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Goodyear Tire & Rubber (GT)
Q2 2011 Earnings Call
July 28, 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
Gregory Fritz - Vice President of Investor Relations
Rod Lache - Deutsche Bank AG
Patrick Archambault - Goldman Sachs Group Inc.
Itay Michaeli - Citigroup Inc
Brett Hoselton - KeyBanc Capital Markets Inc.
Himanshu Patel - JP Morgan Chase & Co
John Murphy - BofA Merrill Lynch
Previous Statements by GT
» Goodyear Tire & Rubber's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Goodyear Tire & Rubber's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» The Goodyear Tire & Rubber Company Q1 2010 Earnings Call Transcript
Thank you, Christina, and good morning, everyone. Welcome to Goodyear's second quarter conference call. Joining me today are Rich Kramer, Chairman and CEO; Darren Wells, Executive Vice President and CFO. Before we get started, there a few comments I would 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 could 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 to the agenda. Rich, will provide a business overview including second quarter highlights and accomplishments. After Rich's remarks, Darren will discuss the financial results and outlook before opening the call for your questions. With that, I will now turn the call over to Rich.
Thanks, Greg, and good morning, everyone. And please join me in welcoming Greg Fritz, our new Vice President of Investor Relations. I know some of you have already been working with Greg, and we're certainly glad to have him on board. So Greg, welcome to the team.
So today, we're very pleased to report outstanding second quarter results, highlighted by record sales, a significant increase in segment operating income and the continued successful execution of our strategy. The most impressive results were delivered by our North American Tire business, which delivered earnings of $137 million, marking its most profitable quarter since 1998.
In total, all of our businesses continued to make solid progress in achieving price/mix improvement through innovative product offerings in targeted market segments. This is consistent with the strategy we shared with you earlier in the year.
In April, we reiterated our belief that our strategies and objectives were the right ones, and our first quarter results provided evidence of progress. We are very pleased that our second quarter results indicate that we are executing our plan and staying on pace to hit our targets.
Now as I usually do, I'll cover a few topics before turning the call over to Darren and then take in your questions. First, I will call attention to some accomplishments that were important to Goodyear's outstanding second quarter results, then I'll share my thoughts on the strong performance we saw in our North American Tire business and try to put it in context. And finally, I'll provide a perspective on the second half of the year and our longer-term outlook, touching on the challenges and opportunities that lie ahead.
The first accomplishment I'd like to highlight in Q2 is our top line performance. We achieved total sales of $5.6 billion, the best quarterly total in our company's history. Likewise, 3 of our 4 regions achieved record second quarter sales.
The second accomplishment is our execution on price and mix, which more than offset significantly higher raw material costs. As we've previously discussed and demonstrated, price/mix improvement has been an effective and necessary response to unrelenting raw material cost headwinds. All 4 of our regions fully offset raw material cost increases in the quarter. And I'll make further comments about price/mix performance in a few moments when I discuss our North American business.
The third accomplishment is maintaining our focus on pursuing sales in targeted market segments. Our revenue per tire grew 18% from a year ago. While the industry volumes were weaker overall, there remained strong demand for our premium innovative products in both emerging and developed regions.
Additionally, we are continuing our focus on operational excellence. Across our global footprint, we are improving our ability to make more of the right tires, leading to a richer product mix and increased customer service levels.
Our efficiency in eliminating low-value tires and moving products from Union City to our other plants facilitated closure of that factory ahead of schedule. This action is also consistent with our plan to reduce high-cost capacity, which we detailed for you in previous calls.
Our new products also were critical to further accomplishments in the quarter. In Latin America, high-technology Fuel Max and Aquamax tires were launched across the region. I know it's been an extremely hot summer for many of us. Europe is already preparing for the winter driving season. Goodyear and Dunlop will continue their leadership in winter tires, with more new products being introduced this year to build on the existing portfolio of award-winning products.
Our European business also delivered significant year-over-year and quarter-over-quarter improvement driven by successful price/mix performance. By keeping our focus on targeted summer tire market segments and getting off to a fast start in winter tire sales, we were not significantly affected by softness in the southern European markets.
We continue to see strong growth for our innovative products in any of targeted market segments, including commercial truck, and we'll keep adding to our portfolio of award-winning tires.