The Goodyear Tire & Rubber Co. has reported results for the fourth quarter and full year of 2015.
“I’m extremely pleased with our outstanding results as we delivered 18 percent growth in full-year segment operating income, exceeding $2 billion for the first time in our 117-year history,” said Richard Kramer, chairman and CEO. “Our success has enabled us to execute on all facets of our capital allocation plan, delivering long-term shareholder value.”
Kramer added that fourth quarter earnings grew 16 percent in North America business and 20 percent in Asia Pacific, both records. Earnings in Europe, Middle East and Africa recovered in the quarter despite a challenging environment, he added.
“While economic uncertainty in the global environment will persist in 2016, we remain committed to our target of 10 to 15 percent growth in segment operating income from our ongoing operations,” Kramer said.
Following the deconsolidation of its Venezuelan subsidiary, the company is targeting record segment operating income of $2.1 billion to $2.2 billion for 2016.
Goodyear’s fourth quarter 2015 sales were $4.1 billion, compared to $4.4 billion a year ago. Sales were impacted by $339 million in unfavorable foreign currency translation.
Full-Year Results
Goodyear’s 2015 sales were $16.4 billion, compared to $18.1 billion in 2014. Sales were impacted by $1.6 billion in unfavorable foreign currency translation.
North America’s fourth quarter 2015 sales decreased 9 percent from last year to $1.9 billion. Sales reflect a 4 percent decrease in tire unit volume, primarily due to the sale of the former Goodyear Dunlop Tires North America Ltd. (GDTNA) business. Replacement tire volume was down 1 percent. OE unit volume was down 8 percent.
Fourth quarter 2015 segment operating income of $266 million was a 16 percent improvement over the prior year and a fourth quarter record. The improvement was primarily driven by favorable price/mix net of raw materials, as well as cost reduction actions.
The sale of GDTNA negatively impacted North America volumes by approximately 400,000 units (2 percent of the total), sales by $61 million and segment operating income by $10 million.
While Europe, Middle East and Africa’s fourth quarter tire unit volumes were up 11 percent, sales decreased 9 percent, primarily due to unfavorable foreign currency translation. Replacement tire shipments were up 12 percent. OE unit volume was up 10 percent.
Fourth quarter 2015 segment operating income of $100 million was $70 million above the prior year primarily due to higher volume, partially offset by unfavorable foreign currency translation.
Asia Pacific’s fourth quarter sales increased 9 percent from last year to $559 million. Sales reflect a 38 percent increase in tire unit volume, primarily due to the NGY acquisition. This improvement was partially offset by unfavorable foreign currency translation. Replacement tire shipments were up 57 percent. OE unit volume was up 19 percent.
Fourth quarter segment operating income of $96 million was up 20 percent from last year and a record, driven by higher volume and lower raw material costs.
The acquisition of NGY positively impacted Asia Pacific volumes by approximately 1.6 million units (19 percent of the total) and sales by $68 million. The net favorable 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 $1 million.
Latin America’s fourth quarter sales decreased 8 percent from last year to $401 million. Sales reflect unfavorable foreign currency translation and an 11 percent decrease in tire unit volume. Replacement tire shipments were down 7 percent. OE unit volume was down 30 percent, primarily in Brazil.
Fourth quarter segment operating income of $14 million was down 30 percent from a year ago, primarily due to cost inflation.
Operating income in Venezuela for the 2015 fourth quarter was $22 million, up $2 million from the prior year. Full-year operating income in Venezuela was $119 million, up $59 million from 2014. Full-year 2015 operating income excludes foreign currency exchange losses related to the Venezuelan bolivar fuerte of $34 million.
Venezuelan Deconsolidation
Effective Dec. 31, 2015, the company deconsolidated the financial statements of its subsidiary in Venezuela and began reporting its results using the cost method of accounting. As a result, it recorded a one-time $646 million pre-tax charge ($577 million after-tax) in the fourth quarter of 2015. Goodyear continues to maintain manufacturing and sales operations in the country.
As a part of its previously announced $450 million share repurchase program, the company repurchased 3 million shares of its common stock for $100 million during the fourth quarter.
On Feb. 4, the company’s board of directors authorized a $650 million increase in the share repurchase program, bringing the total to $1.1 billion.
Goodyear’s record performance has resulted in significant stock price appreciation during the three year period ended Dec. 31, 2015. The company’s total shareholder return over this period totaled nearly 175 percent, placing it in the 94th percentile of the S&P 500 and the highest ranked manufacturer in the automotive sector.
New Organizational Structure
On Dec. 1, 2015, the company announced it will combine its North America and Latin America businesses into one Americas business unit, effective Jan 1. Stephen McClellan, formerly president of the North America business, will lead the new Americas business. Future segment financial reporting will be aligned with the new organizational structure and recast historical segment financial statements will be provided in the Form 10-Q for the period ending March 31.
