Goodyear Tire & Rubber (GT) Q1 2012 Earnings Call April 27, 2012 8:30 am ET Executives Gregory A. Fritz - Vice President of Investor Relations Richard J. Kramer - Chairman of The Board, Chief Executive Officer and President Darren R. Wells - Chief Financial Officer and Executive Vice President Analysts Itay Michaeli - Citigroup Inc, Research Division Patrick Nolan - Deutsche Bank AG, Research Division Elizabeth Lane - BofA Merrill Lynch, Research Division Ravi Shanker - Morgan Stanley, Research Division Saul Ludwig - Northcoast Research Brett D. Hoselton - KeyBanc Capital Markets Inc., Research Division Presentation Operator
Turning now to the agenda. On today's call, Rich will provide a business overview, including perspective on our first quarter results and our progress and Goodyear's key strategic objectives. After Rich's remarks, Darren will discuss the financial results and outlook before opening the call to your questions. With that, I would like to turn the call over to Rich.Richard J. Kramer Great. Thanks, Greg, and good morning, everyone. For more than a year, we've discussed Goodyear's strategy roadmap and our destination of creating sustainable value. But during that time, we've seen significant changes and continued volatility in both the business environment and the economic outlook. But despite these changes, we've remained focused on our strategies that we laid out, building towards our destination. We believe that by executing our strategies, we will be competitively advantaged in an industry that is being shaped by the 7 MegaTrends that we've discussed with you previously. Our strategy roadmap journey aligns not only with where the global tire industry is now but more importantly, where it's headed. We continued on that journey in the first quarter of 2012. Our results confirm that we are continuing to make progress on the path to our 2013 target of $1.6 billion in segment operating income. Over the first 3 months of the year, we recorded $292 million in segment operating income and a record $5.5 billion in sales. We achieved these results despite weaker industry volumes and continued high raw material costs. We were once again able to more than offset raw material increases with price mix as our overall revenue per tire increased 16% versus a year ago. And we continue to focus on, and win in, targeted market segments, growing volume and share in many of these profitable segments while selling fewer, low value and private label tires.
Now to reiterate my comments from our Q4 call, we are not running our business for one good quarter or one good year, but rather with the consistencies and stability over the long-term to withstand the inevitable ups and downs of the tire industry. The progress in our North America business provides us with a great example of how our strategy can change the capability of our business, those that's particularly relevant in North America, as returning that business to consistent profitability is one of our key strategies. In the first quarter, North American tire delivered segment operating income of $80 million, double its total for the first quarter of 2011 and sales increased 8% to $2.5 billion, a first quarter record. This performance was achieved even though total tire unit volume was down 8%. So with 25% higher raw material costs and an 8% lower volume, North America doubled its earnings. This performance was enabled by a consistent execution of the how-to's from our strategy roadmap.Now let me elaborate starting with the first one, and that's market-backed innovation. Our Goodyear Assurance family of tires is the foundation of a clear, simplified product portfolio. Assurance TripleTred, ComforTred and Fuel Max embody market-backed innovation and are the most-demanded Goodyear products in North America. We have helped generate, capture and fulfill that consumer demand with our new and growing tire and service network, which is supported by proprietary online tools. Our digital marketing capabilities now acts as a bridge between shoppers and our network dealers. Our innovation leadership applies not only to innovative products, but also to processes and tools that make it easier for consumers to choose Goodyear. At the same time, those processes and tools support profitable growth for our customers and for Goodyear. It's a winning formula and certainly, a competitive advantage for both of us. Read the rest of this transcript for free on seekingalpha.com