AKRON, Ohio, April 26, 2019 /PRNewswire/ -- The Goodyear Tire
& Rubber Company (NASDAQ: GT) today reported results for
the first quarter of 2019.
"We gained momentum in the U.S. during the quarter, as our
consumer and commercial replacement businesses both grew share,
while increasing the value we capture in the marketplace," said
Richard J. Kramer, chairman, chief
executive officer and president. "In addition, we took steps
to increase our long-term competitiveness. The plans we announced
to modernize our Hanau and Fulda manufacturing facilities in
Germany will improve our supply of
cost-effective premium tires in Europe, helping us achieve our goal of having
the right tire, at the right place, at the right time, at the right
cost," added Kramer.
Goodyear's first quarter 2019 sales were $3.6 billion, down 6% from $3.8 billion a year ago, driven by unfavorable
currency translation and lower volume in its international
businesses, partially offset by improvements in price/mix.
Tire unit volumes totaled 38.0 million, down 3% from 39.0
million in the year ago quarter. Original equipment unit volume
declined 7%, primarily reflecting weaker U.S. volumes and lower
automotive production in China and
India. Replacement tire shipments
were down less than 1% compared with a year ago.
Goodyear's net loss was $61
million in the first quarter of 2019 (26 cents per share) compared to net income of
$75 million (31 cents per share) in the year-ago quarter. The
first quarter of 2019 included several significant items, most
notably $93 million in charges
related to the previously announced plan to modernize two tire
manufacturing facilities in Germany. First quarter 2019 adjusted net
income was $45 million (19 cents per share) compared to $122 million (50
cents per share) in 2018. Per share amounts are diluted.
The company reported first quarter segment operating income of
$190 million in 2019, down from
$281 million a year ago. The decrease
reflects higher raw material costs, lower volume, unfavorable
foreign currency translation, and weaker results from other
tire-related businesses, partially offset by favorable price/mix,
improved overhead absorption and net cost savings.
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
|
First
Quarter
|
|
|
|
(in
millions)
|
2019
|
|
2018
|
|
|
|
|
Tire Units
|
16.7
|
|
16.7
|
|
|
|
|
|
Sales
|
$ 1,876
|
|
$ 1,929
|
|
|
|
|
|
Segment Operating
Income
|
89
|
|
127
|
|
|
|
|
|
Segment Operating
Margin
|
4.7%
|
|
6.6%
|
|
|
|
|
|
Americas' first quarter 2019 sales decreased 3% from last year
to $1.9 billion. Sales reflect the
negative effect of foreign currency translation and lower
third-party chemical sales, partially offset by improved price/mix.
Replacement tire shipments were up 3%, driven by an increase of 4%
in consumer replacement. U.S. consumer replacement volume increased
6% over the prior year, led by above-average growth in the
17-inch-and-greater category. Original equipment unit volume was
down 8%, attributable to a 10% decrease in consumer OE driven in
part by the impact of changes in OEM production.
First quarter 2019 segment operating income of $89 million was down 30% from the prior year. The
decrease reflects higher raw material costs, reduced earnings from
our other tire-related businesses and unfavorable foreign currency
translation, partially offset by favorable price/mix and improved
overhead absorption.
Europe, Middle East and Africa
|
First
Quarter
|
|
|
|
(in
millions)
|
2019
|
|
2018
|
|
|
|
|
Tire Units
|
14.4
|
|
14.7
|
|
|
|
|
|
Sales
|
$ 1,221
|
|
$ 1,330
|
|
|
|
|
|
Segment Operating
Income
|
54
|
|
78
|
|
|
|
|
|
Segment Operating
Margin
|
4.4%
|
|
5.9%
|
|
|
|
|
|
Europe, Middle East and Africa's first quarter 2019 sales of
$1.2 billion were down 8% from the
prior year, which was more than explained by the negative impact of
foreign currency translation. Replacement tire shipments were down
3% reflecting weaker industry demand. OE tire volume was flat.
First quarter 2019 segment operating income of $54 million was 31% less than the prior year. The
decrease was driven by increased raw material and transportation
costs and lower volume. These negative impacts were partially
offset by improved price/mix.
Asia Pacific
|
First
Quarter
|
|
|
|
(in
millions)
|
2019
|
|
2018
|
|
|
|
|
Tire Units
|
6.9
|
|
7.6
|
|
|
|
|
|
Sales
|
$ 501
|
|
$ 571
|
|
|
|
|
|
Segment Operating
Income
|
47
|
|
76
|
|
|
|
|
|
Segment Operating
Margin
|
9.4%
|
|
13.3%
|
|
|
|
|
|
Asia Pacific's first quarter
2019 sales decreased 12% from last year to $501 million, reflecting weaker volume and the
negative effect of foreign currency translation, partially offset
by improved price/mix. Tire unit volumes declined 9% from last
year's first quarter. Original equipment unit volume was down 15%,
reflecting weak vehicle production in China and India. Replacement tire shipments declined 4%,
primarily in China.
