Goodyear Reports Results for 2001's First Quarter
-- Market share gains achieved in North America
-- Loss from operations is $3.5 million, 2 cents per share
AKRON, Ohio, April 24 Despite a significant reduction in orders from North American vehicle
manufacturers and an abrupt slowdown in the region's replacement tire market,
The Goodyear Tire & Rubber Company today reported results for the first
quarter of 2001 that reflect improved operating performance over the previous
quarter.
Excluding after-tax rationalization charges of $57.1 million and an after-
tax gain of $13.9 million resulting from the sale of land and buildings in the
United Kingdom, Goodyear posted an after-tax loss from operations of
$3.5 million (2 cents per share) in 2001's first quarter. The company
estimates the economic impact of foreign currency movements reduced the
quarter's operating income by about $20 million.
The company reported a net loss of $46.7 million (30 cents per share) for
the first quarter of 2001. Net income in the first quarter of 2000 was
$48.2 million (30 cents per share). All per share amounts are diluted.
As previously announced, the 2001 rationalization charges, along with
those recorded in the fourth quarter of 2000, are related to global work force
reductions and facility consolidations. These actions, which include newly
identified opportunities, were undertaken in response to the constantly
changing competitive environment around the world.
The company expects to realize annual cost savings of about $260 million
when these rationalization programs are completed. Approximately $155 million
in savings are anticipated in 2001. Anticipated employment reductions total
more than 7,800. Worldwide employment was reduced about 2,800 in the first
quarter.
"The continued decline in orders for tires and engineered products by auto
and truck manufacturers in North America had a substantial impact on our
results," said Samir G. Gibara, chairman and chief executive officer.
"We significantly reduced our production levels during the quarter, but
could not offset the rapid market decline in February and March. Further
reductions in production are being made this quarter to bring inventory levels
in line with projected sales by the end of June," he added.
In North America, industry shipments of consumer tires to the replacement
market were down about 7 percent. However, Goodyear-brand sales grew more
than 4 percent. In the commercial truck tire market, which was down
16 percent, Goodyear-brand shipments increased 7.5 percent. In farm tires,
industry sales were down 9 percent, but the Goodyear-brand was down only
4 percent.
"Reflective of a trend that began last August, quality-minded tire buyers
continued their move to buy more and more Goodyear products. This is
indicative of a clear flight to quality on the part of tire consumers," Gibara
said.
While competitive pressures exist in several markets, price increases
enacted earlier this year are providing some much-needed relief from high raw
material and energy costs. Raw material costs, however, continue upward and
increased an estimated 3 percent in the first quarter.
Worldwide, the company's sales were $3.4 billion in the 2001 quarter,
versus $3.7 billion in 2000. Goodyear estimates that currency translation
reduced sales by about $130 million.
First quarter 2001 tire volume was 52.7 million units worldwide, down
2.1 million units or 3.8 percent from 2000, principally due to weak original
equipment shipments in North America.
Capital expenditures in the 2001 quarter were $103.9 million, down from
$127.7 million in 2000. Depreciation and amortization expense was
$160.4 million in both periods.
Business Segments
First quarter segment operating income was $105.3 million in 2001 and
$189.6 million in 2000. Segment operating income does not reflect the 2001
rationalization charges or the gain on asset sales in the UK.
North American Tire First Quarter
(in millions of dollars) 2001 2000
Sales $1,624.4 $1,730.1
Operating Income 15.4 50.2
Margin 0.9% 2.9%
North American Tire's unit volume in 2001's first quarter was down
9.6 percent from 2000 to 25.8 million units. Sales to original equipment
customers were down 22.1 percent. Replacement market sales volume was down
2.7 percent. Revenue decreased due to the lower unit volume, which was
partially offset by improved pricing and product mix.
Despite being favorably impacted by a change in product mix to higher-
margin replacement tires and price increases, operating income was down due to
the lower volume; higher costs for raw materials, energy and labor; and the
impact of reducing production to better align inventory with demand.
European Union Tire First Quarter
(in millions of dollars) 2001 2000
Sales $799.3 $874.4
Operating Income 31.4 43.7
Margin 3.9% 5.0%
European Union Tire's volume in 2001's first quarter was up 3.1 percent
from 2000 to 15.6 million units. Original equipment sales volume increased
12 percent. Replacement market volume was flat. Currency translation,
competitive pricing, lower volume in some market segments and a change in
product mix to lower-priced tires adversely affected revenue. The company
estimates that currency translation reduced sales by approximately $60 million
in the quarter.
Operating income benefited from cost reduction programs, but was down due
to competitive market conditions, a lower-margin product mix, higher raw
material costs and currency translation.
Eastern Europe, Africa and First Quarter
Middle East Tire
(in millions of dollars) 2001 2000
Sales $163.4 $191.0
Operating Income 5.9 15.3
Margin 3.6% 8.0%
Eastern Europe, Africa and Middle East Tire's volume in 2001's first
quarter was slightly down from 2000 to 3.4 million units principally due to
3.1 percent lower original equipment sales volume. Replacement market sales
volume was flat. Revenue decreased from 2000 due to the lower volume and
currency devaluations in Turkey, South Africa and Slovenia. The company
estimates that currency translation reduced sales in the region by
approximately $20 million in the quarter.
Operating income fell in the quarter because of currency translation;
lower volume due to adverse economic conditions and higher costs for raw
materials and energy.
