Goodyear Reports Third Quarter Results for 2016, Revises 2016 Outlook

Segment operating income of $556 million for third quarter, record core segment operating income of $1.5 billion for year-to-date period

Third quarter Goodyear net income as a percent of sales of 8.2%, total segment operating margin of 14.5%

Americas third quarter income of $305 million, 14.7% operating margin

Europe, Middle East and Africa third quarter income of $152 million, 12.3% operating margin

Record Asia Pacific third quarter income of $99 million, 18.3% operating margin

Company confirms 2020 targets and capital allocation plan

Richard J. Kramer, chairman and chief executive officer

The Goodyear Tire & Rubber Company recently reported results for the third quarter and first nine months of 2016.

"We delivered solid results in the quarter, with a total segment operating margin of 14.5 percent, which takes our core segment operating income to record levels on a year-to-date basis," said Richard J. Kramer, chairman, chief executive officer and president.

"Our revised 2016 outlook reflects recent volatility impacting our U.S. commercial truck tire business. This near-term headwind will not have an impact on our value proposition or our ability to execute on our long-term plan," he said.

"Our strategy is built to take advantage of the trends shaping our industry. Global demand for high-value-added, large rim-diameter tires is increasing. We are confident that our portfolio of these products and our distribution advantages position us on a path to sustained growth and achievement of the 2020 targets that we recently announced," Kramer said.

Consistent with this strategy, on October 24 the company announced its intention to close its Philippsburg, Germany tire manufacturing facility and realign its European capacity to increase production of high-value-added tires. "Our focus is on winning in the high-value segments of the market and reducing our exposure to low-growth and declining segments to capture the value of our brand and help our customers grow profitably," he added.

Goodyear's third quarter 2016 sales were $3.8 billion, down from $4.2 billion a year ago, with the decrease driven by the deconsolidation of the company's subsidiary in Venezuela.

Tire unit volumes totaled 42 million, which was essentially flat with 2015 after adjusting for the deconsolidation of Venezuela at the end of 2015. Growth in Asia Pacific was more than offset by declines in Americas and Europe, Middle East and Africa. Replacement tire shipments were up 1 percent. Original equipment unit volume was down 6 percent.

Goodyear's third quarter 2016 net income was $317 million ($1.19 per share), up 17 percent from $271 million (99 cents per share) in the year-ago quarter. The improvement was primarily due to an income tax benefit resulting from various discrete tax adjustments that was partially offset by increased rationalization charges. Third quarter 2016 adjusted net income was $310 million ($1.17 per share), up from $271 million (99 cents per share) in 2015. Per share amounts are diluted.

Year to Date Results

Goodyear's sales for the first nine months of 2016 were $11.4 billion, down 8 percent from the 2015 period, reflecting the deconsolidation of Venezuela and unfavorable foreign currency translation.

Tire unit volumes totaled 125 million, up 1 percent from 2015, driven by growth in the Asia Pacific region, primarily in Japan, due to the acquisition of a controlling interest in Nippon Goodyear Ltd. (NGY), and China. Replacement tire shipments were up 2 percent. Original equipment unit volume was down 3 percent. Excluding the impact of the deconsolidation of Venezuela, unit volumes increased 2 percent.

Goodyear's year-to-date net income of $703 million ($2.62 per share) is up 2 percent from $687 million ($2.51 per share) in 2015's first nine months. The increase was primarily due to lower income tax expense due to various discrete tax adjustments. Year-to-date adjusted net income was $818 million ($3.05 per share), up from $649 million ($2.39 per share) in 2015. Per share amounts are diluted.

The company reported year-to-date segment operating income of $1.5 billion in 2016, down 2 percent from a year ago. The decrease was due to the deconsolidation of Venezuela. Core segment operating income, which excludes Venezuela, was $1.4 billion in the 2015 nine months.

Asia Pacific's third quarter 2016 sales increased 18 percent from last year to $541 million. Sales reflect a 33 percent increase in tire unit volume, primarily due to growth in Japan, China and India. This improvement was partially offset by unfavorable price/mix, driven primarily by the impact of lower raw material costs on pricing. Replacement tire shipments were up 47 percent. Original equipment unit volume was up 16 percent.

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