Goodyear Q3 Results
Net income of $9.3 million, 6 cents per share
Sales, units and market share gains in North America
AKRON, Ohio, Oct. 25 -- The Goodyear Tire & Rubber Company
today reported net income of $9.3 million (6 cents per share) for
the third quarter of 2001. Net income in the third quarter of 2000 was $17
million (11 cents per share), which included a net after-tax gain of $2
million (1 cent per share). All per share amounts are diluted.
The company estimates that the negative effect of currency movements
reduced operating income by approximately $20 million in 2001's third quarter.
Third quarter results reflect continued weak economic conditions and
market deterioration in much of the world and an abrupt decline in sales in
September.
In spite of the unfavorable economic environment, Goodyear's worldwide
third quarter sales were $3.7 billion in 2001, versus $3.6 billion in 2000.
The company estimates that the negative effect of currency movements reduced
consolidated sales by approximately $85 million in the quarter. Tire unit
volume in 2001's third quarter was 56.7 million units, down 0.5 percent from
last year.
"Because of a general economic slowdown, market conditions were tough in
many regions during the quarter," said Sam G. Gibara, chairman and chief
executive officer. "In September, industry volumes in our key markets were
off markedly," he said.
"However, in the important North America consumer replacement tire market,
Goodyear outperformed the industry, ending the quarter with a three percentage
point gain in market share."
In response to these difficult economic and industry-wide conditions,
Goodyear cut back production significantly, reduced inventory, pursued an
aggressive cost reduction program, curtailed discretionary expenditures and
implemented initiatives to increase sales revenue and margins.
Capital expenditures in the 2001 third quarter were $94.7 million compared
with $144.4 million in the 2000 period.
Depreciation and amortization expense in 2001's third quarter was
$154.1 million compared with $155.5 million in the 2000 period.
Year-to-Date Results
The company's net loss for the first nine months of 2001 was $29.6 million
(19 cents per share). For the first nine months of 2000, the company had net
income of $142.3 million (90 cents per share).
The 2001 year-to-date results include net after-tax charges of
$43.2 million (28 cents per share). The 2000 results include net after-tax
charges of $3.2 million (2 cents per share).
The company estimates that the negative effect of currency movements
reduced operating income by approximately $70 million in 2001's nine-month
period.
Sales for the first nine months of 2001 were $10.7 billion compared with
$10.9 billion in 2000. The company estimates that the negative effect of
currency movements reduced consolidated sales by approximately $365 million in
the nine months. Tire unit volume was 164.8 million units, down 1.7 percent
in the nine-month period.
Capital expenditures for the nine months were $315.9 million in 2001 and
$411.1 million in 2000.
Depreciation and amortization expense for the nine-month period was
$477.1 million in 2001 and $475.7 million in 2000.
As part of the 2001 rationalization program announced in February, the
company anticipates employment reductions totaling more than 7,800 during the
year. Through the first nine months, worldwide employment has been reduced by
about 7,500 under this program. The company expects to realize annual cost
savings of about $260 million when these rationalization programs are
completed.
"Despite the challenges presented us, Goodyear has made significant gains
in market share, increased prices, reduced inventory levels without
sacrificing customer service and stepped up its global rationalization and
cost reduction programs," Gibara said.
Business Segments
Third quarter segment operating income was $136.8 million in 2001 and
$115 million in 2000. For the first nine months, segment operating income was
$359.6 million in 2001 and $520.8 million in 2000. Segment operating income
does not reflect rationalizations and certain other items in 2001 and 2000.
North American Tire Third Quarter Nine Months
(in millions) 2001 2000 2001 2000
Tire Units 30.2 29.5 84.9 86.8
Sales $1,957.2 $1,832.0 $5,409.6 $5,319.6
Operating Income 87.9 60.8 152.3 197.1
Margin 4.5% 3.3% 2.8% 3.7%
Tire unit volume in 2001's third quarter was up 2.3 percent from 2000 and
down 2.2 percent for the first nine months. Replacement market volumes
increased 5.8 percent for the quarter and 3.7 percent for the nine months.
Shipments to original equipment customers were down 6.7 percent for the
quarter and 14.3 percent for the nine months.
Sales revenue in both 2001 periods reflect the favorable impact of a
change in product mix to higher-priced tires and price increases in the
replacement market. It was adversely affected in both 2001 periods by lower
original equipment volume resulting from production cutbacks by automobile and
commercial truck manufacturers.
The replacement market for consumer tires experienced higher third quarter
volume in both 2000 and 2001 as a result of replacement programs involving
Firestone tires on Ford Motor Co. vehicles. In May 2001, a program involving
an estimated 13 million tires began. In August 2000, a replacement program
involving an estimated 6.5 million tires was initiated.
