– Record second quarter segment operating income of $460 million
– North America second quarter earnings of $208 million, record for any quarter
– Europe, Middle East and Africa second quarter earnings more than double to $117 million
– Second quarter tire volumes increase 3%, in line with full-year outlook
– First half segment operating income of $833 million up 14% from last year
– Company reaffirms 2014-2016 financial targets
The Goodyear Tire & Rubber Company today reported record earnings for the second quarter of 2014.
“We delivered record second quarter results, driven by strong consumer replacement volumes in all of our regions where our new products are in demand,” said Richard J. Kramer, chairman and chief executive officer.
“Our performance in the first half, which was achieved through a balance of volume growth and cost reduction, gives us confidence that our strategy is working and we are on track to attain our 2014-2016 financial targets.”
Goodyear’s second quarter 2014 sales were $4.7 billion, compared to $4.9 billion a year ago. Tire unit volumes totaled 40.6 million for the second quarter of 2014, up 3 percent from 2013. Replacement tire shipments were up 6 percent with growth in all four regions. Original equipment unit volume was down 4 percent, primarily in Latin America.
The company reported record segment operating income of $460 million in the second quarter of 2014. This was up 7 percent from the year-ago quarter driven by significant improvement in Europe, Middle East and Africa, which more than offset softness in emerging markets. The North American business continued to perform at record levels with segment operating margin of more than 10 percent.
Goodyear’s record second quarter 2014 net income available to common shareholders was $213 million (76 cents per share). Excluding certain significant items, adjusted net income was $225 million (80 cents per share). Per share amounts are diluted.
For the second quarter of 2013, net income available to common shareholders was $181 million (67 cents per share). Excluding certain significant items, adjusted net income was $209 million (76 cents per share). Per share amounts are diluted.
Year to date
Goodyear’s sales for the first six months of 2014 were $9.1 billion, down 6 percent from the 2013 period. Tire unit volumes totaled 80.6 million for the first half of 2014, up 2 percent from 2013. Replacement tire shipments were up 4 percent. Original equipment unit volume was down 3 percent.
The company’s first half segment operating income of $833 million was up 14 percent from last year and a record. Compared to the prior year, year-to-date segment operating income reflects volume and earnings growth in North America and Europe, Middle East and Africa, which offset lower earnings in emerging markets.
Goodyear’s year-to-date net income available to common shareholders of $155 million (58 cents per share) is down from $206 million (79 cents per share) in 2013’s first half. All per share amounts are diluted.
See the note at the end of this release for further explanation and reconciliation tables for Segment Operating Income; Free Cash Flow from Operations; and Adjusted Net Income, reflecting the impact of certain significant items on the 2014 and 2013 quarters.
Business Segment Results
| North America | Second Quarter | Six Months | ||
|---|---|---|---|---|
| (in millions) | 2014 | 2013 | 2014 | 2013 |
| Tire Units | 15.3 | 14.8 | 29.9 | 29.6 |
| Sales | $2,044 | $2,201 | $3,923 | $4,367 |
| Segment Operating Income | 208 | 204 | 364 | 331 |
| Segment Operating Margin | 10.2% | 9.3% | 9.3% | 7.6% |
North America’s second quarter 2014 sales decreased 7 percent from last year to $2 billion. Sales reflect a 3 percent increase in tire unit volume, offset by lower third party chemical sales and lower price/mix. Replacement tire shipments were up 6 percent. Original equipment unit volume was down 4 percent.
Second quarter 2014 segment operating income of $208 million was a 2 percent improvement over the prior year and a record for any quarter. The improvement was driven primarily by higher replacement tire volume.
| Europe, Middle East and Africa | Second Quarter | Six Months | ||
|---|---|---|---|---|
| (in millions) | 2014 | 2013 | 2014 | 2013 |
| Tire Units | 15.1 | 14.6 | 31.3 | 29.7 |
| Sales | $1,580 | $1,577 | $3,256 | $3,184 |
| Segment Operating Income | 117 | 51 | 227 | 82 |
| Segment Operating Margin | 7.4% | 3.2% | 7.0% | 2.6% |
Europe, Middle East and Africa’s second quarter sales increased $3 million from last year to $1.6 billion. Sales reflect a 3 percent increase in tire unit volume and favorable foreign currency translation, partially offset by unfavorable price/mix. Replacement tire shipments were up 4 percent. Original equipment unit volume was flat.
Second quarter 2014 segment operating income of $117 million was $66 million above the prior year primarily due to higher tire volume and cost reduction actions, including savings from the closure of a tire plant in Amiens, France.
| Latin America | Second Quarter | Six Months | ||
|---|---|---|---|---|
| (in millions) | 2014 | 2013 | 2014 | 2013 |
| Tire Units | 4.4 | 4.5 | 8.4 | 9.0 |
| Sales | $489 | $531 | $911 | $1,044 |
| Segment Operating Income | 59 | 82 | 101 | 142 |
| Segment Operating Margin | 12.1% | 15.4% | 11.1% | 13.6% |
Latin America’s second quarter sales decreased 8 percent from last year to $489 million. Sales reflect a 2 percent decrease in tire unit volume and unfavorable foreign currency translation, partially offset by improved price/mix. Replacement tire shipments were up 13 percent. Original equipment unit volume was down 33 percent, primarily in Brazil.
Second quarter segment operating income of $59 million was down 28 percent from a year ago primarily due to the effects of continuing challenges in the operating environment in Venezuela, inflationary cost increases, lower original equipment volume and plant expansion costs in Brazil, partially offset by favorable price/mix.
| Asia Pacific | Second Quarter | Six Months | ||
|---|---|---|---|---|
| (in millions) | 2014 | 2013 | 2014 | 2013 |
| Tire Units | 5.8 | 5.6 | 11.0 | 10.7 |
| Sales | $543 | $585 | $1,035 | $1,152 |
| Segment Operating Income | 76 | 91 | 141 | 175 |
| Segment Operating Margin | 14.0% | 15.6% | 13.6% | 15.2% |
Asia Pacific’s second quarter sales decreased 7 percent from last year to $543 million. Sales reflect a 5 percent increase in tire unit volume, offset by unfavorable price/mix and unfavorable foreign currency translation. Replacement tire shipments were up 4 percent. Original equipment unit volume was up 6 percent.
Second quarter segment operating income of $76 million was down 17 percent from last year, driven by weak market demand for OTR tires and unfavorable foreign currency translation.
Outlook
The company reaffirmed its 2014-2016 financial targets, which include:
– Segment Operating Income growth of between 10 percent and 15 percent per year,
– Annual positive Free Cash Flow from Operations and,
– An Adjusted Debt to EBITDAP ratio of 2.0x to 2.1x.
Additionally, the company continues to expect a 2 percent to 3 percent increase in unit volumes for 2014 over 2013.
Common Stock Dividend
The company paid a quarterly dividend of 5 cents per share of common stock on June 2, 2014. Directors have declared a quarterly dividend of 6 cents per share payable September 2, 2014 to shareholders of record on August 1, 2014.
Common Stock Share Repurchase
As a part of its previously announced $450 million share repurchase program, the company repurchased 1,150,000 shares of its common stock at an average price of $26.56 per share during the second quarter.
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 Web site: http://investor.goodyear.com.
