Market Overview

Goodyear Reports Third Quarter 2019 Results

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AKRON, Ohio, Oct. 25, 2019 /PRNewswire/ -- The Goodyear Tire & Rubber Company (NASDAQ:GT) today reported results for the third quarter of 2019.

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

"In the Americas, we saw continued strength in our U.S. consumer replacement business and solid growth in Brazil, giving us positive momentum in these important markets as we head into the final months of the year," said Richard J. Kramer, chairman, chief executive officer and president. "Our Asia Pacific business improved in the quarter as we benefitted from the launch of several new OE fitments in China, which helped mitigate the impact of lower auto production. This is a testament to the strength of our technology and our success winning fitments on the right platforms," he added.

"Industry conditions were softer than we anticipated in Europe and we continued to see an adverse impact from lack of alignment in our distribution channels. In response, we expect to accelerate our plans to rationalize distribution in the region. These actions, which will begin early next year, should improve the focus on our brands and ensure that we capture the full benefits of the investments we are making to increase the supply of premium, high margin tires over the next few years," said Kramer.

Goodyear's third quarter 2019 sales were $3.8 billion, down 3% from a year ago, driven by unfavorable foreign currency translation and lower third-party chemical sales.

Tire unit volumes totaled 40.3 million, down 1% from 2018. Original equipment unit volume decreased 5%, driven by lower global vehicle production. Replacement tire shipments increased 1%.

Goodyear's third quarter 2019 net income was $88 million (38 cents per share), down from $351 million ($1.48 per share) a year ago. The decrease was driven by a $287 million net gain recorded during the third quarter of 2018 resulting from the company's TireHub transaction. Third quarter 2019 adjusted net income was $105 million (45 cents per share), compared to $163 million (68 cents per share) in 2018. Per share amounts are diluted.

The company reported segment operating income of $294 million in 2019, down from $362 million a year ago. The decrease primarily reflects increased raw material costs, the impacts of lower volume, and the non-recurrence of a favorable indirect tax settlement in Brazil. These factors were partially offset by improved price/mix.

Year-to-Date Results

Goodyear's net sales for the first nine months of 2019 were $11.0 billion, a 5% decrease from the 2018 period due to unfavorable foreign currency translation, lower volume and lower third-party chemical sales. These factors were partially offset by improved price/mix.

Tire unit volumes totaled 115.7 million, down 2% from 2018. Original equipment volume decreased 8%, primarily due to lower global vehicle production. Replacement tire shipments were effectively unchanged.

Goodyear's net income for the first nine months of 2019 was $81 million (35 cents per share), down from $583 million ($2.42 per share) in the prior year's period. The 2019 period included several significant items, most notably $128 million in rationalization charges, primarily related to the previously announced plan to modernize two tire manufacturing facilities in Germany. Goodyear's net income for the comparable period in 2018 included a $273 million net gain resulting from the company's TireHub transaction. Adjusted net income for the first nine months was $208 million (89 cents per share), compared to $434 million ($1.80 per share) in the prior year's period. Per share amounts are diluted.

The company reported segment operating income of $703 million for the first nine months of 2019, down from $967 million a year ago. The decrease primarily reflects higher raw material costs, lower volume and reduced earnings from other tire-related businesses, partially offset by improved 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 2019 and 2018 periods.

Business Segment Results 

Americas


Third Quarter


Nine Months

(in millions)

2019


2018


2019


2018

Tire Units

17.9


17.8


51.7


51.8

Sales

$ 2,049


$ 2,107


$ 5,896


$ 6,054

Segment Operating Income 

175


194


398


475

Segment Operating Margin

8.5%


9.2%


6.8%


7.8%

Americas' third quarter 2019 sales of $2.0 billion were 3% lower than in the previous year, driven by lower third-party chemical sales. Tire unit volume rose 1%. Replacement tire shipments increased 3%, led by growth in the U.S. and Brazil. Original equipment unit volume declined 7%.  The reduction was driven by our U.S. business, reflecting lower vehicle production, including the impact of a strike at a major OE customer, and strategic fitment choices.

Third quarter 2019 segment operating income of $175 million was down 10% compared to the prior year. The decline was more than explained by a favorable indirect tax settlement in Brazil in 2018.

Europe, Middle East and Africa


Third Quarter


Nine Months

(in millions)

2019


2018


2019


2018

Tire Units

14.5


15.2


42.1


44.1

Sales

$ 1,205


$ 1,290


$ 3,567


$ 3,880

Segment Operating Income 

66


111


164


289

Segment Operating Margin

5.5%


8.6%


4.6%


7.4%

Europe, Middle East and Africa's third quarter 2019 sales decreased 7% from last year to $1.2 billion, primarily attributable to lower volume and unfavorable foreign currency translation, partially offset by improved price/mix. Tire unit volume decreased 6%. Replacement tire shipments fell 5%, reflecting decreased industry demand and distribution challenges. Original equipment unit volume decreased 9%, attributable to lower vehicle production and strategic fitment choices.

Third quarter 2019 segment operating income of $66 million was 41% lower than the prior year's quarter, driven by higher conversion costs, including the impact of lower factory utilization, and lower volume.

Asia Pacific


Third Quarter


Nine Months

(in millions)

2019


2018


2019


2018

Tire Units

7.9


7.5


21.9


22.6

Sales

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