Goodyear reports record results

• Record third quarter segment operating income of $520 million, up 21% 
• Record North America third quarter earnings up 30% to $210 million 
• Europe, Middle East and Africa third quarter earnings up 57% to $181 million 
• Year-to-date segment operating income of $1.4 billion, up 17% 
• Company expects 2014 earnings growth near high end of 10% – 15% range 
• Company reaffirms 2014-2016 financial targets 
• Company plans to acquire up to $150 million of its common stock in fourth quarter

The Goodyear Tire & Rubber Company today reported record segment operating income for the third quarter of 2014.

“We delivered outstanding earnings growth in the quarter and achieved a segment operating income margin of more than 11 percent, the highest in more than a decade, despite an increasingly challenged global economy,” said Richard J. Kramer, chairman and chief executive officer.

“These results reflect our focus on capturing the value of our branded products in the marketplace and continued progress generating cost savings through our operational excellence activities,” he added.

Goodyear’s third quarter 2014 sales were $4.7 billion, compared to $5.0 billion a year ago. Sales were negatively impacted by $137 million in unfavorable foreign currency translation. Tire unit volumes totaled 41.9 million for the third quarter of 2014, down 2 percent year-over-year. Original equipment unit volume was down 3 percent, primarily due to reduced vehicle production in Brazil. Replacement tire shipments were down 1 percent, due primarily to a decline in North America where markets were disrupted due to significant stockpiling of imported low-end tires in advance of potential tariffs being imposed in 2015.

“In the distorted North American industry environment, we remained committed to our strategy of pursuing profitable volume and we achieved record segment operating income in the quarter,” said Kramer.

The company reported segment operating income of $520 million in the third quarter of 2014, a record for any quarter. Segment operating income was up 21 percent from the year-ago quarter driven by significant improvement in North America; Europe, Middle East and Africa, and Asia Pacific.

Goodyear’s third quarter 2014 net income available to common shareholders was $161 million (58 cents per share). Excluding certain significant items, adjusted net income was $242 million (87 cents per share).

For the third quarter of 2013, net income available to common shareholders was $166 million (62 cents per share). Excluding certain significant items, adjusted net income was $190 million (68 cents per share). Per share amounts are diluted.

Year to date

Goodyear’s sales for the first nine months of 2014 were $13.8 billion, compared to $14.8 billion in the 2013 period. Tire unit volumes totaled 122.5 million for the first nine months of 2014, up 1 percent from 2013. Replacement tire shipments were up 2 percent. Original equipment unit volume was down 3 percent.

The company’s year-to-date segment operating income of $1.4 billion was up 17 percent from last year and a record. Compared to the prior year, year-to-date segment operating income reflects significant earnings growth in North America and Europe, Middle East and Africa.

Goodyear’s year-to-date net income available to common shareholders was $316 million ($1.15 per share). Excluding certain significant items, adjusted net income was $621 million ($2.22 per share).

For the first nine months of 2013, net income available to common shareholders was $372 million ($1.43 per share). Excluding certain significant items, adjusted net income was $517 million ($1.87 cents per share). 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 and Margin; Free Cash Flow from Operations; and Adjusted Net Income, reflecting the impact of certain significant items on the 2014 and 2013 periods.

Business Segment Results

North America’s third quarter 2014 sales decreased 6 percent from last year to $2.1 billion. Sales reflect a 4 percent decrease in tire unit volume and unfavorable currency translation. Replacement tire shipments were down 4 percent. Original equipment unit volume was down 4 percent.

Third quarter 2014 segment operating income of $210 million was a 30 percent improvement over the prior year and a record for any quarter. The improvement was driven primarily by lower conversion and raw material costs.

Europe, Middle East and Africa’s third quarter sales decreased 8 percent from last year to $1.6 billion. Sales reflect a 1 percent decrease in tire unit volume, lower price/mix and unfavorable currency translation. Replacement tire shipments were down 1 percent. Original equipment unit volume was down 3 percent.

Third quarter 2014 segment operating income of $181 million was 57 percent above the prior year primarily due to lower conversion and raw material costs as well as cost reduction actions, including savings from the closure of a tire plant in Amiens, France.

Latin America’s third quarter sales decreased 14 percent from last year to $451 million. Sales reflect a 5 percent decrease in tire unit volume and unfavorable foreign currency translation, partially offset by improved price/mix. Replacement tire shipments were up 4 percent. Original equipment unit volume was down 27 percent, primarily in Brazil.

Third quarter segment operating income of $49 million was down 45 percent from a year ago primarily due to the effects of continuing challenges in the operating environment in Venezuela, lower original equipment volume and increased plant expansion expenses in Brazil.

Asia Pacific’s third quarter sales decreased 1 percent from last year to $531 million. Sales reflect a 7 percent increase in tire unit volume, which was more than offset by unfavorable price/mix and lower off-the-road tire sales. Replacement tire shipments were up 4 percent. Original equipment unit volume was up 11 percent.

Third quarter segment operating income of $80 million was up 21 percent from last year, driven by higher volume and lower SAG expenses.

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.
The company now anticipates Segment Operating Income growth in 2014 will be near the high end of the 10 percent to 15 percent range. Based on year-to-date performance, the company now expects unit volumes to be flat to up 1 percent for 2014 over 2013.

Common Stock Dividend

The company paid a quarterly dividend of 6 cents per share of common stock on September 2, 2014. Directors have declared a quarterly dividend of 6 cents per share payable December 1, 2014 to shareholders of record on October 31, 2014.

Common Stock Share Repurchase

As a part of its previously announced $450 million share repurchase program, the company repurchased 1,200,000 shares of its common stock at an average price of $24.75 per share during the third quarter. Year-to-date, Goodyear has repurchased 3,200,000 shares of its common stock at an average price of $26.03 per share.

Based on recent trading prices of its common stock, the company plans to acquire up to $150 million of its common stock under its existing share repurchase program during the fourth quarter of 2014.