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The Goodyear Tire & Rubber Company Reports Operating Results (10-Q)

July 29, 2010 | About:
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The Goodyear Tire & Rubber Company (GT) filed Quarterly Report for the period ended 2010-06-30.

The Goodyear Tire & Rubber Company has a market cap of $2.89 billion; its shares were traded at around $11.95 with and P/S ratio of 0.2. GT is in the portfolios of Eric Mindich of Eton Park Capital Management, L.P., David Tepper of APPALOOSA MANAGEMENT LP, George Soros of Soros Fund Management LLC, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, John Buckingham of Al Frank Asset Management, Inc., Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC, Charles Brandes of Brandes Investment.
This is the annual revenues and earnings per share of GT over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of GT.


Highlight of Business Operations:

Cost of goods sold (“CGS”) in the second quarter of 2010 was $3,686 million, increasing $333 million, or 9.9%, from $3,353 million in the second quarter of 2009. CGS increased due to higher tire volume of $256 million, higher costs in other tire-related businesses of $148 million, primarily in North American Tire, increased raw material costs of $54 million, and product mix-related manufacturing cost increases of $22 million. CGS benefited from lower conversion costs of $107 million, savings from rationalization plans of approximately $34 million, and favorable foreign currency translation of $18 million, primarily in EMEA. The lower conversion costs resulted from lower under-absorbed fixed overhead costs of approximately $71 million due to higher production volume and lower pension expenses of $20 million. The second quarter of 2010 also included asset write-offs and accelerated depreciation of $6 million ($5 million after-tax or $0.02 per share), compared to $12 million ($12 million after-tax or $0.05 per share) in the 2009 period. CGS was 81.4% of sales in the second quarter of 2010, compared to 85.0% in the second quarter of 2009.

Other Expense in the second quarter of 2010 was $7 million, decreasing $25 million from $32 million in the second quarter of 2009. Net gains on asset sales were $8 million ($8 million after-tax or $0.03 per share) in the second quarter of 2010 compared to net losses on asset sales of $41 million ($40 million after-tax or $0.17 per share) in the 2009 period, a favorable change of $49 million. Net gains in the second quarter of 2010 related primarily to the recognition of a deferred gain from the sale of a warehouse in Guatemala in 2008. Net losses in the second quarter of 2009 were due primarily to the sale of certain of our properties in Akron, Ohio that comprise our current headquarters to IRG in connection with the development of a proposed new headquarters in Akron, Ohio. Foreign currency exchange net gains (losses) were a $12

CGS in the first six months of 2010 was $7,142 million, increasing $570 million, or 8.7%, from $6,572 million in the first six months of 2009. CGS increased due to higher tire volume of $595 million, higher costs in other tire-related businesses of $253 million, primarily in North American Tire, and foreign currency translation of $167 million, primarily in Asia Pacific Tire and Latin American Tire. CGS benefited from lower raw material costs of $229 million, decreased conversion costs of $143 million, savings from rationalization plans of approximately $64 million, and product mix-related manufacturing cost decreases of $3 million. The lower conversion costs were caused primarily by lower under-absorbed fixed overhead costs of approximately $138 million due to higher production volume partially offset by increased pension expenses of $23 million in North American Tire. The first six months of 2010 also included asset write-offs and accelerated depreciation of $9 million ($7 million after-tax or $0.03 per share), compared to $22 million ($22 million after-tax or $0.09 per share) in the 2009 period. CGS was 81.2% of sales in the first six months of 2010, compared to 87.9% in the first six months of 2009.

Operating income in the second quarter of 2010 was $16 million, improving $107 million from a loss of $91 million in the second quarter of 2009. Operating income improved due primarily to lower conversion costs of $55 million, improved price and product mix of $36 million while raw material costs remained flat, higher operating income from third-party sales of chemical products and other tire-related businesses of $16 million, and higher tire volume of $14 million partially offset by increased general and product liability expense of $20 million. The lower conversion costs were driven by lower under-absorbed fixed overhead costs of approximately $17 million due to higher production volume and decreased pension expense of $21 million. Conversion costs and SAG expenses included savings from rationalization plans of $22 million and $1 million, respectively. The increase in general and product liability expense was due primarily to an unexpected, unfavorable judgment involving one claim in which an appellate court affirmed a trial court order that prohibited us from presenting evidence with respect to our liability for that claim.

Operating income in the first six months of 2010 was $2 million, improving $282 million from a loss of $280 million in the first six months of 2009. Operating income improved due primarily to decreased raw material costs of $133 million, improved price and product mix of $50 million, lower conversion costs of $62 million, higher operating income from third-party sales of chemical products and other tire-related businesses of $32 million, and higher tire volume of $20 million, which were partially offset by increased general and product liability expense of $21 million. The lower conversion costs were driven by lower under-absorbed fixed overhead costs of approximately $50 million due to higher production volume which were partially offset by increased pension expense of $23 million. Conversion costs and SAG expenses included savings from rationalization plans of $41 million and $4 million, respectively.

Operating income in the second quarter of 2010 was $73 million, increasing $88 million from a loss of $15 million in the second quarter of 2009. Operating income increased due primarily to lower conversion costs of $58 million, improved price and product mix of $23 million which more than offset increased raw materials of $3 million, and higher tire volume of $20 million. These were partially offset by an increase in SAG expenses of $11 million due primarily to increased advertising expenses of $7 million. Conversion costs included lower under-absorbed fixed overhead costs of approximately $36 million due to higher production volume. Conversion costs and SAG expenses included savings from rationalization plans of $5 million and $3 million, respectively.

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