Market Overview

Goodyear Reports Second Quarter, First Half 2018 Results

Share:

Goodyear Reports Second Quarter, First Half 2018 Results

- Global tire unit shipments increase 4%, driven by growth in replacement

- U.S. & European ≥17" consumer replacement volumes significantly outpace industry growth

- TireHub launch on track; transition ahead of plan

- Company repurchases $75 million of common stock, $100 million year-to-date

PR Newswire

AKRON, Ohio, July 27, 2018 /PRNewswire/ -- The Goodyear Tire & Rubber Company (NASDAQ:GT) today reported results for the second quarter and first half of 2018.

The Goodyear Tire & Rubber Company, Akron, Ohio, USA. (PRNewsFoto/Goodyear Tire & Rubber Company)

"We delivered strong operating performance in the quarter highlighted by impressive volume growth in our mature markets where we regained share, particularly in the more profitable 17 inch and greater rim sizes in the U.S. and Europe," said Richard J. Kramer, chairman, chief executive officer and president. "Additionally, we achieved our price/mix and net cost savings goals for the quarter."

"While our execution in the period was robust, macro headwinds are intensifying – including rising raw material costs, a stronger U.S. dollar and softening market conditions in China. We are adjusting our plans accordingly to mitigate the impact of these challenges over the intermediate-term. I remain confident that our strengthening position in the marketplace, along with value created through our strategic initiatives, will allow us to deliver on our 2020 plan," he added.

"Our new TireHub distribution joint venture in the U.S. is performing exceptionally well out of the gate, and our shipments to the wholesale channel are running ahead of our transition plans. Goodyear's customer base has demonstrated its loyalty to our brand and I am confident that TireHub's best-in-class service model, together with added supply from our new Americas plant, will enhance value for our retail and fleet customers," said Kramer.

Goodyear's second quarter 2018 sales were $3.8 billion, up 4 percent from a year ago, driven by higher volume and improved price/mix.

Tire unit volumes totaled 39.0 million, a 4 percent increase from 2017. Replacement tire shipments rose 5 percent, attributable to increased industry demand and share gains in EMEA.  Original equipment unit volume was up 3 percent, primarily driven by consumer demand in Asia Pacific and global commercial shipments. Consumer replacement shipments in the U.S. outpaced industry growth after adjusting for the impact of the TireHub transition, driven by outperformance in the 17-inch-and-larger category.

Goodyear's second quarter 2018 net income was $157 million (65 cents per share), up from $147 million (58 cents per share) a year ago. Second quarter 2018 adjusted net income was $150 million (62 cents per share), compared to $177 million (70 cents per share) in 2017. Per share amounts are diluted.

The company reported second quarter segment operating income of $324 million in 2018, down from $369 million a year ago. The decrease was driven by the impacts of higher raw material costs, general cost inflation and lower price/mix, which were partially offset by the benefits from cost savings initiatives and increased sales volume.

Year-to-Date Results

Goodyear's sales for the first six months of 2018 were $7.7 billion, a 4 percent increase from the 2017 period, primarily due to favorable foreign currency translation, improvements in price/mix and higher tire volume. These increases were partially offset by lower sales in other tire-related businesses.

Tire unit volumes totaled 78.0 million, up 1 percent from 2017, driven by stronger consumer replacement shipments in EMEA, as well as increased consumer OE demand in Asia Pacific and higher global commercial shipments. Replacement tire shipments increased 1 percent. Original equipment volume was essentially flat.

Goodyear's year-to-date net income of $232 million (96 cents per share) is down from $313 million ($1.23 per share) in the prior year's period. First half 2018 adjusted net income was $272 million ($1.12 per share), compared to $366 million ($1.44 per share) in the prior year's period. Per share amounts are diluted.

The company reported first half segment operating income of $605 million in 2018, down from $759 million a year ago. The decrease was attributable to the effect of higher raw material costs and reduced price/mix.

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 2018 and 2017 periods.

