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Saturday, August 13, 2011

Goodyear Tire and Rubber (GT)

Goodyear (sec)

I stumbled into Cooper Tire and Rubber (sec) when scanning for stocks.  That brings back very old memories from before I was ever an investor.  That leads to GT as well as Bridgestone and Michelin.


Goodyear Tire and Rubber

Looking at the very long term chart is a strange thing.  It goes back to around 1970.  The stock has see-sawed wildly between then and now but has essentially gone nowhere.  Considering that 1970s dollars were worth a whole lot more than today's dollars, the stock is seriously lower than it was back then.  Japanese tires and probably Chinese tires lately.  I remember reading Les Schwab's autobiography which covered the shift from Bridgestone to Toyo tires.

My interest in GT is to see if it's a stable company in order to take advantage of the wild swings in price that line up with economic downturns.  I'm not looking for excellence, I'm looking for survivability.

10-K

243 million shares.
They operate all over the world. 56 manufacturing plants in 22 countries.
Also rubber related chemicals.

In 2010, Titan Tire bought the rights to sell Goodyear brand farm tires in Europe, Latin America, and the US.
Expect a $270 million charge from closing the Union City, TN plant.  Was making 12 million tires per year.

Started closing a plant in France in 2009.  $107 million estimated cost.  High cost capacity.  Was making 6 million tires per year.

Goodyear, Dunlop, Kelly, Fulda,Debica, and Sava brands.  Also various house brands.
Cars, trucks, buses, aircraft, motorcycles, farm equipment, earthmoving, mining, industrial, etc.
Also retreads for trucks and aircraft and other stuff.
Mud flaps (presumably with sillouettes of reclining girls)
84% of sales are new tires.  Mostly replacement tires.

Most of the revenues are in the US and Europe.  21% Asia.

Competitors are mainly Bridgestone (日本) and Michelin (Vive la France!).
Global alliance (75%) with Sumitomo 住友 Rubber Industries (25%) for selling tires in Japan.

I notice that Asia sales are fairly flat. Someone else must be winning there.  Bridgestone?  Michelin?

Raw material costs went up 12% in 2010, not surprising.  They expect it to increase 25% to 30% in Q1 2011.  Ouch.

2,400 patents in the US.  3,700 in other countries.  License agreements.  Zillions of patents among a small number of companies tends to lock them in as an oligarchy, which is fairly good for long term business. 1,700 trademarks.

72,000 employees.  39,000 in unions.

14 million stock options.  $15.11 ave strike.

Revenues: (billions of dollars)
2006: $18
2007: $20
2008: $20
2009: $16
2010: $18
Makes sense.

Hey wait a minute!  They lose money just about every year.  The only year they made money was 2007 and that was because they sold a business.

Operating incomes in 2008, 2009, 2010 were 17.6%, 16.6%, 15.3%.

Balance sheet is weak.  Equity is almost gone. Lots of debt.
Cash flow looks weak.  Capex burns up all the operating cash flow.

This company looks bad.  I wonder if Bridgestone is any better?


Cooper Tire and Rubber

Quick look at Cooper Tire and Rubber:
Latest 10-Q
Balance sheet is way better.
Basically earned 50 cents for 6 months (not counting discontinued operations)
They actually pay a dividend.

Latest 10-K
62 million shares.
North America, UK, and PRC JV.

Revenues (billions of dollars), Earnings per diluted share
2006: $2.6, ($1.21)
2007: $2.9, $1.46
2008: $2.9, ($3.88), cost of goods sold issue (oil prices)
2009: $2.8, $1.54
2010: $3.4, $1.86

Cumulative earnings per diluted share: a 23 cent loss
International revenues are climbing substantially (1.9% in 2009, 28% in 2010), they're now half of the North American revenues.

Cash flow looks ok.  Looks like earnings match free cash flow over a three year period without anything too ridiculous.

So is CTB worth $20?  Needs more work.


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