Breaking Down Rich Kramer’s Speech at the Goodyear Shareholders Meeting

Bob Ulrich
Posted on April 14, 2016

Chairman and CEO Rich Kramer’s message to Goodyear Tire & Rubber Co. shareholders on April 11 was very positive. Phrases like “record levels of performance,” “positive momentum,” and “well-positioned to grow” were what the shareholders, board members (13 were re-elected) and employees in attendance wanted to hear.

Feel-good statements are hot right now because the U.S. presidential election is in full swing, with candidates saying things that don’t always stand up under scrutiny.

In the spirit of transparency, here is my breakdown of what Kramer, who is also president of Goodyear, said by the numbers.

1. “Our company delivered record levels of performance in 2015.” Net income and net sales were down last year compared to 2014 (more on that later), but segment operating income passed $2 billion for the first time.

It was the third year in a row that segment operating income was a record:

* $1.58 billion in 2013, up 26.6%.

* $1.71 billion in 2014, up 8.3%.

* $2.02 billion in 2015, up 18.1%.

In the North America business unit, 2015 operating income was $1.1 billion, also a record and a 38% increase over 2014’s record total.

I would say that constitutes “record levels of performance.”

2. “I believe we’re clearly on the right path, and we expect our positive momentum to continue in 2016.” In the last three years, Goodyear has recorded net sales of $19.5 billion (2013), $18.1 billion (2014) and $16.4 billion (2015). The decrease is not surprising given the company’s focus on premium market segments and mantra of profitability-over-volume.

More importantly, it posted net income of $2.1 billion, $600 million and nearly $307 million, respectively, over the same time span.

Is a decrease in net income (not counting one-time or extraordinary charges) over the last three years momentum? Sure. Profit, which fluctuates anyway, is always good (Goodyear hasn’t lost money in a fiscal year since 2010), and combined with positive operating income, allows Goodyear, as Kramer said to the shareholders, “to continue to invest in our business for future growth.”

3. “Our results… have allowed us to strengthen our balance sheet while at the same time returning capital to shareholders through dividends and share repurchases.” Goodyear’s focus on creating shareholder value over the long term is measurable beyond the balance sheet, which, as noted earlier, is clearly positive.

The company has declared a quarterly dividend for 18 consecutive quarters, including the 7 cents per share dividend on common stock payable June 1, 2016. For 2015, the payout represents an annual rate of 28 cents per share. Own 1,000 shares, make $280.

In 2013, Goodyear paid out $12 million in dividends. That rose to $60 million in 2014 and $68 million in 2015.

The stock itself has been a steady performer for the shareholders. In the last three years, it has increased 37%, from $23.85 to $32.67 a share (at the beginning of 2012, it was $14.57 a share). Goodyear ranked 30th in stock price performance among all S&P 500 companies over the three-year period that ended on Dec. 31, 2015.

I would guess almost all the shareholders are pleased with the results.

So Kramer can back up what he told the shareholders. Maybe he should run for President of the United States.

Related Topics: dividends, Goodyear financials, Rich Kramer, shareholders meeting

Bob Ulrich Editor
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