Business Segment Results

Americas



Second Quarter


Six Months


(in millions)

2018


2017


2018

2017


Tire Units

17.3


17.1


34.0

34.3



Sales

$ 2,018


$ 2,029


$   3,947

$ 3,987



Segment Operating Income 

154


218


281

434



Segment Operating Margin

7.6%


10.7%


7.1%

10.9%



Americas' second quarter 2018 tire unit volume increased approximately 2 percent. Sales of $2 billion were down slightly, reflecting unfavorable foreign currency translation and reduced price/mix. Replacement tire shipments rose 1.5 percent, led by strength in the U.S. despite the impact of transitioning to TireHub. Original equipment unit volume was up 2 percent, driven by growth in both commercial and consumer. The company estimates that a national transportation strike in Brazil restricted growth in the Americas by about 1.5 percent.

Second quarter 2018 segment operating income of $154 million was down 29 percent from the prior year. The decline was driven by the impact of reduced price/mix and increased raw material costs. The lower price/mix reflects the impact of last year's price reductions, which were partially offset by strong growth in the U.S. within the 17-inch-and-larger category.

Europe, Middle East and Africa



Second Quarter


Six Months


(in millions)

2018


2017


2018

2017


Tire Units

14.2


13.0


28.9

28.5



Sales

$ 1,260


$ 1,114


$   2,590

$ 2,353



Segment Operating Income 

100


80


178

181



Segment Operating Margin

7.9%


7.2%


6.9%

7.7%



Europe, Middle East and Africa's second quarter 2018 sales increased 13 percent from last year to $1.3 billion, primarily attributable to increased volume. Replacement tire shipments were up 13 percent, driven by the consumer tire business, reflecting increased industry demand and share gains. Original equipment unit volume rose 1 percent.

Second quarter 2018 segment operating income of $100 million was 25 percent higher than the prior year, reflecting the benefits of increased sales volume and favorable price/mix, partially offset by higher raw material costs.

Asia Pacific



Second Quarter


Six Months


(in millions)

2018


2017


2018

2017


Tire Units

7.5


7.3


15.1

14.6



Sales

$ 563


$ 543


$   1,134

$ 1,045



Segment Operating Income 

70


71


146

144



Segment Operating Margin

12.4%


13.1%


12.9%

13.8%



Asia Pacific's second quarter 2018 sales increased 4 percent from last year to $563 million, driven by increased volume and improved price/mix. Tire unit volumes were 2 percent greater than in the prior year's period. Original equipment unit volume rose 9 percent, driven by our consumer business in China. Replacement tire shipments were down 3 percent and were impacted by softening market conditions in China.

Second quarter 2018 segment operating income of $70 million was down slightly from last year reflecting lower price/mix, which more than offset the benefits from increased volume.

2018 Outlook

The company expects its 2018 segment operating income to total between $1.45 billion and $1.5 billion. The company has reduced its second-half outlook from the low end of the prior guidance to reflect a $130 million increase in raw material costs, a $60 million unfavorable swing in foreign currency due to a stronger U.S. dollar, and a $70 million headwind due to softening market conditions in China.

Shareholder Returns

The company declared a quarterly dividend of 14 cents per share of common stock on July 14, 2018, payable on September 4, 2018 to shareholders of record on August 1, 2018. The payout represents an annual rate of 56 cents per share.

As a part of its previously announced $2.1 billion share repurchase program, the company repurchased nearly 3 million shares of its common stock for $75 million during the second quarter, bringing the full-year totals to $100 million and approximately 4 million shares. Since its inception, the company has acquired 48 million shares for $1.4 billion.

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 website: http://investor.goodyear.com.

Investors, members of the media and other interested persons can access the conference call on the website or via telephone by calling either (877) 876-9176 or (785) 424-1667 before 8:55 a.m. and providing the conference ID "Goodyear." A taped replay will be available by calling (800) 839-2398 or (402) 220-7208. The replay will also remain available on the website.

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.