Latin America Tire First Quarter
(in millions of dollars) 2001 2000
Sales $257.7 $257.8
Operating Income 22.8 23.4
Margin 8.8% 9.1%
Latin American Tire's volume in 2001's first quarter increased 6.2 percent
from 2000 to 5 million units. Original equipment sales volume was up
41.6 percent, while replacement market sales were down 3 percent. Revenue was
flat as a result of currency translation, particularly in Brazil, and a change
in product mix to lower-priced tires. The company estimates that currency
translation reduced sales by approximately $20 million in the quarter.
Operating income decreased due to the change in product mix, higher raw
material and energy costs and currency translation. Income was favorably
impacted by lower production costs as a result of cost reduction programs.
Asia Tire First Quarter
(in millions of dollars) 2001 2000
Sales $119.0 $138.0
Operating Income 3.9 9.8
Margin 3.3% 7.1%
Asia Tire's volume in 2001's first quarter was down 4.1 percent from 2000
to 2.9 million units. Gains were made in the original equipment market, which
increased 11.6 percent, while replacement market sales volume was down
8.9 percent. Revenue decreased as a result of currency translation, lower
unit volume and competitive pricing.
Operating income for the quarter was down primarily due to currency
translation, lower volume, competitive pricing and the change in product mix
to lower-margin tires.
Engineered Products First Quarter
(in millions of dollars) 2001 2000
Sales $299.4 $321.0
Operating Income 9.5 23.8
Margin 3.2% 7.4%
Engineered Products' sales in 2001's first quarter decreased primarily
because of reduced hose, molded rubber product, air spring and power
transmission product shipments to original equipment customers in North
America. Automotive replacement markets for hose and power transmission
products remain weak. Operating income was down due to the lower volume,
higher labor costs and the impact of reducing production to better align
inventory with demand.
Chemical Products First Quarter
(in millions of dollars) 2001 2000
Sales $291.6 $278.0
Operating Income 16.4 23.4
Margin 5.6% 8.4%
Chemical Products' sales increased in 2001's first quarter due to price
increases that were enacted to recover higher raw material and energy costs,
which also offset lower volume. Operating income was down as increases in raw
material and energy costs outpaced the ability to raise prices due to
competitive pricing conditions.
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statement of Income
(In millions, except per share) First Quarter
Ended March 31
2001 2000
(unaudited)
Net Sales $3,414.2 $3,664.1
Cost of Goods Sold 2,785.6 2,934.0
Selling, Administrative and
General Expense 547.9 559.7
Rationalizations 79.0 --
Interest Expense 68.7 62.1
Other (Income) Expense (6.5) 3.9
Foreign Currency Exchange (9.9) 5.1
Equity in Earnings of Affiliates 5.1 2.4
Minority Interest in
Net Income of Subsidiaries 7.8 16.6
Income (Loss) before Income Taxes (63.5) 80.3
United States and Foreign Taxes
on Income (16.8) 32.1
Net Income (Loss) $(46.7) $48.2
Per Share of Common Stock - Basic
Net Income (Loss) $(0.30) $0.31
Average Shares Outstanding 158.2 156.3
Per Share of Common Stock - Diluted
Net Income (Loss) $(0.30) $0.30
Average Shares Outstanding 158.2 158.7
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheet
(In millions) Mar. 31 Dec. 31
Assets 2001 2000
(unaudited)
Current Assets:
Cash and Cash Equivalents $234.2 $252.9
Accounts and Notes Receivable,
less allowance - $87.2 ($93.3 in 2000) 2,218.5 2,074.7
Inventories:
Raw Materials 467.8 480.4
Work in Process 118.0 123.5
Finished Product 2,463.9 2,275.8
Total 3,049.7 2,879.7
Prepaid Expenses and Other Current Assets 268.1 259.9
Total Current Assets 5,770.5 5,467.2
Long Term Accounts and Notes Receivable 70.9 92.8
Investments in Affiliates, at Equity 115.7 102.0
Other Assets 200.3 183.8
Goodwill 576.3 588.4
Deferred Charges 1,595.4 1,612.8
Properties and Plants,
Less Accumulated Depreciation - $5,899.1
($5,862.6 in 2000) 5,361.4 5,521.0
Total Assets $13,690.5 $13,568.0
Liabilities
Current Liabilities:
Accounts Payable - Trade $1,389.3 $1,505.2
Compensation and Benefits 786.6 823.6
Other Current Liabilities 377.9 395.6
United States and Foreign Taxes 249.0 208.4
Notes Payable 1,289.4 1,077.0
Sumitomo 1.2% Convertible Note Payable -- 56.9
Long Term Debt due within One Year 145.6 159.2
Total Current Liabilities 4,237.8 4,225.9
Long Term Debt and Capital Leases 2,621.4 2,349.6
Compensation and Benefits 2,298.4 2,310.5
Other Long Term Liabilities 342.0 334.1
Minority Equity in Subsidiaries 837.7 844.9
Total Liabilities 10,337.3 10,065.0
Shareholders' Equity
Preferred Stock, no par value:
Authorized 50 shares, unissued -- --
Common Stock, no par value:
Authorized 300 shares
Outstanding Shares - 158.8 (157.6 in 2000)
After Deducting 36.9 Treasury Shares
(38.1 in 2000) 158.8 157.6
Capital Surplus 1,148.0 1,092.4
Retained Earnings 3,464.5 3,558.8
Accumulated Other Comprehensive Income (1,418.1) (1,305.8)
Total Shareholders' Equity 3,353.2 3,503.0
Total Liabilities and Shareholders' Equity $13,690.5 $13,568.0
