Goodyear Reports Third Quarter Results for 2016, Revises 2016 Outlook
The Goodyear Tire & Rubber Company reports results for the third quarter and first nine months of 2016.
- Strong Goodyear net income of $317 million for third quarter, $703 million year-to-date
- Segment operating income of $556 million for third quarter, record core segment operating income of $1.5 billion for year-to-date period
- Third quarter Goodyear net income as a percent of sales of 8.2%, total segment operating margin of 14.5%
- Americas third quarter income of $305 million, 14.7% operating margin
- Europe, Middle East and Africa third quarter income of $152 million, 12.3% operating margin
- Record Asia Pacific third quarter income of $99 million, 18.3% operating margin
- Company confirms 2020 targets and capital allocation plan“We delivered solid results in the quarter, with a total segment operating margin of 14.5 percent, which takes our core segment operating income to record levels on a year-to-date basis,” said Richard J. Kramer, chairman, chief executive officer and president.
“Our revised 2016 outlook reflects recent volatility impacting our U.S. commercial truck tire business. This near-term headwind will not have an impact on our value proposition or our ability to execute on our long-term plan,” he said.
“Our strategy is built to take advantage of the trends shaping our industry. Global demand for high-value-added, large rim-diameter tires is increasing. We are confident that our portfolio of these products and our distribution advantages position us on a path to sustained growth and achievement of the 2020 targets that we recently announced,” Kramer said.
Consistent with this strategy, on October 24 the company announced its intention to close its Philippsburg, Germany tire manufacturing facility and realign its European capacity to increase production of high-value-added tires. “Our focus is on winning in the high-value segments of the market and reducing our exposure to low-growth and declining segments to capture the value of our brand and help our customers grow profitably,” he added.
Goodyear’s third quarter 2016 sales were $3.8 billion, down from $4.2 billion a year ago, with the decrease driven by the deconsolidation of the company’s subsidiary in Venezuela.
Tire unit volumes totaled 42 million, which was essentially flat with 2015 after adjusting for the deconsolidation of Venezuela at the end of 2015. Growth in Asia Pacific was more than offset by declines in Americas and Europe, Middle East and Africa. Replacement tire shipments were up 1 percent. Original equipment unit volume was down 6 percent.
Goodyear’s third quarter 2016 net income was $317 million ($1.19 per share), up 17 percent from $271 million (99 cents per share) in the year-ago quarter. The improvement was primarily due to an income tax benefit resulting from various discrete tax adjustments that was partially offset by increased rationalization charges. Third quarter 2016 adjusted net income was $310 million ($1.17 per share), up from $271 million (99 cents per share) in 2015. Per share amounts are diluted.
The company reported third quarter segment operating income of $556 million in 2016, down from $602 million a year ago. Segment operating income in 2016 was negatively impacted by the deconsolidation of Venezuela. Core segment operating income, which excludes Venezuela, was $563 million in the year-ago quarter.
Year to Date Results
Goodyear’s sales for the first nine months of 2016 were $11.4 billion, down 8 percent from the 2015 period, reflecting the deconsolidation of Venezuela and unfavorable foreign currency translation.
Tire unit volumes totaled 125 million, up 1 percent from 2015, driven by growth in the Asia Pacific region, primarily in Japan, due to the acquisition of a controlling interest in Nippon Goodyear Ltd. (NGY), and China. Replacement tire shipments were up 2 percent. Original equipment unit volume was down 3 percent. Excluding the impact of the deconsolidation of Venezuela, unit volumes increased 2 percent.
Goodyear’s year-to-date net income of $703 million ($2.62 per share) is up 2 percent from $687 million ($2.51 per share) in 2015’s first nine months. The increase was primarily due to lower income tax expense due to various discrete tax adjustments. Year-to-date adjusted net income was $818 million ($3.05 per share), up from $649 million ($2.39 per share) in 2015. Per share amounts are diluted.