(financial statements follow)

The Goodyear Tire & Rubber Company and Subsidiaries

Consolidated Statements of Operations (unaudited)



Three Months
Ended


Six Months
Ended


June 30,


June 30,

(In millions, except per share amounts)

2018

2017


2018

2017







NET SALES

$ 3,841

$ 3,686


$ 7,671

$ 7,385







Cost of Goods Sold

2,949

2,785


5,925

5,545

Selling, Administrative and General Expense

588

579


1,179

1,155

Rationalizations

(2)

27


35

56

Interest Expense

78

89


154

176

Other (Income) Expense

45

16


82

24







Income before Income Taxes

183

190


296

429

United States and Foreign Tax Expense

19

36


52

106







Net Income

164

154


244

323

     Less:  Minority Shareholders' Net Income

7

7


12

10







Goodyear Net Income

$  157

$  147


$ 232

$ 313







Goodyear Net Income
- Per Share of Common Stock












   Basic

$      0.66

$      0.58


$       0.97

$       1.24







   Weighted Average Shares Outstanding

239

252


240

252







   Diluted

$      0.65

$      0.58


$       0.96

$       1.23







   Weighted Average Shares Outstanding

241

256


242

256







Cash Dividends Declared Per Common Share

$      0.14

$      0.10


$       0.28

$       0.20

 

The Goodyear Tire & Rubber Company and Subsidiaries


Consolidated Balance Sheets (unaudited)


(In millions, except share data) 

June 30,


December 31,


2018


2017

Assets:




Current Assets:




  Cash and Cash Equivalents

$        975


$     1,043

  Accounts Receivable, less Allowance - $108 ($116 in 2017)

2,388


2,025

  Inventories:




     Raw Materials

530


466

     Work in Process

160


142

     Finished Products

2,251


2,179


2,941


2,787

  Prepaid Expenses and Other Current Assets

265


224

     Total Current Assets

6,569


6,079

Goodwill

576


595

Intangible Assets

138


139

Deferred Income Taxes

2,035


2,008

Other Assets

804


792

Property, Plant and Equipment

  less Accumulated Depreciation - $10,110 ($10,078 in 2017)

7,233


7,451

    Total Assets

$   17,355


$   17,064





Liabilities:




Current Liabilities:




  Accounts Payable-Trade

$     2,880


$     2,807

  Compensation and Benefits

511


539

  Other Current Liabilities

821


1,026

  Notes Payable and Overdrafts

335


262

  Long Term Debt and Capital Leases due Within One Year

286


391

    Total Current Liabilities

4,833


5,025

Long Term Debt and Capital Leases

5,726


5,076

Compensation and Benefits

1,369


1,515

Deferred Income Taxes

99


100

Other Long Term Liabilities

484


498

    Total Liabilities

12,511


12,214





Shareholders' Equity:




Common Stock, no par value:




Authorized, 450 million shares, Outstanding shares – 237 and 240 million in 2018
  and 2017 after deducting 41 and 38 million treasury shares in 2018 and 2017

237


240

Capital Surplus

2,214


2,295

Retained Earnings

6,208


6,044

Accumulated Other Comprehensive Loss

(4,022)


(3,976)

   Goodyear Shareholders' Equity

4,637


4,603

Minority Shareholders' Equity – Nonredeemable

207


247

   Total Shareholders' Equity

4,844


4,850

   Total Liabilities and Shareholders' Equity

$   17,355


$   17,064

 

The Goodyear Tire & Rubber Company and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(In millions) 

Six Months Ended


June 30,


2018

2017

Cash Flows from Operating Activities:



Net Income

$       244

$       323

  Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:



     Depreciation and Amortization

392

387

     Amortization and Write-Off of Debt Issuance Costs

8

14

     Provision for Deferred Income Taxes

(55)

45

     Net Pension Curtailments and Settlements

3

1

     Net Rationalization Charges

35

56

     Rationalization Payments

(131)

(54)

     Net (Gains) Losses on Asset Sales

--

(13)

     Pension Contributions and Direct Payments

(42)

(45)

  Changes in Operating Assets and Liabilities, Net of Asset Acquisitions and Dispositions:



     Accounts Receivable

(475)

(470)

     Inventories

(222)

(482)

     Accounts Payable - Trade

253

190

     Compensation and Benefits

(30)

(67)

     Other Current Liabilities

(100)

27

     Other Assets and Liabilities

36

(97)

     Total Cash Flows from Operating Activities

(84)

(185)

Cash Flows from Investing Activities:



  Capital Expenditures

(442)

(497)

  Asset Dispositions

2

2

  Short Term Securities Acquired

(30)

(43)

  Short Term Securities Redeemed

38

43

  Other Transactions

(38)

(3)

     Total Cash Flows from Investing Activities

(470)

(498)

