Goodyear Reports Global First Quarter Results, Reaffirms Targets
"Our Segment Operating Income growth demonstrates our strategy is working and continues to deliver sustainable results. Despite the Venezuelan charge in the quarter, our operating results remained strong and in line with our expectations and we are reaffirming our 2014-2016 financial targets," said Richard J. Kramer, chairman and chief executive officer.
"We delivered solid performance in our developed markets, led by North America, which reported a 23 percent increase in earnings. Growth in North America and Europe offset headwinds in emerging markets where we continue to navigate foreign currency and economic challenges," he said.Goodyear's first quarter 2014 sales were $4.5 billion, compared to $4.9 billion a year ago. First quarter 2014 sales reflect $202 million in lower sales in other tire related businesses, most notably third party chemical sales in North America; $126 million in unfavorable foreign currency translation; and$98 million in lower price/mix, principally due to lower raw material costs, partially offset by $44 million in higher tire unit volumes.Tire unit volumes totaled 40 million, up 1 percent from 2013. Original equipment unit volume was down 2 percent. Replacement tire shipments were up 3 percent.
"We remain confident in our full-year expectation of 2 percent to 3 percent year-over-year volume growth, despite the negative impact of severe January winter weather in North America and labor and economic disruptions in Venezuela during the quarter," Kramer said.
Goodyear's first quarter 2014 Net Loss Available to Common Shareholders was $58 million (23 cents per share), driven by a $132 million after-tax foreign currency exchange charge in Venezuela. Goodyear Net Income Available to Common Shareholders in the 2013 first quarter was $26 million (10 cents per share). All per share amounts are presented on a fully diluted GAAP basis.
The company reported record Segment Operating Income of $373 million in the first quarter of 2014. This was up 24 percent from the year-ago quarter, reflecting $111 million in cost savings that more than offset inflation of $75 million, lower unabsorbed overhead of $48 million due to higher production levels and favorable price/mix net of raw materials of $17 million (excluding raw material cost savings). These were partially offset by $22 million of increased SAG expense and $16 million in unfavorable foreign currency translation.
Consistent with historical seasonal trends, the company used cash in the first quarter. This use of cash was due to the normal timing of collections inEurope as well as higher inventory levels in North America to support sales growth in the second quarter. As a result, Free Cash Flow from Operations was a use of $513 million for the first quarter of 2014.
See the note at the end of this release for further explanation and reconciliation tables for Segment Operating Income; Free Cash Flow from Operations; and Adjusted Net Income (Loss) and Adjusted Diluted Earnings per Share, reflecting the impact of certain significant items and the April 1, 2014 conversion of the company's mandatory convertible preferred stock.First Quarter Business Segment ResultsAsia PacificFirst Quarter(in millions)
2014
2013Tire Units
5.2
5.1Sales
$492
$567Operating Income
$65
$84Operating Margin1
3.2%
14.8%
Asia Pacific's first quarter sales decreased 13 percent from last year to $492 million. Sales reflect a 2 percent increase in tire unit volume, which was more than offset by reduced price/mix, $41 million in unfavorable foreign currency translation and $6 million in lower sales in other tire-related businesses. Original equipment unit volume remained flat. Replacement tire shipments were up 3 percent.First quarter Operating Income of $65 million was down 23 percent from last year. Lower factory start-up costs of $11 million positively impacted Operating Income. It was offset by $8 million in unfavorable foreign currency translation; $7 million in higher SAG expense, $7 million in lower insurance recoveries and $2 million in unfavorable price/mix net of raw materials
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