AKRON, Ohio — The Goodyear Tire & Rubber Company reported financial results on Feb. 11 for the fourth quarter and full-year of 2019.
“In the U.S., market conditions remained largely stable and our consumer and commercial replacement businesses delivered strong performances this year, as they benefited from the strength of our brand, new product introductions, and the steps we have taken to align our distribution,” said Richard J. Kramer, chairman, chief executive officer and president. “We also delivered solid consumer replacement growth in both China and Brazil during the second half of the year,” he added.
“We continue to face a challenging global environment, including recessionary demand trends in many international markets. To address these challenges, we remain focused on further improving our cost structure and working capital management, while continuing to build our capabilities to enable mobility, today and in the future,” said Kramer.
Goodyear’s fourth quarter 2019 sales were $3.7 billion, down 4 percent from a year ago, driven primarily by lower industry volume and unfavorable foreign currency translation, partially offset by improved price/mix.
Tire unit volumes totaled 39.6 million, down 2 percent from 2018. Original equipment unit volume decreased 10 percent, driven by lower global vehicle production. Replacement tire shipments increased slightly.
Goodyear’s fourth quarter 2019 net loss was $392 million ($1.68 per share) compared to net income of $110 million ($0.47 per share) a year ago. The decrease was driven by discrete tax adjustments of $380 million during the fourth quarter of 2019, including a noncash charge of $334 million related to an acceleration of royalty income in the U.S. from the sale of the next 12 years of European royalty payments to our Luxembourg business, and rationalization charges of $77 million.
Fourth quarter 2019 adjusted net income was $45 million (19 cents per share), compared to $120 million (51 cents per share) in 2018. Per share amounts are diluted.
The company reported segment operating income of $242 million in the fourth quarter of 2019, down from $307 million a year ago. The decline primarily reflects a decrease in favorable indirect tax settlements in Brazil, lower factory utilization and lower volume.
Goodyear’s 2019 net sales were $14.7 billion, a 5 percent decrease from the prior year due to unfavorable foreign currency translation, lower volume and reduced third-party chemical sales. These factors were partially offset by improved price/mix.
Tire unit volumes totaled 155.3 million, down 2 percent from 2018. Original equipment volume decreased 8 percent, primarily due to lower global vehicle production. Replacement tire shipments were essentially unchanged.
Goodyear’s 2019 net loss was $311 million ($1.33 per share) compared to net income of $693 million ($2.89 per share) in the prior year. The 2019 period included several significant items, most notably discrete tax adjustments of $386 million and rationalization charges of $205 million, primarily related to the previously announced plan to modernize two tire manufacturing facilities in Germany and a plan to curtail production of tires for declining, less profitable segments of the tire market at our Gadsden, Alabama, manufacturing facility.
Goodyear’s 2018 net income included a net gain of $272 million resulting from the TireHub transaction, net of transaction costs. Full-year 2019 adjusted net income was $253 million ($1.08 per share) compared to $555 million ($2.32 per share) in the prior year. Per share amounts are diluted.
The company reported segment operating income of $945 million in 2019, down from $1,274 million a year ago. The decrease primarily reflects higher raw material costs, lower volume, a decrease in favorable indirect tax settlements in Brazil and unfavorable foreign currency translation, which were partially offset by improved price/mix.
Reconciliation of Non-GAAP Financial Measures
See the note at the end of this release for further explanation and reconciliation tables for Segment Operating Income and Margin; Adjusted Net Income; and Adjusted Diluted Earnings per Share, reflecting the impact of certain significant items on the 2019 and 2018 periods.
Business Segment Results
Americas’ fourth quarter 2019 sales of $2.0 billion were 4 percent lower than in the previous year, driven by lower third-party chemical sales and lower volume, partially offset by improved price/mix. Tire unit volume declined 2 percent. Replacement tire shipments increased 2 percent, led by growth in the U.S. and Brazil. Original equipment unit volume declined 18 percent.
The reduction was driven by our U.S. business, reflecting lower vehicle production, including the impact of a strike at a major OE customer, and strategic fitment choices.
Fourth quarter 2019 segment operating income of $152 million was down 15 percent compared to the prior year. The decline was more than explained by a decrease in favorable indirect tax settlements in Brazil of $21 million and the impact of a strike at a major OE customer.
Europe, Middle East and Africa
Europe, Middle East and Africa’s fourth quarter 2019 sales decreased 6 percent from last year to $1.1 billion, primarily attributable to lower volume and unfavorable foreign currency translation, partially offset by improved price/mix.
Tire unit volume decreased 4 percent. Replacement tire shipments fell 2 percent, driven by decreased industry demand, particularly in the winter tire segment. Original equipment unit volume decreased 12 percent, attributable to lower vehicle production and strategic fitment choices.
Fourth quarter 2019 segment operating income of $38 million was 49 percent lower than the prior year’s quarter, driven by reduced volume and higher conversion costs.
Asia Pacific’s fourth quarter 2019 sales decreased 1 percent to $546 million, reflecting lower sales in other tire-related businesses and unfavorable foreign currency translation.
Tire unit volume was unchanged. Replacement tire shipments decreased 3 percent, which was more than explained by lower industry demand in Japan. Original equipment unit volume rose 4 percent, driven by growth in China.
Fourth quarter 2019 segment operating income of $52 million was 4 percent lower than last year, driven by higher selling, administrative and general expenses and lower price/mix.
Disruption of Operations in China
As is the case with many other companies, Goodyear’s operations in China have been disrupted by the coronavirus. The company’s office-based associates will continue to work remotely through at least Feb. 17.
Following a nine-day closure, the Goodyear-Pulandian manufacturing plant restarted operations on a limited basis on Feb. 10 to support customers across the Asia Pacific region. It is not clear what the full impact of the coronavirus disruption will be.
At the 2020 Consumer Electronics Show, Goodyear unveiled AndGo, a digital vehicle servicing platform that combines predictive software and a trusted, national service network to enable consumer fleets to be ready to go when they are needed.
In January, Goodyear announced a new venture capital fund, Goodyear Ventures, with $100 million targeted for investments in future mobility technology over the next 10 years to accelerate its innovation efforts.
Common Stock Dividend
The company declared a quarterly dividend of 16 cents per share of common stock on Jan. 14, 2020, payable on March 2, 2020, to shareholders of record on Feb. 3, 2020. The payout represents an annual rate of 64 cents per share.
Goodyear will hold an investor conference call at 9 a.m. today. Prior to the commencement of the call, the company will post the financial and other related information that will be presented on its investor relations website: http://investor.goodyear.com.
Participating in the conference call will be Richard J. Kramer, chairman, chief executive officer and president; and Darren R. Wells, executive vice president and chief financial officer.
Investors, members of the media and other interested persons can access the conference call on the website or via telephone by calling either 800-895-3361 or 785-424-1062 before 8:55 a.m. and providing the Conference ID “Goodyear.” A taped replay will be available by calling 800-839-3011 or 402-220-7231. The replay will also remain available on the website.
Goodyear is one of the world’s largest tire companies. It employs about 63,000 people and manufactures its products in 47 facilities in 21 countries around the world. Its two Innovation Centers in Akron, Ohio, and Colmar-Berg, Luxembourg, strive to develop state-of-the-art products and services that set the technology and performance standard for the industry. www.goodyear.com/corporate