Solid Quarter For Goodyear

Goodyear Tire (GT: 13.46 -0.84 -5.87%) posted a net income of $107 million or 14 cents per share (excluding special items) for the fourth quarter of 2009 in stark contrast to the loss of $287 million or $1.18 (excluding special items) in the same quarter a year ago and the Zacks Consensus Estimate of a loss of 6 cents. The company believes lower raw material costs, improved sales volumes and cost-reduction initiatives contributed to earnings growth.
 
Sales in the quarter rose 7% to $4.4 billion. It reflected positive impacts of $276 million due to an 8% rise in tire unit volume fueled by improved global consumer tire demand and growth in emerging markets and $310 million due to favorable foreign currency translation effects.
 
Goodyear had a segment operating income of $249 million in the quarter compared to a segment operating loss of $159 million in the year-ago quarter. The segment operating income reflected a benefit of $358 million due to lower raw material costs. All the geographical tire segments, except North America, benefited from favorable foreign currency translation effects and higher tire unit volumes.
 
Segment Performance
 
Sales in the North American Tire segment fell 3% to $1.88 billion. Unit sales to original equipment manufacturers (OEMs) decreased 7%. Nevertheless, replacement tire shipments were up 2%. Due to lower sales, the segment showed an operating loss of $27 million. However, this was a $166 million improvement from the prior-year level.
 
Sales in the Europe, Middle East and Africa Tire segment elevated 11% to $1.56 billion. Unit sales to OEMs increased 15%. Meanwhile, replacement tire shipments went up 5%. Operating income in the segment improved by $157 million to $125 million compared to the year-ago level.
 
Sales in the Latin American Tire segment appreciated 25% to $508 million. OEM unit volume rose 39%. Replacement tire shipments were up 26%. Operating income in the segment shot up 65% to $81 million.
 
Sales in the Asia-Pacific Tire segment ascended 28% to $486 million. Unit sales to OEMs improved 36%. Replacement tire shipments were up 11%. Operating income in the segment improved $53 million to $70 million.
 
Annual Results
 
In 2009, Goodyear recorded a net loss of $375 million or $1.55 per share compared to a $77 million or 32 cents in 2008. The loss was broader than the Zacks Consensus Estimate of $1.12.
 
Sales in the year dampened 16% to $16.3 billion. This reflected negative impacts of $1.4 billion due to a 9.5% decline in tire unit volume in North America and Europe, $924 million due to reduction in sales in other tire-related businesses, primarily third-party chemical sales by North American Tire and $699 million due to unfavorable foreign currency translation effects.
 
Segment operating income reduced to $372 million from $804 million in 2008 due to weak industry demand.
 
Product Launches
 
Goodyear successfully launched 62 new products during the year. With this, the company has exceeded its goal of more than 50 new product launches for the year.
 
Four-point Cost Saving Plan
 
As per its Four-point Cost Saving Plan, Goodyear has met the 4-year goal of achieving $2.5 billion in savings in 2009. Further, the company has targeted to achieve gross savings of an additional $1 billion over the next three years. The company also downsized its global work force by approximately 5,700 positions, exceeding its full-year target of 5,000.
 
Financial Position
 
Goodyear had cash and cash equivalents amounting to $1.92 billion as of December 31, 2009, an increase from $1.89 billion as of December 31, 2008. Long-term debt and capital leases were $5.03 billion as of December 31, 2009. Long-term debt to capitalization ratio stood at 85%.
 
Based on the solid results, Goodyear’s stock price appreciated about 3% to $14.30 in the evening.