Goodyear refinancing charges lead to $11M 1Q loss

AP News
Posted: Apr 27, 2012 6:08 PM
Goodyear refinancing charges lead to $11M 1Q loss

Goodyear Tire & Rubber Co. lost $11 million in its first quarter as refinancing charges more than offset the impact of higher revenue.

The biggest North American tire maker said Friday that it expects the global tire industry will grow at a slower pace than it previously forecast and expects to sell 2 percent fewer tires this year.

Its shares fell 61 cents, or 5.1 percent, to close at $11.32 Friday. Its shares are down 40 percent from their 52-week high of $18.83 last May. They traded as low as $8.53 in October.

Goodyear said the loss was equivalent to 5 cents per share for the three months ended March 31, compared with net income of $103 million, or 42 cents a share, a year ago.

Excluding charges, Goodyear earned 34 cents per share, topping Wall Street estimates of 7 cents per share.

Revenue rose 2 percent to $5.5 billion. Analysts expected $5.83 billion.

In its core North America tire market, sales increased 8 percent to $2.5 billion over the same period in 2011 despite an 8 percent decline in the number of tires sold.

Operating income doubled to $80 million and stronger sales of high-end tires offset $184 million in higher raw material costs.

For the full year in North America, Goodyear expects the consumer replacement market to decline between 1 percent and 3 percent.

In its other regions, sales increased in the quarter 4.7 percent in Asia-Pacific but dipped 1.1 percent in Europe-Middle East-Africa and 10.9 percent in Latin America.

The number of tires sold globally by Goodyear declined 8 percent in the quarter, hurt by lower demand amid weak economic conditions and warm winter weather.

In a conference call with analysts, Chairman and CEO Richard Kramer said the company would pursue cost controls amid a volatile economic environment, particularly in Europe.

"We remain optimistic over the long term as we believe volumes, particularly in our mature markets, will ultimately rebound as we continue to see pent-up consumer demand driven by weak economies, high unemployment and general consumer cautiousness," he said.

Kramer said the company expects continuing hikes in raw material costs _ 12 percent in the second quarter over April-June 2011 and up 9 percent in 2012 over last year.

Goodyear said the refinancing allowed it to redeem $650 million in senior notes at an interest rate of 10.5 percent while issuing $700 million at 7 percent.