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Goodyear Tire & Rubber's (GT) CEO Rich Kramer on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 27, 2016, 9:00 am ET

Executives

Christina Zamarro - VP, IR

Rich Kramer - Chairman & CEO

Laura Thompson - EVP & CFO

Analysts

Justin Barell - Citi

David Tamberrino - Goldman Sachs

Ryan Brinkman - JPMorgan

Pat Nolan - Deutsche Bank

Emmanuel Rosner - CLSA

Operator

Good morning. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to The Goodyear Tire & Rubber Company First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you.

I would now like to hand the program over to Christina Zamarro, Goodyear's Vice President, Investor Relations. Please go ahead.

Christina Zamarro

Thank you, Keith, and thank you everyone for joining us for Goodyear's first quarter 2016 earnings call. Joining me today are Rich Kramer, Chairman and Chief Executive Officer; and Laura Thompson, Executive Vice President and Chief Financial Officer.

Before we get started, there are a few items we need to cover. To begin, the supporting slide presentation for today's call can be found on our website at investor.goodyear.com. And a replay of this call will be available later today. Replay instructions were included in our earnings release issued earlier this morning.

If I could now draw your attention to the Safe Harbor statement on Slide two. I would like to remind participants on today's call that our presentation includes some forward-looking statements about Goodyear's future performance. Actual results could differ materially from those suggested by our comments today. The most significant factors that could affect future results are outlined in Goodyear's filings with the SEC and in our earnings release. The company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

Our financial results are presented on a GAAP basis and, in some cases, a non-GAAP basis. The non-GAAP financial measures discussed on our call are reconciled to the U.S. GAAP equivalent as part of the Appendix to the slide presentation.

And with that, I will now turn the call over to Rich.

Rich Kramer

Thank you, Christina, and good morning, everyone. I’ll begin today’s call by providing a summary of our first quarter highlights in each of our three regions. Then with an eye on the next stage in our longer-term plan, I’ll share an update to our strategy roadmap which has been the cornerstone of how we operate our business. Laura will follow with a financial review and our 2016 outlook.

We delivered strong first quarter performance highlighted by record segment operating income of $419 million, that’s an increase of 14% in our core segment operating income which excludes Venezuela from our 2015 base. On that same basis, our volumes grew 3% in the quarter. Demand for our premium branded high-value added products is robust and our product mix continues to grow richer. Our results are not only consistent with our expectations for the quarter but also with our long-term strategy and reflect the continued strong execution of our teams.

As you know, this is our first quarter of results for combined Americas business and I’m extremely pleased with the team’s performance. While we’ll talk in some detail about how the U.S. and certain other countries are performing as part of our quarterly updates, I want to reinforce the long-term benefits we anticipate in managing the business internally as one consolidated unit.

After adjusting for the loss of Venezuela’s income, Americas segment operating income grew 15% in the quarter driven by strong demand for our premium branded HVA products. In the U.S. favorable demand is being created by lower fuel prices, higher miles driven and growing consumer OE needs particularly in SUV and light truck. We are growing our OE profitability by winning shipments on many of the most popular vehicles and responding to the increasing complexity of OEM requirements. Our success in OE gives us a favorable position in the subsequent replacement market.