The Goodyear Tire & Rubber Company today reported results for the third quarter and first nine months of 2017.
“During the third quarter, we saw a continuation of the challenging industry conditions we experienced in the second quarter including lower consumer replacement volumes, production cuts by automakers and an increase of more than 30 percent in our raw material input costs,” said Richard J. Kramer, chairman, chief executive officer and president.
“Despite these headwinds, which we expect to moderate over the coming quarters, we continue to execute against our long-term strategy. We remain focused on the opportunities for driving profitable growth including our connected business model, which aligns all of our assets from our manufacturing plants to consumers who choose Goodyear online and at retail.”
Goodyear’s third quarter 2017 sales were $3.9 billion, up from $3.8 billion a year ago, with the increase largely attributable to improved price/mix, which drove revenue per tire up 5 percent over the 2016 quarter, excluding the impact of foreign currency translation.
Tire unit volumes totaled 39.8 million, down 5 percent from 2016. Replacement tire shipments were down 4 percent. Original equipment unit volume was down 9 percent.
Goodyear’s third quarter 2017 net income was $129 million (50 cents per share), down from $317 million ($1.19 per share) in the year-ago quarter. Third quarter 2017 adjusted net income was $177 million (70 cents per share), down from $310 million ($1.17 per share) in 2016. Per share amounts are diluted.
The company reported third quarter segment operating income of $357 million in 2017, down from $556 million a year ago. The decrease reflects higher raw material costs and the impact of lower volume, which were partially offset by improved price/mix and net cost savings.
Year-to-Date Results
Goodyear’s sales for the first nine months of 2017 were $11.3 billion, down 1 percent from the 2016 period, reflecting lower tire unit volume, partially offset by improved price/mix, which drove revenue per tire up 4 percent over the 2016 period, excluding the impact of foreign currency translation.
Tire unit volumes totaled 117.2 million, down 6 percent from 2016. Replacement tire shipments were down 5 percent due to increased competition. Original equipment unit volume was down 8 percent, driven by reduced auto production.
Goodyear’s year-to-date net income of $442 million ($1.73 per share) is down from $703 million ($2.62 per share) in 2016’s first nine months. Year-to-date adjusted net income was $543 million ($2.13 per share), down from $818 million ($3.05 per share) in 2016. Per share amounts are diluted.
The company reported first nine months segment operating income of $1.1 billion in 2017, down from $1.5 billion a year ago. The decrease was driven by higher raw material costs and the impact of lower volume, partially offset by improved price/mix 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 2017 and 2016 periods.
Business Segment Results
Americas
| Third Quarter | Nine Months | |||
|---|---|---|---|---|
| (in millions) | 2017 | 2016 | 2017 | 2016 |
| Tire Units | 17.1 | 18.6 | 51.4 | 55.4 |
| Sales | $2,041 | $2,070 | $6,028 | $6,111 |
| Segment Operating Income | 189 | 305 | 616 | 856 |
| Segment Operating Margin | 9.3% | 14.7% | 10.2% | 14.0% |
Americas’ third quarter 2017 sales decreased 1 percent from last year to $2.0 billion. Sales reflect an 8 percent decrease in tire unit volume, primarily in the consumer tire business. Replacement tire shipments were down 6 percent, due to increased competition and weak industry demand. Original equipment unit volume was down 11 percent, driven by reduced auto production in the United States. Third quarter revenue per tire increased 4 percent in 2017 compared to 2016, excluding the impact of foreign currency translation.
Third quarter 2017 segment operating income of $189 million was down from $305 million in the prior year. The decrease was driven by higher raw material costs and the impact of lower volume, partially offset by improved price/mix.
During the third quarter, several company-owned locations were directly impacted by hurricanes, which negatively impacted segment operating income by about $5 million.
Europe, Middle East and Africa
| Third Quarter | Nine Months | |||
|---|---|---|---|---|
| (in millions) | 2017 | 2016 | 2017 | 2016 |
| Tire Units | 14.9 | 15.4 | 43.4 | 47.0 |
| Sales | $1,311 | $1,236 | $3,664 | $3,748 |
| Segment Operating Income | 87 | 152 | 262 | 380 |
| Segment Operating Margin | 6.6% | 12.3% | 7.2% | 10.1% |
Europe, Middle East and Africa’s third quarter sales increased 6 percent from last year to $1.3 billion. Sales reflect improved price/mix and favorable foreign currency translation, partially offset by a 4 percent decrease in tire unit volume, primarily in the consumer OE tire business. Replacement tire shipments were down 1 percent. Original equipment unit volume was down
12 percent. Third quarter revenue per tire increased 5 percent in 2017 compared to 2016, excluding the impact of foreign currency translation.
Third quarter 2017 segment operating income of $87 million was down from $152 million in the prior year, driven by higher raw material costs and the impact of lower volume, partially offset by improved price/mix and net cost savings.
Asia Pacific
| Third Quarter | Nine Months | |||
|---|---|---|---|---|
| (in millions) | 2017 | 2016 | 2017 | 2016 |
| Tire Units | 7.8 | 8.0 | 22.4 | 22.6 |
| Sales | $569 | $541 | $1,614 | $1,558 |
| Segment Operating Income | 81 | 99 | 225 | 270 |
| Segment Operating Margin | 14.2% | 18.3% | 13.9% | 17.3% |
Asia Pacific’s third quarter 2017 sales increased 5 percent from last year to $569 million, reflecting improved price/mix. Tire unit volumes were down 2 percent. Replacement tire shipments were down 2 percent. Original equipment unit volume was down 1 percent. Third quarter revenue per tire increased 7 percent in 2017 compared to 2016, excluding the impact of foreign currency translation.
Third quarter 2017 segment operating income of $81 million was down from $99 million in the prior year, driven by higher raw material costs, partially offset by improved price/mix.
Hurricane Impact
The company’s Americas business was impacted by hurricanes during the third quarter. Goodyear operates three chemical plants in Texas and has tire distribution and retail operations in the affected areas that were damaged or experienced shutdowns.
Sales were negatively impacted during the quarter in company-owned locations by approximately $23 million, resulting in lost profits of about $5 million in segment operating income. In addition, approximately $12 million in hurricane-related costs were incurred during the quarter representing fixed costs during chemical plant shutdowns as well as incremental clean-up and repair expenses. These items have been excluded from operating earnings per share in the quarter.
The company estimates that the negative impact of the hurricanes on the United States consumer replacement industry overall was approximately one percent in the third quarter.
2017 Outlook
The company now expects its full-year 2017 segment operating income to be approximately $1.5 billion.
Shareholder Return Program
The company paid a quarterly dividend of 10 cents per share of common stock on September 1, 2017. The Board of Directors has declared a quarterly dividend of 14 cents per share payable December 1, 2017, to shareholders of record on November 1, 2017, which represents a 40 percent increase per share.
As a part of its previously announced $2.1 billion share repurchase program, the company repurchased 5.6 million shares of its common stock for $175 million during the third quarter. Since its inception, purchases under the program total 37.6 million shares for $1.1 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.
Participating in the conference call will be Richard J. Kramer, chairman, chief executive officer and president; and Laura K. Thompson, 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 (888) 632-3384 or (785) 424-1675 before
8:55 a.m. and providing the Conference ID “Goodyear.” A replay will be available by calling (800) 753-5207 or (402) 220-2156. The replay will also remain available on the website.
Goodyear is one of the world’s largest tire companies. It employs about 65,000 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.