First quarter 2019 segment operating income of $47 million was down 38% from last year,
reflecting the impacts of lower volume and higher raw material
costs.
German Modernization and Restructuring
During the first quarter, Goodyear announced plans to invest
approximately $122 million to
modernize its manufacturing facilities in Hanau and Fulda,
Germany, as part of its strategy
to strengthen the competitiveness of its global manufacturing
footprint and increase its supply of premium, large-rim-diameter
consumer tires.
The transformation will result in the Hanau and Fulda
manufacturing facilities having more automated production and being
fully capable of producing consumer tires with rim diameters
greater than or equal to 17 inches, better positioning the company
to meet the growing demand for higher margin, premium tires in
Europe.
The company anticipates that required changes to the layout of
the plants, efficiency gains from the new equipment and the
decision to curtail production of tires for the declining, less
profitable segments of the tire market will result in approximately
1,100 job reductions. These actions will increase the productivity
of both plants and the resulting conversion savings are expected to
improve Europe, Middle East and Africa's segment operating income by
$60 to $70
million on an annualized basis over a three-year period
beginning in 2020. The plan remains subject to consultation with
relevant employee representative bodies.
European Revolving Credit Facility
The company refinanced its European revolving credit facility in
March, extending the maturity to 2024, increasing the available
commitments from €550 million to €800 million, decreasing the
interest rate margin by 25 basis points and decreasing the annual
commitment fee by 5 basis points.
Common Stock Dividend
The company paid a quarterly dividend of 16 cents per share of common stock on
March 1, 2019. The Board of Directors
has declared a quarterly dividend of 16
cents per share payable June 3,
2019, to shareholders of record on May 1, 2019. The payout represents an annual rate
of 64 cents per
share.
Conference Call
Goodyear will hold an investor conference call at 9:30 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.
Participating in the conference call will be Richard J. Kramer, chairman, chief executive
officer and president; and Darren R.
Wells, executive vice president and chief financial
officer.
Investors, members of the media and other interested persons can
access the conference call on the website or via telephone by
calling either (800) 895-3361 or (785) 424-1062 before
9:25 a.m. and providing the
Conference ID "Goodyear." A taped replay will be available by
calling (800) 839-2383 or (402) 220-7202. 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 47
facilities in 21 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
|
|
|
March
31,
|
|
(In millions,
except per share amounts)
|
2019
|
2018
|
|
|
|
|
|
NET
SALES
|
$
3,598
|
$
3,830
|
|
|
|
|
|
Cost of Goods
Sold
|
2,879
|
2,976
|
|
Selling,
Administrative and General Expense
|
547
|
591
|
|
Rationalizations
|
103
|
37
|
|
Interest
Expense
|
85
|
76
|
|
Other (Income)
Expense
|
22
|
37
|
|
|
|
|
|
Income (Loss) before
Income Taxes
|
(38)
|
113
|
|
United States and
Foreign Tax Expense
|
6
|
33
|
|
|
|
|
|
Net Income
(Loss)
|
(44)
|
80
|
|
Less: Minority
Shareholders' Net Income
|
17
|
5
|
|
|
|
|
|
Goodyear Net
Income (Loss)
|
$
(61)
|
$
75
|
|
|
|
|
|
Goodyear Net
Income (Loss)
- Per Share of Common Stock
|
|
|
|
|
|
|
|
Basic
|
$
(0.26)
|
$
0.31
|
|
|
|
|
|
