The Goodyear Tire & Rubber Company (NASDAQ:GT) Q4 2017 Earnings Conference Call - Final Transcript

Feb 08, 2018 • 08:30 am ET

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The Goodyear Tire & Rubber Company (NASDAQ:GT) Q4 2017 Earnings Conference Call - Final Transcript

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Presentation
Executive
Richard Krame

full year basis, we delivered more than $1.5 billion in segment operating income and cash flow from operating activities of $1.2 billion.

Looking ahead, I continue to be optimistic about the opportunities for growth in our markets. Our strategy is designed to take advantage of the long-term trends shaping our industry, particularly in the larger rim size segments of the market, which we define as greater than or equal to 17-inches. This segment is growing in multiple to the total industry. Our strategy and our strengths focus on the increasing profit pool in that part of the market that is simultaneously growing and mixing up. This is where Goodyear can add value with our technology, our brand, our aligned retail and distribution network and all of the capabilities that we bring to bear for the market.

The combination of these elements drives value for our customers and consumers and is where Goodyear continues to demonstrate its competitive advantage. We have executed against that strategy and we have positioned the Company in the right way and for the long-term. Over time, we have reshaped our business and we have rebuilt momentum in challenging environments. The future will be no different and my confidence remains undeterred. We feel very positive about the progress in our business during the fourth quarter and we remain confident in our ability to build on that momentum in the year ahead.

Our strategy is clear and unwavering and despite challenges in our markets in 2017 including raw material costs, we believe we are positioned to generate significant increases in segment operating income and cash flow over the long-term.

Now with that, I'd like to turn the call over to Laura to walk through the fourth quarter results.

Executive
Laura Thompson

Thank you, Rich, and good morning everyone. Turning to the income statement on Slide 4, our fourth quarter unit volume was up 2% year-over-year. Strong growth and consumer replacement driven by the U.S. and EMEA more than offset a 1% decline at OE. Our fourth quarter sales of $4.1 billion were up 9%, driven by a 5% improvement in price mix and the benefit of increased volume. Our gross margin was 24% and segment operating margin was 10%.

Our fourth quarter earnings per share on a diluted basis was a net loss of $0.39. Our results were influenced by certain significant items including a one-time non-cash charge that was driven by the revaluation of our existing U.S. deferred tax assets to the new lower tax rate. After adjustments, our earnings per share was $0.99.

The step chart on Slide 5 walks fourth quarter 2016 segment operating income to fourth quarter 2017. The positive impact of higher volume was $19 million and unfavorable overhead absorption was $33 million. Increased raw material cost of $194 million more than offset improved price mix of $115 million for a net $79 million negative impact. Net cost saving actions were $20 million and foreign currency translation was a tailwind of $13 million.

Turning to the