more than offset higher manufacturing costs and selling, administrative and general expenses.
Asia Pacific Tire's first quarter sales were a record for any quarter and up 21 percent over last year due to favorable currency translation, higher volume and improved pricing and product mix.
Segment operating income increased 69 percent and was a record for any quarter. The improvement was due to improved pricing and product mix of $13 million, which more than offset $4 million in increased raw material costs, as well as higher volume, favorable currency translation and lower selling, administrative and general expenses.
Conference Call
Goodyear will hold an investor conference call at 9 a.m. today. Prior to the call, the company will post the financial and other statistical information that will be presented on its investor relations Web site: investor.goodyear.com.
Participating in the conference call with Keegan will be W. Mark Schmitz, executive vice president and chief financial officer, and Darren R. Wells, senior vice president, finance and strategy.
Shareholders, members of the media and other interested persons may access the call on the Web site or via telephone by calling (706) 634-5954 before 8:55 a.m. A replay will be available at 3 p.m. by calling (706) 634-4556. The replay will also be available on the Web site.
Investor Meeting
Goodyear will hold an investor meeting in New York on June 26. Participating in the meeting will be Keegan and Schmitz, along with leaders of the company's strategic business units and key functions.
Further details, as well as information on accessing the meeting via webcast or telephone, will be announced at a later date.
Goodyear is one of the world's largest tire companies. Fortune magazine named Goodyear the World's Most Admired Motor Vehicle Parts Company in its 2008 list of the World's Most Admired Companies. The publication ranked Goodyear No. 1 in innovation, people management, use of assets and global orientation. The company is also listed on Forbes magazine's list of the Most Trustworthy Companies in America and CRO magazine's ranking of the 100 Best Corporate Citizens. Goodyear employs about 70,000 people and manufactures its products in more than 60 facilities in 25 countries around the world. For more information about Goodyear, go to GOODYEAR .
