Goodyear Tire & Rubber (GT)
Q1 2011 Earnings Call
April 29, 2011 10:00 am ET
Richard Kramer - Chairman of the Board, Chief Executive Officer, President and Chief Operating Officer
Darren Wells - Chief Financial Officer and Executive Vice President
Patrick Stobb - Director of Investor Relations
Rod Lache - Deutsche Bank AG
Patrick Archambault - Goldman Sachs Group Inc.
Itay Michaeli - Citigroup Inc
Ravi Shanker - Morgan Stanley
Himanshu Patel - JP Morgan Chase & Co
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Good morning, everyone, and welcome to our first quarter conference call. With me today are Rich Kramer, Chairman and CEO; and Darren Wells, Executive Vice President and CFO. Before we get started, there are a few items I'd like to cover.
To begin, the webcast of this morning's discussion and the supporting slide presentation can be found on our website at investor.goodyear.com.
Additionally, a replay of this call will be accessible later today. Replay instructions were included in our earnings release issued earlier this morning.
If I can now direct your attention to the Safe Harbor statement on Slide 2 of the presentation. Our discussion this morning may contain forward-looking statements based on our current expectations and assumptions that are subject to risks and uncertainties.
These risks and uncertainties which can cause our actual results to differ materially are outlined in Goodyear’s filings with the SEC and in the news release we issued this morning.
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.
Turning now to the agenda. On today's call, Rich will provide a business review including first quarter highlights. After Rich's remarks, Darren will discuss the financial results and outlook before opening the call to your questions. That finishes my comments. I'll now turn the call over to Rich.
Thank you, Pat, and good morning, everyone. Our strong first quarter results provide further evidence that our strategies are working, we are executing our plan and we are continuing our positive momentum. But before I discuss our first quarter results, which I am very pleased with, I'd like to go back 5 weeks ago when we met with you in New York City. At that time, we outlined Goodyear's strategic roadmap through 2013, a plan that reflects confidence in our ability to take advantage of the opportunities we see in the tire industry.
During my remarks today, you will hear many of the themes we discussed at the investor meeting as our progress in the first quarter is consistent with the strategies and objectives we presented to you. These strategies not only position Goodyear to hit our targets, but position us for success beyond 2013.
I'd like to spend my time today focusing on 3 areas: first, I will highlight our outstanding first quarter results and provide context for how they were achieved; then, I'll discuss specific areas of performance, focusing on our North America Tire business; and finally, I will provide our perspective on a couple of important topics that we believe will affect our industry for the rest of the year.
At the New York meeting, we shared with you the details of Goodyear's plan for reaching our target of $1.6 billion of segment operating income in 2013. We discussed the MegaTrends, shaping the industry over the next 5 to 10 years and how they offer distinct advantages for Goodyear. And members of our team provided evidence that we are on pace to hit our key metrics.
As we share our first quarter results with you this morning, I believe you'll see further confirmation that we are on the right path toward not only the 2013 target, but also, our long-term objective of creating sustainable economic value.
Our total sales in the first quarter were $5.4 billion, the highest achieved by our company in any quarter, ever. Sales in all 4 of our regions hit record levels. Total segment operating income was $327 million, an $87 million improvement over our 2010 first quarter. And our first quarter 2011 results were the highest quarterly performance since mid-2008 before the great recession took hold. And now as strong those results are, I'm even more pleased with how we earned them.
We saw continued profitability in our North American Tire unit. Revenue per tire increased by 15%. Price/mix nearly offset a 26% increase in raw material costs. We gained share in our key targeted market segments. We achieved our targeted overhead absorption level with increased production, including our growing commercial business.
Productivity gains in the quarter supported our supply chain and fill rate progress, particularly in our North America business where producing more of the right tires enabled our volume growth and share gains in our profitable branded business. Our new product engine continued to deliver more relevant innovative new tires around the globe. We delivered on our initiative to achieve our expected cost savings. And finally, we made significant progress toward balance sheet improvements through success in executing the preferred stock offering in March in both of our European credit facility refinancing and notes offering in April.