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Goodyear sets sales record for fourth quarter, full year

Goodyear sets sales record for fourth quarter, full year

The Messenger 02.18.08

Goodyear Tire & Rubber Company has reported record sales for the fourth quarter and the full year of 2007.
Goodyear’s fourth quarter 2007 sales were $5.2 billion, an 11 percent increase compared with the 2006 quarter, offsetting lower volumes with higher prices and a richer product mix.
The company estimates that a 12-week strike at its North American facilities in 2006 reduced fourth quarter 2006 sales by $318 million.
Improved pricing and product mix drove revenue per tire up 10 percent over the 2006 quarter. Lower volumes reflect weak winter tire sale demand in Europe and the company’s exit from certain segments of the private label tire business in North America along with weak conditions in several key markets.
“Our fourth quarter results show significant gains as we drive sales of our higher-margin premium product lines,” said Robert J. Keegan, chairman and chief executive officer.
“This is especially true in our emerging markets businesses in Eastern Europe, Asia and Latin America. In aggregate, these three businesses grew sales 20 percent and segment operating income 41 percent in the quarter,” he said.
“Excluding the impact of the strike, North American Tire’s focus on innovative new products helped it achieve its highest full-year segment operating income since 2000,” he said. “Our new product engine will provide additional growth opportunities in 2008 and beyond.”
Goodyear made further progress during the fourth quarter on its plan to achieve $1.8 billion to $2 billion in gross cost savings by the end of 2009.
“We have now achieved more than $1 billion in savings in 2006 and 2007 and clearly remain on target to reach our four-year goal,” Keegan said.
“During 2007, we also made substantial progress on improving our balance sheet with net debt decreasing more than $2 billion,” he said. “We remain on track to achieve our next stage financial metrics, which include an 8 percent segment operating income return on sales globally, a 5 percent segment operating income return on sales in North America and a target of 2.5 times debt-to-EBITDA.”
Fourth quarter segment operating income was $313 million in 2007, compared to a segment operating loss of $86 million in the strike-impacted 2006 period.
Segment operating income benefited from improved pricing and product mix of $119 million in the fourth quarter of 2007, which more than offset increased raw material costs of $8 million.
Favorable foreign currency translation positively impacted sales by $315 million and segment operating income by $45 million in the quarter.
Gross margin was 19.4 percent for the 2007 quarter compared to 11.3 percent in last year’s strike-impacted quarter.
Fourth quarter 2007 income from continuing operations was $61 million (27 cents per share), compared to a loss of $310 million ($1.74 per share) in the strike-impacted fourth quarter of 2006.
Including discontinued operations, Goodyear had fourth quarter net income of $52 million (23 cents per share), compared to a net loss of $358 million ($2.02 per share) last year. All per share amounts are diluted.
The 2007 fourth quarter included $26 million (11 cents per share) in after-tax rationalization and accelerated depreciation, after-tax losses on asset sales of $19 million (8 cents per share), after-tax financing fees of $17 million (7 cents per share) related to debt conversion and reduced tax expense of $11 million (4 cents per share) due to a tax law change.
The 2006 fourth quarter included the strike impact of $313 million ($1.77 per share); $184 million ($1.03 per share) in after-tax charges for rationalization, accelerated depreciation and asset write-offs principally related to plant closures; and a gain of $153 million (86 cents per share) related to the favorable resolution of a tax contingency.
North American Tire
North American Tire’s fourth quarter 2007 sales increased 10 percent over the strike-impacted 2006 period. The company estimates the USW strike reduced sales in the 2006 quarter by $318 million.
In addition, 2007 fourth quarter sales reflect the company’s exit from certain segments of the private label tire market and continued weakness in both the replacement and original equipment markets. This was offset by improved pricing and product mix as well as market share gains in Goodyear and Dunlop brand tires.
Fourth quarter segment operating income was significantly improved compared to the strike-impacted 2006 period. The company estimates the strike reduced segment operating income by $313 million in the 2006 quarter.

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