Cash Flows from Financing Activities:



  Short Term Debt and Overdrafts Incurred

1,012

290

  Short Term Debt and Overdrafts Paid

(920)

(303)

  Long Term Debt Incurred

3,544

3,456

  Long Term Debt Paid

(2,933)

(2,905)

  Common Stock Issued

3

11

  Common Stock Repurchased

(100)

(30)

  Common Stock Dividends Paid

(67)

(50)

  Transactions with Minority Interests in Subsidiaries

(26)

(5)

  Debt Related Costs and Other Transactions

6

(38)

     Total Cash Flows from Financing Activities

519

426

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash

(25)

37

Net Change in Cash, Cash Equivalents and Restricted Cash

(60)

(220)

Cash, Cash Equivalents and Restricted Cash at Beginning of the Period

1,110

1,189

Cash, Cash Equivalents and Restricted Cash at End of the Period

$    1,050

$       969

Non-GAAP Financial Measures (unaudited)
This earnings release presents Total Segment Operating Income and Margin, Adjusted Net Income and Adjusted Diluted Earnings Per Share (EPS), which are important financial measures for the company but are not financial measures defined by U.S. GAAP, and should not be construed as alternatives to corresponding financial measures presented in accordance with U.S. GAAP.

Total Segment Operating Income is the sum of the individual strategic business units' (SBUs') Segment Operating Income as determined in accordance with U.S. GAAP. Total Segment Operating Margin is Total Segment Operating Income divided by Net Sales as determined in accordance with U.S. GAAP. Management believes that Total Segment Operating Income and Margin are useful because they represent the aggregate value of income created by the company's SBUs and exclude items not directly related to the SBUs for performance evaluation purposes.

The most directly comparable U.S. GAAP financial measure to Total Segment Operating Income is Goodyear Net Income and to Total Segment Operating Margin is Return on Sales (which is calculated by dividing Goodyear Net Income by Net Sales).

Adjusted Net Income is Goodyear Net Income as determined in accordance with U.S. GAAP adjusted for certain significant items. Adjusted Diluted EPS is the company's Adjusted Net Income divided by Weighted Average Shares Outstanding-Diluted as determined in accordance with U.S. GAAP. Management believes that Adjusted Net Income and Adjusted Diluted EPS are useful because they represent how management reviews the operating results of the company excluding the impacts of rationalizations, asset write-offs, accelerated depreciation, asset sales and certain other significant items.

It should be noted that other companies may calculate similarly-titled non-GAAP financial measures differently and, as a result, the measures presented herein may not be comparable to such similarly-titled measures reported by other companies.

The company is unable to present a quantitative reconciliation of its forward-looking non-GAAP financial measure, Total Segment Operating Income, to the most directly comparable U.S. GAAP financial measure, Goodyear Net Income, because management cannot reliably predict all of the necessary components of Goodyear Net Income without unreasonable effort. Goodyear Net Income includes several significant items that are not included in Total Segment Operating Income, such as rationalization charges, other (income) expense, pension curtailments and settlements, and income taxes. The decisions and events that typically lead to the recognition of these and other similar non-GAAP adjustments, such as a decision to exit part of the company's business, acquisitions and dispositions, foreign currency exchange gains and losses, financing fees, actions taken to manage the company's pension liabilities, and the recording or release of tax valuation allowances, are inherently unpredictable as to if or when they may occur. The inability to provide a reconciliation is due to that unpredictability and the related difficulty in assessing the potential financial impact of the non-GAAP adjustments. For the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to the company's future financial results. 

See the tables below for reconciliations of historical Total Segment Operating Income and Margin, Adjusted Net Income and Adjusted Diluted EPS to the most directly comparable U.S. GAAP financial measures.

