Goodyear Reports Fourth Quarter, Full-Year 2017 Results; Company Outlines Financial Targets, Capital Allocation Plan
- Net sales of $4.1 billion for the fourth quarter up 9%, $15.4 billion for full-year
- Global revenue per tire up 5% for fourth quarter, up 4% for full-year
- Full-year Goodyear net income of $346 million
- Company exceeds full-year segment operating income target of $1.5 billion
- Full-year cash flow from operating activities of $1.2 billion
- Strong fourth quarter volume recovery with U.S. consumer replacement up 8%, EMEA up 2%
- Record volume, operating income in Asia Pacific
- Company announces 2020 segment operating income target, capital allocation plan
“Our fourth-quarter results were highlighted by our performance in the 17-inch-and-larger segment in consumer replacement, which delivered nearly double the industry growth in the U.S. and Europe,” said Richard J. Kramer, chairman, chief executive officer and president. “Our strong volume recovery in the quarter gives us positive momentum as we head into 2018.”
“These results reflect the power of the Goodyear brand across all of our regions,” Kramer added. “Our strong global brand is integral to Goodyear’s connected business model which combines innovation and technology leadership, industry-leading products, aligned wholesale and retail distribution and provides us with a competitive advantage.”
“Looking ahead to 2020, I am very confident in our capability to execute our long-term strategy to capture profitable growth in key market segments and deliver significant growth in earnings,” he added.
Goodyear’s fourth quarter 2017 sales were $4.1 billion, up 9 percent from $3.7 billion a year ago, driven by improved price/mix, favorable currency translation and volume. Excluding currency translation, global revenue per tire increased 5 percent.
Tire unit volumes totaled 42 million, up 2 percent from 2016. Replacement tire shipments were up 3 percent. Original equipment unit volume was down 1 percent.
Goodyear reported a net loss of $96 million in the fourth quarter of 2017 (39 cents per share) compared to net income of $561 million ($2.14 per share) in the year-ago quarter, that was driven by a $299 million one-time, non-cash tax charge related to U.S. tax reform. In addition, the company recognized discrete tax benefits of $331 million in 2016 primarily due to the release of foreign valuation allowances. Fourth quarter 2017 adjusted earnings per share was 99 cents, compared to 95 cents in 2016. Per share amounts are diluted.
The company reported fourth quarter segment operating income of $419 million in 2017, down from $479 million a year ago. The decrease reflects higher raw material costs and the unfavorable impact of lower production on cost, which were partially offset by improved price/mix, net cost savings and higher volume.
Goodyear’s 2017 sales were $15.4 billion, up 1 percent from 2016, reflecting an increase in price/mix, favorable foreign currency translation and higher sales in other tire-related businesses, which were partially offset by lower volume.
Tire unit volumes totaled 159.2 million, down 4 percent from 2016. Replacement tire shipments were down 3 percent. Original equipment unit volume was down 6 percent.
Goodyear’s 2017 net income of $346 million ($1.37 per share) is down from $1,264 million ($4.74 per share) in 2016. The decrease was driven by increased income tax expense, which was primarily due to the recognition of a one-time, non-cash tax charge related to U.S. tax reform in 2017, and lower segment operating income. In addition, the company recognized discrete tax benefits in 2016, primarily due to the release of foreign valuation allowances. Full-year adjusted earnings per share for 2017 was $3.12, compared to $4.00 a year ago.
The company reported 2017 segment operating income of $1,522 million in 2017, down
23 percent from $1,985 million a year ago. The decrease was primarily attributable to increased raw material costs and the effect of lower volume, which were partially offset by price/mix improvements.
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 2017 and 2016 periods.
Business Segment Results
|(in millions)||Q4 2017||Q4 2016||2017*||2016*|
|Segment Operating Income||209||295||825||1,151|
|Segment Operating Margin||9.6%||14.3%||10.0%||14.1%|
Americas’ fourth quarter 2017 sales increased 6 percent from last year to $2.2 billion. Sales reflect a 4 percent increase in tire unit volume and favorable price/mix. Replacement tire shipments were up 5 percent, driven by an increase of 8 percent in U.S. consumer replacement. Original equipment unit volume was flat.
Fourth quarter 2017 segment operating income of $209 million was down 29 percent from the prior year. The decrease was driven by higher raw material costs and increased costs due to lower production, which were partially offset by improved price/mix and higher volume.
Europe, Middle East and Africa
|(in millions)||Q4 2017||Q4 2016||2017*||2016*|
|Segment Operating Income||93||81||355||461|
|Segment Operating Margin||7.4%||7.2%||7.2%||9.4%|
Europe, Middle East and Africa’s fourth quarter sales of $1.3 billion were up 12 percent from the prior year, which was driven by foreign currency translation and improved price/mix. Replacement tire shipments were up 2 percent. OE tire volume decreased 12 percent.
Fourth quarter 2017 segment operating income of $93 million was 15 percent above the prior year. The increase was driven by improved price/mix and cost savings actions, which were partially offset by increased raw material costs.
|(in millions)||Q4 2017||Q4 2016||2017*||2016*|
|Segment Operating Income||117||103||342||373|
|Segment Operating Margin||18.8%||18.8%||15.3%||17.7%|
Asia Pacific’s fourth quarter 2017 sales increased 14 percent from last year to $623 million, reflecting improved price/mix and higher volume. Tire unit volumes were a record for any quarter and up 5 percent. Replacement tire shipments were flat. Original equipment unit volume was up 12 percent.
Fourth quarter 2017 segment operating income of $117 million was up 14 percent from last year and a record for any quarter, driven by improved price/mix and volume, and partially offset by increased raw material costs.
U.S. Tax Reform
Income tax expense in 2017 was $513 million on income before income taxes of $878 million. In 2017, tax expense included a $299 million one-time, non-cash charge primarily driven by the revaluation of U.S. deferred tax assets to the lower tax rate effective under the Tax Cuts and Jobs Act. Given its significant deferred tax assets, the company had not expected to pay cash taxes in the U.S. through 2020. With the change in the corporate tax rate, this time period extends through 2025.
The company expects its full-year 2018 segment operating income to be between $1.8 and $1.9 billion. The company also has updated its 2020 segment operating income target and capital allocation plan:
- Segment operating income target in 2020 of $2.0 to $2.4 billion.
- The company’s capital allocation plan includes growth capital, restructuring, debt/pension payments and a shareholder return program.
See the note at the end of this release for further explanation of forward-looking total segment operating income.
Shareholder Return Program
The company paid a quarterly dividend of 14 cents per share of common stock on December 1, 2017. The Board of Directors has declared a quarterly dividend of 14 cents per share payable March 1, 2018, to shareholders of record on February 1, 2018.
As a part of its previously announced $2.1 billion share repurchase program, the company repurchased 6.3 million shares of its common stock for $195 million during the fourth quarter. For the full year, the company repurchased 12.8 million shares for $400 million.
Since 2013, purchases under the program total 44 million shares for $1.3 billion. There is $0.8 billion remaining under the outstanding authorization through 2019.
Goodyear is one of the world’s largest tire companies. It employs about 64,000 people and manufactures its products in 48 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; 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.
Greet WillekensCorporate Communications Manager EMEABelgiumgreet_willekens@goodyear.com-32 0498 86 12 70