NEW YORKGoodyear's return to profitability has prompted management to reinstate the firm's quarterly dividend after an 11-year interruption and disclose plans to buy back up to $100 million worth of its common stock, company executives said during a recent investor conference in New York.
The share repurchases are intended to offset new shares issued under equity-compensation programs, Goodyear said,
Driven forward by the disciplined execution of our strategy and building on the growing momentum in our business, the plans we are announcing today put us on a path to achieve consistent earnings growth and value creation, Chairman and CEO Richard Kramer said.
Our capital allocation plan demonstrates Goodyear's commitment to creating value for shareholders while maintaining financial flexibility to execute our strategic plan, continuing to strengthen our balance sheet and investing for future growth, Mr. Kramer said.
Goodyear's directors declared a quarterly dividend of 5 cents per share of common stock, payable Dec. 1 to shareholders of record Nov. 1. The payout represents an annual rate of 20 cents per share, Goodyear said. Future dividends will be subject to board approval.
Goodyear last paid a common stock dividend in December 2002.
Goodyear also reconfirmed its outlook for 2013 segment operating income of about $1.5 billion and is targeting annual segment operating income growth of 10 to 15 percent through 2016 as well as targeting positive cash flow, excluding pension pre-funding, through 2016.
These financial targets represent a giant step since 2009, when the firm's North American business posted a $300 million loss, Mr. Kramer told those attending the Sept. 20 meeting in New York.
Since those dismal days in 2009, the North American operation has returned to profitability, reporting $514 million in segment operating income in 2012, which put the company a year ahead of the recovery schedule it announced in March 2011.
In the last two and a half years, Goodyear has improved its segment operating income percentage from 4.9 percent in 2010 to an expected 7.5 percent in 2013 in a tough economy, the executive said, prompting the decision to reinstate the dividend.
North American Tire returned to the black in part by eliminating some of its high-cost capacity during the last few years, according to Steve McClellan, who heads up the North American operation, closing the Union City, Tenn., factory and streamlining others.
The company also increased manufacturing and supply chain efficiencies throughout its operations, he said. The firm no longer is chasing volume for volume's sake and has simplified its product portfolio.
We're building a branded business and we're competing in the most profitable segments in the market, Mr. McClellan said.
Goodyear is continuing to work on its cost structure, said Darren Wells, chief financial officer and executive vice president. He cited a number of structural cost changes the company is working on, including closing its farm and car tire plant in Amiens, France, which will deliver $75 million of structural cost savings once that's completed.
I would also put in that category some of the work that we're doing for additional productivity improvements in our Europe, Middle East, Africa business.
He said the company has upgraded its plants in Lawton, Okla., and Fayetteville, N.C., and is investing in its Asian-Pacific operations, relocating and expanding its plant in Dalian, China, and boosting the size of its mining tire factory in Tatsuno, Japan. Goodyear also is expanding and modernizing plants in Santiago, Chile, and Americana, Brazil.
Those projects represent more than $1 billion in investment since Goodyear announced them in 2011.
I expect that we're going to continue the need to make investments to support growth in Brazil,...and we're going to have to start to lay the groundwork for being able to deliver additional supply of high value-added tires in the Americas, Mr. Wells said. Announcements on those projects probably will be made in the next year or so, he said.