Weighted
Average Shares Outstanding
|
232
|
240
|
|
|
|
|
|
Diluted
|
$
(0.26)
|
$
0.31
|
|
|
|
|
|
Weighted
Average Shares Outstanding
|
232
|
244
|
|
|
|
|
|
Cash Dividends
Declared Per Common Share
|
$
0.16
|
$
0.14
|
|
|
|
|
|
The Goodyear Tire
& Rubber Company and Subsidiaries
Consolidated
Balance Sheets (unaudited)
|
|
(In millions,
except share data)
|
March
31,
|
December
31,
|
|
2019
|
2018
|
Assets:
|
|
|
Current
Assets:
|
|
|
Cash and Cash
Equivalents
|
$
860
|
$
801
|
Accounts
Receivable, less Allowance - $115 ($113 in 2018)
|
2,446
|
2,030
|
Inventories:
|
|
|
Raw Materials
|
549
|
569
|
Work in Process
|
161
|
152
|
Finished Products
|
2,230
|
2,135
|
|
2,940
|
2,856
|
Prepaid
Expenses and Other Current Assets
|
246
|
238
|
Total Current
Assets
|
6,492
|
5,925
|
Goodwill
|
563
|
569
|
Intangible
Assets
|
136
|
136
|
Deferred Income
Taxes
|
1,864
|
1,847
|
Other
Assets
|
1,160
|
1,136
|
Operating Lease
Right-of-Use Assets
|
862
|
--
|
Property, Plant and
Equipment
less
Accumulated Depreciation - $10,285 ($10,161 in 2018)
|
7,196
|
7,259
|
Total Assets
|
$
18,273
|
$
16,872
|
|
|
|
Liabilities:
|
|
|
Current
Liabilities:
|
|
|
Accounts
Payable-Trade
|
$
2,737
|
$
2,920
|
Compensation
and Benefits
|
492
|
471
|
Other Current
Liabilities
|
694
|
737
|
Notes Payable
and Overdrafts
|
495
|
410
|
Operating
Lease Liabilities due Within One Year
|
203
|
--
|
Long Term Debt
and Finance Leases due Within One Year
|
466
|
243
|
Total Current Liabilities
|
5,087
|
4,781
|
Operating Lease
Liabilities
|
667
|
--
|
Long Term Debt and
Finance Leases
|
5,545
|
5,110
|
Compensation and
Benefits
|
1,299
|
1,345
|
Deferred Income
Taxes
|
94
|
95
|
Other Long Term
Liabilities
|
550
|
471
|
Total Liabilities
|
13,242
|
11,802
|
|
|
|
Commitments and
Contingent Liabilities
Shareholders'
Equity:
|
|
|
Common Stock, no par
value:
|
|
|
Authorized, 450 million
shares, Outstanding shares – 232 million in 2019
and 2018
|
232
|
232
|
Capital
Surplus
|
2,114
|
2,111
|
Retained
Earnings
|
6,476
|
6,597
|
Accumulated Other
Comprehensive Loss
|
(4,014)
|
(4,076)
|
Goodyear Shareholders' Equity
|
4,808
|
4,864
|
Minority
Shareholders' Equity – Nonredeemable
|
223
|
206
|
Total
Shareholders' Equity
|
5,031
|
5,070
|
Total
Liabilities and Shareholders' Equity
|
$
18,273
|
$
16,872
|
|
|
|
|
|
|
The Goodyear Tire
& Rubber Company and Subsidiaries
Consolidated
Statements of Cash Flows (unaudited)
|
|
(In
millions)
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
2018
|
Cash Flows from
Operating Activities:
|
|
|
Net Income
(Loss)
|
$
(44)
|
$
80
|
Adjustments to
Reconcile Net Income (Loss) to Cash Flows from Operating
Activities:
|
|
|
Depreciation and
Amortization
|
193
|
199
|
Amortization and Write-Off
of Debt Issuance Costs
|
4
|
3
|
Provision for Deferred
Income Taxes
|
(23)
|
(17)
|
Net Rationalization
Charges
|
103
|
37
|
Rationalization
Payments
|
(18)
|
(106)
|
Net (Gains) Losses on Asset
Sales
|
(5)
|
2
|
Operating Lease Expense
Under New Accounting Standard
|
74
|
--
|
Operating Lease Payments
Under New Accounting Standard
|
(71)
|
--
|
Pension Contributions and
Direct Payments
|
(18)
|
(21)
|
Changes in
Operating Assets and Liabilities, Net of Asset Acquisitions and
Dispositions:
|
|
|
Accounts
Receivable
|
(425)
|
(467)
|
Inventories
|
(93)
|
(81)
|
Accounts Payable -
Trade
|
(71)
|
99
|
Compensation and
Benefits
|
31
|
(16)
|
Other Current
Liabilities
|
(11)
|
(64)
|
Other Assets and
Liabilities
|
10
|
(37)
|
Total Cash Flows from
Operating Activities
|
(364)
|
(389)
|
Cash Flows from
Investing Activities:
|
|
|
Capital
Expenditures