Segment Operating Income and Margin Reconciliation Table


Three Months
Ended

Six Months
Ended

June 30,

June 30,




(In millions)

2018

2017

2018

2017

Total Segment Operating Income 

$324

$369

$605

$759

  Rationalizations

(2)

27

35

56

  Interest Expense

78

89

154

176

  Other (Income) Expense

45

16

82

24

  Asset Write-offs and Accelerated Depreciation

1

21

2

29

  Corporate Incentive Compensation Plans

3

12

7

27

  Intercompany Profit Elimination

(1)

(2)

(4)

(5)

  Retained Expenses of Divested Operations

2

3

5

6

  Other

15

13

28

17

Income before Income Taxes

$183

$190

$296

$429

United States and Foreign Taxes

19

36

52

106

Less: Minority Shareholders Net Income

7

7

12

10

Goodyear Net Income

$157

$147

$232

$313






Sales

$3,841

$3,686

$7,671

$7,385

Return on Sales

4.1%

4.0%

3.0%

4.2%

Total Segment Operating Margin

8.4%

10.0%

7.9%

10.3%

 

Adjusted Net Income and Adjusted Diluted Earnings per Share Reconciliation Tables


Second Quarter 2018

Income
Before
Income
Taxes

Taxes

Minority Interest

Goodyear Net Income

Weighted
Average Shares
Outstanding-
Diluted

Diluted EPS

(In millions, except EPS)







As Reported

$ 183

$ 19

$  7

$ 157

241

$ 0.65

Significant Items:







    Transaction Costs Related to TireHub

10

2


8


0.03

    Hurricane Effect

8



8


0.03

    Brazil Transportation Strike

7

2


5


0.02

    Pension Settlement

3

1


2


0.01

    Net Gains on Asset Sales

(2)

(1)


(1)


(0.01)

    Insurance Recovery –

       Discontinued Products        

(2)

(1)


(1)


(0.01)

    Discrete Tax Items


28


(28)


(0.10)


24

31


(7)


(0.03)

As Adjusted

$ 207

$  50

$  7

$ 150

241

$ 0.62



Second Quarter 2017

Income
Before
Income
Taxes

Taxes

Minority Interest

Goodyear Net Income

Weighted
Average Shares
Outstanding-
Diluted

Diluted EPS

(In millions, except EPS)







As Reported

$ 190

$ 36

$  7

$ 147

256

$ 0.58

Significant Items:







    Rationalizations, Asset Write-offs,
       and Accelerated Depreciation
       Charges

48

12


36


0.14

    Debt Redemption Charges

31

12


19


0.07

    Net Gains on Asset Sales

(12)



(12)


(0.04)

    Discrete Tax Items

(5)

8


(13)


(0.05)


62

32


30


0.12

As Adjusted

$ 252

$ 68

$  7

$ 177

256

$ 0.70



First Six Months 2018

Income
Before
Income
Taxes

Taxes

Minority Interest

Goodyear Net Income

Weighted
Average Shares
Outstanding-
Diluted

Diluted EPS

(In millions, except EPS)







As Reported

$ 296

$ 52

$ 12

$ 232

242

$ 0.96

Significant Items:







    Rationalizations, Asset Write-Offs,

       and Accelerated Depreciation

37

10


27


0.11

       Charges







    Hurricane Effect

11



11


0.05

    Transaction Costs Related to TireHub

14

3


11


0.04

    Pension Standard Change

9

2


7


0.03

    Brazil Transportation Strike

7

2


5


0.02

    Pension Settlement

3

1


2


0.01

    Insurance Recovery –

       Discontinued Products        

(2)

(1)


(1)


(0.01)

    Discrete Tax Items


22


(22)


(0.09)


79

39


40


0.16

As Adjusted

$ 375

$ 91

$ 12

$ 272

242

$ 1.12



First Six Months 2017

Income
Before
Income
Taxes

Taxes

Minority Interest

Goodyear
Net Income

Weighted
Average Shares
Outstanding-
Diluted

Diluted EPS

(In millions, except EPS)







As Reported

$ 429

$ 106

$ 10

$ 313

256

$ 1.23

Significant Items:







    Rationalizations, Asset Write-offs,
       and Accelerated Depreciation
       Charges

85

24


61


0.24

    Debt Redemption Charges

31

12


19


0.07

    Net Gains on Asset Sales

(13)

(1)


(12)


(0.04)

    Discrete Tax Items

(5)

10


(15)


(0.06)


98

45


53


0.21

As Adjusted

$ 527

$ 151

$ 10

$ 366

256

$ 1.44

 

 

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/goodyear-reports-second-quarter-first-half-2018-results-300687547.html

SOURCE The Goodyear Tire & Rubber Company

View Comments and Join the Discussion!