The company reported year-to-date segment operating income of $1.5 billion in 2016, down 2 percent from a year ago. The decrease was due to the deconsolidation of Venezuela. Core segment operating income, which excludes Venezuela, was $1.4 billion in the 2015 nine months.
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 2016 and 2015 periods.
Business Segment Results
|(in millions)||Q3 2016||Q3 2015||2016*||2015*|
|Segment Operating Income||305||376||856||982|
|Segment Operating Margin||14.7%||15.7%||14.0%||13.9%|
* Nine Months
Americas’ third quarter 2016 sales decreased 14 percent from last year to $2.1 billion. Sales reflect an 8 percent decrease in tire unit volume. Replacement tire shipments were down 6 percent. Original equipment unit volume was down 15 percent. Excluding the impact of the deconsolidation of Venezuela and the sale of the former Goodyear Dunlop Tires North America Ltd. business (GDTNA), unit volume decreased 5 percent, driven primarily by consumer original equipment and replacement in Brazil and Canada. Total U.S. consumer shipments were essentially flat and U.S. commercial shipments were down 12 percent.
Third quarter 2016 segment operating income of $305 million was down 19 percent from the prior year. The decrease was driven primarily by the deconsolidation of Venezuela and the impact of lower volume.
The deconsolidation of Venezuela negatively impacted volumes by 0.4 million units, sales by $155 million and segment operating income by $39 million.
The sale of GDTNA negatively impacted volumes by 0.2 million units, sales by $60 million and segment operating income by $16 million.
Europe, Middle East and Africa
|(in millions)||Q3 2016||Q3 2015||2016*||2015*|
|Segment Operating Income||152||154||380||335|
|Segment Operating Margin||12.3%||11.6%||10.1%||8.5%|
* Nine Months
Europe, Middle East and Africa’s third quarter sales of $1.2 billion were down 7 percent from the prior year reflecting a 5 percent decrease in sales volume resulting from the company’s original equipment sales strategy and increased competition for smaller rim diameter consumer tires. Replacement tire shipments were down 3 percent. Original equipment unit volume was down 8 percent.
Third quarter 2016 segment operating income of $152 million was 1 percent below the prior year driven by the impact of lower volume.
The dissolution of the global alliance with Sumitomo Rubber Industries (SRI) negatively impacted volumes by 0.1 million units and sales by $11 million. Segment operating income was positively impacted by $6 million due to a decrease in royalties to SRI.
|(in millions)||Q3 2016||Q3 2015||2016*||2015*|
|Segment Operating Income||99||72||270||223|
|Segment Operating Margin||18.3%||15.7%||17.3%||15.9%|
* Nine months
Asia Pacific’s third quarter 2016 sales increased 18 percent from last year to $541 million. Sales reflect a 33 percent increase in tire unit volume, primarily due to growth in Japan, China and India. This improvement was partially offset by unfavorable price/mix, driven primarily by the impact of lower raw material costs on pricing. Replacement tire shipments were up 47 percent. Original equipment unit volume was up 16 percent.
Third quarter 2016 segment operating income of $99 million was up 38 percent from last year and a record, driven by higher volume.
The NGY acquisition positively impacted volumes by 1.3 million units and sales by $48 million. The NGY acquisition and the sale of the company’s 25 percent interest in Dunlop Goodyear Tires Ltd. positively impacted segment operating income by $4 million.
The company has confirmed its 2020 financial targets and capital allocation plan, which were announced on September 15, 2016.
The company has revised its 2016 financial targets. The company now expects its full-year 2016 total segment operating income to be between $2 billion and $2.025 billion.
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 7 cents per share of common stock on September 1, 2016. The Board of Directors has declared a quarterly dividend of 10 cents per share payable December 1, 2016, to shareholders of record on November 1, 2016.
As a part of its previously announced $1.1 billion share repurchase program, the company repurchased 1.7 million shares of its common stock for $50 million during the third quarter.
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; 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; increases in the prices paid for raw materials and energy; 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
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