|
(221)
|
(248)
|
Short Term
Securities Acquired
|
(31)
|
(8)
|
Short Term
Securities Redeemed
|
31
|
8
|
Notes
Receivable
|
(7)
|
--
|
Other
Transactions
|
(16)
|
--
|
Total Cash Flows from
Investing Activities
|
(244)
|
(248)
|
Cash Flows from
Financing Activities:
|
|
|
Short Term
Debt and Overdrafts Incurred
|
571
|
584
|
Short Term
Debt and Overdrafts Paid
|
(485)
|
(518)
|
Long Term Debt
Incurred
|
1,850
|
1,652
|
Long Term Debt
Paid
|
(1,223)
|
(1,226)
|
Common Stock
Issued
|
--
|
1
|
Common Stock
Repurchased
|
--
|
(25)
|
Common Stock
Dividends Paid
|
(37)
|
(34)
|
Transactions
with Minority Interests in Subsidiaries
|
--
|
(22)
|
Debt Related
Costs and Other Transactions
|
(31)
|
(13)
|
Total Cash Flows from
Financing Activities
|
645
|
399
|
Effect of Exchange
Rate Changes on Cash, Cash Equivalents and Restricted
Cash
|
--
|
16
|
Net Change in Cash, Cash
Equivalents and Restricted Cash
|
37
|
(222)
|
Cash, Cash
Equivalents and Restricted Cash at Beginning of the
Period
|
873
|
1,110
|
Cash, Cash Equivalents
and Restricted Cash at End of the Period
|
$
910
|
$
888
|
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
|
|
March
31,
|
|
|
|
|
(In
millions)
|
2019
|
2018
|
|
Total Segment
Operating Income
|
$
190
|
$
281
|
|
Rationalizations
|
103
|
37
|
|
Interest
Expense
|
85
|
76
|
|
Other (Income)
Expense
|
22
|
37
|
|
Asset
Write-offs and Accelerated Depreciation
|
--
|
1
|
|
Corporate
Incentive Compensation Plans
|
1
|
4
|
|
Intercompany
Profit Elimination
|
(4)
|
(3)
|
|
Retained
Expenses of Divested Operations
|
3
|
3
|
|
Other
|
18
|
13
|
|
Income (Loss)
before Income Taxes
|
$
(38)
|
$
113
|
|
United States and
Foreign Taxes
|
6
|
33
|
|
Less: Minority
Shareholders Net Income
|
17
|
5
|
|
Goodyear Net
Income (Loss)
|
$
(61)
|
$
75
|
|
|
|
|
|
Sales
|
$3,598
|
$3,830
|
|
Return on
Sales
|
(1.7)%
|
2.0%
|
|
Total Segment
Operating Margin
|
5.3%
|
7.3%
|
|
Adjusted Net
Income and Adjusted Diluted Earnings per Share Reconciliation
Tables
|
|
First Quarter
2019
|
Income
Before
Income
Taxes
|
Taxes
|
Minority
Interest
|
Goodyear
Net
Income
|
Weighted
Average
Shares
Outstanding-
Diluted*
|
Diluted
EPS
|
(In millions,
except EPS)
|
|
|
|
|
|
|
As
Reported
|
$
(38)
|
$
6
|
$
17
|
$
(61)
|
232
|
$
(0.26)
|
Significant
Items:
|
|
|
|
|
|
|
Rationalizations, Asset Write-offs, and
Accelerated Depreciation Charges
|
103
|
18
|
|
85
|
|
0.36
|
Indirect Tax Settlements and Discrete
Tax
Items
|
|
(7)
|
(16)
|
23
|
|
0.10
|
Legal Claims Related to Discontinued
Operations
|
5
|
1
|
|
4
|
|
0.02
|
Net Insurance Recovery from
Hurricanes
|
(3)
|
(1)
|
|
(2)
|
|
(0.01)
|
Asset Sales
|
(5)
|
(1)
|
|
(4)
|
|
(0.02)
|
|
100
|
10
|
(16)
|
106
|
|
0.45
|
As
Adjusted
|
$
62
|
$
16
|
$
1
|
$
45
|
235
|
$
0.19
|
|
*Weighted Average
Shares Outstanding – Diluted for the calculation of as-reported
diluted EPS excludes 3 million weighted
average shares outstanding for stock options and other securities
that were anti-dilutive.
|
First 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
|
$
113
|
$
33
|
$
5
|
$
75
|
244
|
$
0.31
|
Significant
Items:
|
|
|
|
|
|
|
Rationalizations, Asset Write-offs, and
Accelerated Depreciation Charges
|
38
|
11
|
|
27
|
|
0.11
|
Discrete Tax Items
|
|
(7)
|
|
7
|
|
0.03
|
Pension Standard Change
|
9
|
2
|
|
7
|
|
0.03
|
Transaction Costs Related to Tire Hub
|
4
|
1
|
|
3
|
|
0.01
|
Hurricane Effect
|
3
|
|
|
3
|
|
0.01
|
|
54
|
7
|
|
47
|
|
0.19
|
As
Adjusted
|
$
167
|
$
40
|
$
5
|
$
122
|
244
|
$
0.50
|
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SOURCE The Goodyear Tire & Rubber Company