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The Goodyear Tire & Rubber (GT)
Q4 2013 Earnings Call
February 13, 2014 9:00 am ET
Thomas Kaczynski - Vice President of Investor Relations and Treasurer
Richard J. Kramer - Chairman, Chief Executive Officer and President
Laura K. Thompson - Chief Financial Officer and Executive Vice President
Itay Michaeli - Citigroup Inc, Research Division
Rod Lache - Deutsche Bank AG, Research Division
Patrick Archambault - Goldman Sachs Group Inc., Research Division
Emmanuel Rosner - CLSA Limited, Research Division
Previous Statements by GT
» Goodyear Tire & Rubber Co. Discusses Q4 2013 Results (Webcast)
» The Goodyear Tire & Rubber Management Discusses Q3 2013 Results - Earnings Call Transcript
» The Goodyear Tire & Rubber Company's CEO Hosts 2013 Investor Day Conference (Transcript)
Thank you, Tony, and good morning, everyone. Welcome to Goodyear's fourth quarter 2013 conference call. Joining me today are Rich Kramer, Chairman and Chief Executive Officer; and Laura Thompson, Executive Vice President and Chief Financial Officer.
On today's call, Rich and Laura will discuss our fourth quarter results, along with the outlook for 2014. However, before we get started, there are a 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, and a replay of this call will be available later today. Replay instructions were included in our earnings release issued earlier this morning.
If I could now draw your attention to the Safe Harbor statement on Slide 2. I'd like to remind you that 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 on the call are reconciled to the U.S. GAAP equivalent as part of the appendix to the slide presentation.
And with that, I'll now turn the call over to Rich.
Richard J. Kramer
Great. Thanks, Tom, and good morning, everyone. Before we get started, I'd like to take a moment to welcome Laura Thompson to her first conference call as CFO. A few of you may know her from her role as Investor Relations Director about 12 years ago, and I'm sure some of you have had a chance to meet or talk with her over the past 2 months. Laura's made a seamless transition into the CFO role, and I have complete confidence in her ability to help us execute our strategic plan and keep us on our current path. So officially, welcome, Laura.
Now this morning, I'll provide a few highlights of the quarter and discuss some key actions we've taken already in 2014. Then I'll touch on highlights from our 4 businesses before turning the call over to Laura to review the financials in detail and review our outlook.
As you saw in our news release this morning, the fourth quarter was an outstanding conclusion to our record-setting year. Our segment operating income in the quarter was $419 million, up 54% from last year. For the full year, segment operating income was up 27% to $1.6 billion, exceeding our October guidance and the highest ever achieved in Goodyear's 115 years of existence.
It's also the third consecutive year we've delivered more than $1.2 billion in segment operating income, another first in our history. This outstanding performance contributed to free cash flow from operations that reached $1 billion for 2013.
Now as pleased as I am to report these results, I believe it's more important to view this as evidence of the soundness of our strategy, our ability to execute against that strategy and outstanding performance by our teams across the globe.
Slide 4 summarizes the progress we've made executing our strategy, resulting in steady segment operating income growth and positioning us well for that growth to continue. Our team has consistently met our goals, doing what we say we're going to do. Needless to say, I'm pleased and proud of the men and women of Goodyear for delivering this level of performance. And as I said many times, we're not measuring success by the quarter or the year, but by continued progress toward our destination of creating sustainable economic value. That theme has not and will not change.
If you look at our strategy roadmap on Slide 5, you'll see we've highlighted our pension challenges. In my 14 years at Goodyear, our legacy obligations has been a constant source of underlying volatility to the business. In 2008, we addressed our retiree medical obligation through the innovative VEBA structure. Now I'm very happy to report that within the past 3 weeks, we have fully funded our largest U.S. hourly pension plans. By doing so, we've paid off our biggest remaining pension obligation and successfully executed a plan that we previously discussed.
Today, the strength of our business is validated by how we met this responsibility. Rather than having the access to debt markets to fulfill our pension obligation, we funded the plans with cash. Our strong cash flow performance in 2013 and our ample liquidity enabled us to fully fund our U.S. hourly pension using 100% cash generated from operations.
In addition, this action drives long-term shareholder value and is consistent with the balanced capital allocation plan we unveiled in September. This is a major milestone in Goodyear's 115-year history. For more than a decade, we've been dealing with the volatility associated with legacy obligations. Even so, we've always maintained our commitment to meet these obligations. Now we're pleased to have fulfilled that responsibility.