- Net income of $184 million, record segment operating income of $419 million
- Segment operating income growth of 8%, core segment operating income growth of 14%
- Americas’ segment earnings of $260 million, operating margin of 13%
- Asia Pacific segment earnings of $79 million, operating margin of 16%
- Completed $50 million in share repurchases in first quarter
- Company reaffirms 2016 financial targets, announces upcoming Investor Day
The Goodyear Tire & Rubber Company today reported record results for the first quarter of 2016.
“We are very pleased with our strong first quarter performance,” said Richard J. Kramer, chairman, chief executive officer and president. “Demand for our premium-branded, high-value-added products is robust and our product mix continues to grow richer, driving margin expansion,” he added. The company’s first quarter segment operating margin of 11.4 percent was up from
9.6 percent a year ago.
“Our results are a reflection of our ability to successfully execute on our strategy,” said Kramer. “We will continue to focus on profitable growth in market segments where our innovation, brand and operational excellence capabilities provide a competitive advantage.”
Goodyear’s first quarter 2016 sales were $3.7 billion, down from $4.0 billion a year ago, largely due to unfavorable foreign currency translation of $141 million and the deconsolidation of the company’s subsidiary in Venezuela.
Tire unit volumes totaled 41.5 million, up 2 percent from 2015, driven by growth in the Asia Pacific region, primarily in Japan and China. Replacement tire shipments were up 2 percent. Original equipment unit volume was up 2 percent. Excluding the impact of the deconsolidation of Venezuela, unit volumes increased 3 percent.
The company reported record first quarter segment operating income of $419 million in 2016, up from $388 million a year ago. The increase was driven by favorable price/mix net of raw materials and the impact of higher volume. These improvements were partially offset by the deconsolidation of the Venezuelan subsidiary and higher selling, administrative and general expenses. Core segment operating income, which excludes Venezuela, was $366 million in the year-ago quarter.
Goodyear’s first quarter 2016 net income was $184 million (68 cents per share). Excluding certain significant items, adjusted net income was $195 million (72 cents per share). Per share amounts are diluted.
Goodyear’s first quarter 2015 net income was $224 million (82 cents per share). Net income included a non-cash, one-time gain of $155 million ($99 million after taxes and minority interest) for the recognition of deferred royalty income resulting from the termination of a licensing agreement associated with the company’s former Engineered Products business. Excluding certain significant items, adjusted net income was $148 million (54 cents per share). Per share amounts are diluted.
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
| Americas | First Quarter | |
|---|---|---|
| (in millions) | 2016 | 2015 |
| Tire Units | 18.0 | 19.2 |
| Sales | $1,951 | $2,243 |
| Segment Operating Income | 260 | 248 |
| Segment Operating Margin | 13.3% | 11.1% |
Americas’ first quarter 2016 sales decreased 13 percent from last year to $2.0 billion. Sales reflect a 6 percent decrease in tire unit volume, primarily due to the deconsolidation of the Venezuelan subsidiary and the sale of the former Goodyear Dunlop Tires North America Ltd. business (GDTNA). Replacement tire shipments were down 6 percent. Original equipment unit volume was down 7 percent.
Excluding Venezuela and GDTNA, tire unit volume was down 2 percent, driven primarily by the weak economic environment in Brazil.
First quarter 2016 segment operating income of $260 million was a 5 percent improvement over the prior year. The improvement was driven primarily by favorable price/mix net of raw materials, partially offset by the deconsolidation of the Venezuelan subsidiary and lower volume.
The deconsolidation of the Venezuelan subsidiary negatively impacted volumes by approximately 0.4 million units, sales by $94 million and segment operating income by
$22 million.
The sale of GDTNA negatively impacted volumes by approximately 0.3 million units, sales by $64 million and segment operating income by $12 million.
| Europe, Middle East and Africa | First Quarter | |
|---|---|---|
| (in millions) | 2016 | 2015 |
| Tire Units | 16.2 | 15.9 |
| Sales | $1,251 | $1,331 |
| Segment Operating Income | 80 | 73 |
| Segment Operating Margin | 6.4% | 5.5% |
While Europe, Middle East and Africa’s first quarter tire unit volumes were up 2 percent, sales decreased 6 percent from last year to $1.3 billion, primarily due to unfavorable price/mix and foreign currency translation. Replacement tire shipments were flat. Original equipment unit volume was up
5 percent.
First quarter 2016 segment operating income of $80 million was 10 percent above the prior year due to favorable price/mix net of raw materials and lower conversion costs.
| Asia Pacific | First Quarter | |
|---|---|---|
| (in millions) | 2016 | 2015 |
| Tire Units | 7.3 | 5.7 |
| Sales | $489 | $450 |
| Segment Operating Income | 79 | 67 |
| Segment Operating Margin | 16.2% | 14.9% |
Asia Pacific’s first quarter 2016 sales increased 9 percent from last year to $489 million. Sales reflect a 28 percent increase in tire unit volume, primarily due to growth in Japan and China. This improvement was partially offset by unfavorable foreign currency translation. Replacement tire shipments were up 41 percent. Original equipment unit volume was up 14 percent.
First quarter 2016 segment operating income of $79 million was up 18 percent from last year, driven by higher volume and favorable price/mix net of raw materials.
The acquisition of a controlling interest in Nippon Goodyear Ltd. (NGY) in Japan positively impacted volumes by approximately 0.9 million units and sales by $41 million. The net unfavorable impact on segment operating income of the NGY acquisition and the sale of the company’s 25 percent interest in Dunlop Goodyear Tires Ltd. was $3 million.
2016 Financial Targets
The company reaffirmed its 2016 financial targets, which include:
– Core Segment Operating Income growth of between 10 percent and 15 percent (excludes Venezuela);
– Positive Free Cash Flow from Operations and
– An Adjusted Debt to EBITDAP ratio of 2.0x to 2.1x at year-end.
Shareholder Return Program
The company paid a quarterly dividend of 7 cents per share of common stock on March 1, 2016. The Board of Directors has declared a quarterly dividend of 7 cents per share payable June 1, 2016, to shareholders of record on May 2, 2016.
As a part of its previously announced $1.1 billion share repurchase program, the company repurchased 1.6 million shares of its common stock for $50 million during the first quarter.
Investor Day
The company announced that it will hold an Investor Day on September 15, 2016 in Boston. Additional details will be made available at a later date.
