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Q3 Results
The Akron, Ohio-based company's third-quarter net income was $72 million or $0.30 per share, compared to $31 million or $0.13 per share in the year-ago quarter.
On average, 7 analysts polled by Thomson Reuters expected the company to post earnings of $0.40 per share. Analysts' estimates typically exclude special items.
The most recent quarter results were impacted by charges of $29 million or 12 cents per share due to rationalizations, asset write-offs and accelerated depreciation; a non-cash loss of $18 million or 8 cents per share on the liquidation of a subsidiary in Guatemala; a charge of $9 million or $0.04 per share to correct first-half earnings attributable to minority shareholders; expenses of $5 million or 2 cents per share related to the company's new USW labor contract; net tax-related benefits of $22 million or $0.08 per share, and a gain on asset sales of $6 million or 3 cents per share.
Quarterly net sales dropped 15% to $4.39 billion from the previous year's net sales of $5.17 billion, but surpassed the $4.26 billion revenue consensus estimate of three Wall Street analysts.
The company noted that sales for the latest quarter reflect the $276 million impact of a 7% downturn in tire unit volume, due to lower industry demand as well as a $279 million reduction in sales in other tire-related businesses, primarily third-party chemical sales by North American Tire. Unfavorable foreign currency translation further reduced sales by $159 million.
Robert Keegan, chairman and chief executive officer of Goodyear Tire, said, "We are pleased that our results for the quarter were in line with our original operating plan despite more difficult conditions than we had expected at the beginning of the year."
Segmental Analysis
The company's North American Tire's third-quarter sales fell 15% to $1.86 billion from $2.19 billion in the previous year, impacted by lower sales in other tire-related businesses of $234 million, primarily third-party chemical sales, reduced industry demand, and unfavorable foreign currency translation. Segment operating income for the quarter was $2 million, compared to a loss of $19 million incurred a year ago.
Third-quarter sales at the Europe, Middle East and Africa Tire totaled $1.58 billion, a decline of 18%, compared to $1.94 billion in the previous year, mainly due to lower tire unit volume, reflecting reduced industry demand, as well as unfavorable foreign currency translation. Segment operating income of $106 million versus $134 million last year, was impacted by lower sales and production levels, which drove a negative volume impact of $37 million and under-absorbed fixed costs of about $48 million. Foreign currency translation also negatively impacted operating income.
Latin American Tire's quarterly sales decreased 16% to $486 million from $581 million a year earlier, primarily due to lower tire unit volume, reflecting reduced industry demand, as well as unfavorable foreign currency translation. Segment operating income dropped to $99 million from $101 million in the prior year quarter, largely due to lower tire unit volume, reflecting reduced industry demand, as well as unfavorable foreign currency translation.
Third-quarter sales at the company's Asia Pacific Tire dropped 3% to $456 million from the previous year's sales of $470 million, due to unfavorable foreign currency translation and lower tire unit volume, reflecting reduced industry demand. Segment operating income rose to $68 million from $50 million in the same quarter of last year, reflecting lower raw material costs of $16 million, price/mix improvements of $6 million and actions to reduce costs. Foreign currency translation also negatively impacted operating income.
Other Metrics
Segment operating income for the quarter was $275 million, up from $266 million in the third quarter of fiscal 2008. The segment operating income growth reflects continued weak industry demand, which resulted in a negative volume impact of $64 million and under-absorbed fixed costs of approximately $107 million. The 2009 quarter benefited from $207 million in lower raw material costs.
The company reduced its global work force by 300 positions during the latest quarter, adding to about 5,500 first-half reductions. The company's full-year target was a reduction of 5,000 positions.
Year-To-Date Highlights
For the nine-month period, the company reported a net loss of $482 million or $2.00 per share, compared to a profit of $253 million or $1.04 per share in the prior-year period.
Net sales for the nine months ended September 30, 2009 totaled $11.9 billion, a decline from $15.4 billion reported a year ago.
Road Ahead
Looking forward, Goodyear said it expects year-over-year global industry growth in 2010, especially in markets for tires featuring high-value-added features, larger rim diameters and fuel-efficient technology. The company's new product engine, advantaged supply chain and reduced cost structure positions it well to capitalize on these market opportunities, the company said.
Earthmover Tire Production
In a separate communique, Goodyear Tire announced its plans to commence production of 63-inch, 12,000-pound off-the-road or OTR tires in the fourth quarter of 2010. The company noted that the 63-inch radial tire is a natural extension of the company's full OTR line-up, which has included 57-inch radial tires for nearly 20 years.
Goodyear also said it plans to upgrade its Topeka, Kansas, plant, where work has already begun to prepare for production of the 63-inch tires, as part of its capital investment strategy.
John Cavanaugh, vice president of Goodyear's off-highway tire business, said, "This is a long-term strategic decision that reflects Goodyear's commitment to deliver products for OTR customers' changing demands."
Stock Quotes
Goodyear Tire shares, which have been trading between $3.17 and $18.84 in the past 52 weeks, closed Tuesday's trading session at $16.74. In the pre-market session, the stock is currently trading at $15.47, down $1.27 or 7.59%.
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