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Goodyear Tire & Rubber (GT)
Q1 2013 Earnings Call
April 26, 2013 9:00 am ET
Gregory A. Fritz - Vice President of Investor Relations
Richard J. Kramer - Chairman, Chief Executive Officer and President
Darren R. Wells - Chief Financial Officer and Executive Vice President
Rod Lache - Deutsche Bank AG, Research Division
Itay Michaeli - Citigroup Inc, Research Division
Aditya Oberoi - Goldman Sachs Group Inc., Research Division
John M. Healy - Northcoast Research
John Murphy - BofA Merrill Lynch, Research Division
Ravi Shanker - Morgan Stanley, Research Division
Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division
Previous Statements by GT
» Goodyear Tire & Rubber Management Discusses Q4 2012 Results - Earnings Call Transcript
» Goodyear Tire & Rubber Management Discusses Q3 2012 Results - Earnings Call Transcript
» Goodyear Tire & Rubber Management Discusses Q2 2012 Results - Earnings Call Transcript
Gregory A. Fritz
Thank you, Tony, and good morning, everyone. Welcome to Goodyear's first quarter conference call. Joining me today are Rich Kramer, Chairman and Chief Executive Officer; and Darren Wells, Executive Vice President and Chief Financial Officer. On today's call, Rich and Darren will provide perspective on our results and outlook for the remainder of the year.
Before we get started, there are few items I need to cover. To begin, the supporting slide presentation for today's call can be found on our website at investor.goodyear.com. A replay of this call will be available later today. Replay instructions are included in our earnings release issued earlier this morning.
If I could now draw your attention to the Safe Harbor statement on Slide 2. Today's presentation includes some forward-looking statements about Goodyear's future performance. Actual results could differ materially from those suggested by our comments today. The most significant factors that could affect future results are outlined in Goodyear's filings with the SEC and in our earnings release. The company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
The financial results presented are on a GAAP basis, and in some cases, a non-GAAP basis. The non-GAAP financial measures discussed in the call are reconciled to the U.S. GAAP equivalent as part of the Appendix to the slide presentation.
With that, I will now turn the call over to Rich.
Richard J. Kramer
Great. Thanks, Greg, and good morning, everyone. This morning, I'd like to review a few of the highlights of our solid performance in the first quarter, touch on some of the actions we have taken to respond to continued challenges in Europe and provide an outlook for our business and the global tire industry for the remainder of the year.
I'm very pleased with our overall earnings results, our strong momentum in North America and the execution of our strategy roadmap, which, as you know, serves as our business playbook. Despite a tough industry environment, particularly in North America and Europe, we continued to achieve earnings improvement. Overall, our segment operating income for the first quarter was $302 million, up 3% from a ago, and earnings were up in 3 of our 4 business units.
This performance reflects favorable product and brand mix, improved operational efficiency, a disciplined focus on targeted market segments and the benefits of our investments in both innovative products and in upgrading our manufacturing footprint to build those products.
North America earned a first quarter record of $127 million, a 59% improvement over last year's quarter. This exceptional performance was accomplished in a continuing weak volume environment in which unit sales decreased 6%. However, consistent with our key how-to of targeting profitable market segments, we sold a richer mix of branded products, and we continued to manage our costs in line with the weak volume environment we are experiencing. Now in addition, the North America team's disciplined approach to working capital is helping us improve our cash generation.
This marks the 15th straight quarter of year-over-year earnings improvement in North America. Two years ago, returning North America to profitability was our top priority. We've accomplished this. Now with the business model changes we've made, North America is not only solidly profitable in a weak industry, but is on a path to further grow earnings and capitalize on opportunities when industry volume growth returns.
Asia Pacific delivered another strong quarter as well. Its segment operating income of $84 million, a first quarter record, is a 25% increase over last year's quarter. In China, we are seeing strong return on our investments in expanding our capacity as Goodyear's business continues to grow.
Product mix in consumer tires is on an upward trajectory, and our commercial truck business is in the midst of launching 7 new SKUs to meet the needs of our growing customer base. We see tremendous upside as we enter the truck market in China, enabled by our new manufacturing plants in Pulandian.
Asia's results continued to be tempered by a sluggish economy and industry in Australia. While our business in Australia has traditionally been a big part of our Asia earnings, the extended industry weakness there has resulted in a significantly reduced contribution. Our team is starting to see the results of its plan to strengthen our competitive position and better serve our customers in this key market.
The third bright spot was our Latin America business. Segment operating income increased to $60 million, a 9% improvement despite a $16 million earnings decline in Venezuela, where political instability and currency devaluation continues to contribute to a volatile economic environment in that country.