During the third quarter of 2001, North American Tire supplied about
3 million tires for the replacement program. During the third quarter of
2000, it supplied about 1.5 million tires.
For the first nine months of 2001, North American Tire supplied about
4 million tires for the replacement program. For 2000's nine-month period, it
supplied about 1.5 million tires.
Operating income in the third quarter was favorably impacted by a change
in product mix to higher-margin tires, price increases in the replacement
market, lower raw material costs and higher volume. It was adversely affected
by costs associated with manufacturing inefficiencies resulting from
production cutbacks to align inventory with demand.
For the nine months, operating income decreased due to costs associated
with manufacturing inefficiencies resulting from production cutbacks to align
inventory with demand, higher raw material costs and lower commercial tire and
consumer original equipment tire volume, which offset price increases in the
replacement market and a change in product mix to higher-margin tires.
European Union Tire Third Quarter Nine Months
(in millions) 2001 2000 2001 2000
Tire Units 15.0 14.9 45.6 45.3
Sales $770.7 $759.6 $2,329.7 $2,436.2
Operating Income 3.1 12.3 52.1 95.8
Margin 0.4% 1.6% 2.2% 3.9%
Tire unit volume in 2001's third quarter was up 0.4 percent from 2000 and
0.8 percent for the first nine months. Replacement market volumes decreased
4.4 percent for the quarter and 3 percent for the nine months. Shipments to
original equipment customers increased 14.1 percent for the quarter and
9.8 percent for the nine months.
Sales revenue in the third quarter of 2001 increased compared to 2000
primarily due to higher volume in the original equipment market.
For the nine months, sales revenue decreased compared to 2000 due to
currency translation, lower volume in the replacement market and competitive
pricing, which exceeded the benefit of higher volume in the original equipment
market.
Operating income decreased in the 2001 quarter and nine months due to
higher raw material costs and a change in mix to lower-margin original
equipment tires, which offset the favorable impact of cost containment and
rationalization programs. For the nine months, income also was negatively
impacted by currency translation and competitive pricing.
The company estimates that the effects of currency movements in 2001's
nine-month period reduced sales by approximately $110 million and operating
income by about $10 million.
Eastern Europe, Africa,
Middle East Tire Third Quarter Nine Months
(in millions) 2001 2000 2001 2000
Tire Units 3.5 4.5 10.3 11.7
Sales $181.7 $215.1 $523.0 $599.7
Operating Income 6.2 19.0 15.6 46.4
Margin 3.4% 8.8% 3.0% 7.7%
Tire unit volume in 2001's third quarter was down 21.6 percent from 2000
and 12 percent for the first nine months. Replacement market volumes
decreased 20.7 percent for the quarter and 10.8 percent for the nine months.
Shipments to original equipment customers decreased 25.8 percent for the
quarter and 16.4 percent for the nine months.
Sales revenue in both periods decreased from 2000 due to currency
devaluations in Turkey, Poland, South Africa and Slovenia; and lower volume,
both in original equipment and replacement markets.
The company estimates that currency movements negatively impacted sales by
approximately $35 million in the quarter and $85 million in the nine months.
Operating income decreased in both 2001 periods due to the economic crisis
in Turkey, the effects of currency translation, lower sales volume and the
impact of an industry-wide strike in South Africa during the third quarter.
Income in both 2001 periods was favorably impacted by cost containment and
rationalization programs. Additionally, the 2000 nine-month period was
negatively impacted by a strike in Turkey.
The company estimates that currency movements negatively impacted
operating income by approximately $5 million in the 2001 quarter and $25
million in the nine months.
Latin American Tire Third Quarter Nine Months
(in millions) 2001 2000 2001 2000
Tire Units 4.9 5.0 14.8 14.7
Sales $246.4 $263.2 $754.8 $785.5
Operating Income 19.3 10.1 61.5 54.9
Margin 7.8% 3.8% 8.1% 7.0%
Tire unit volume in 2001's third quarter was down 3.3 percent from 2000
and up 1.1 percent for the first nine months. Replacement market volumes
decreased 6.6 percent for the quarter and 7.1 percent for the nine months.
Shipments to original equipment customers increased 4.5 percent for the
quarter and 26.2 percent for the nine months.
Sales revenue fell in both 2001 periods due to weak economic conditions;
currency translation, particularly in Brazil; and a shift in product mix to
the original equipment market. Sales benefited from higher original equipment
volume and price increases in some markets.
The company estimates that currency movements negatively impacted sales by
approximately $30 million in the 2001 quarter and $75 million in the nine
months.
Operating income in both 2001 periods reflected the favorable impact of
price increases, cost reduction programs, rationalizations and lower raw
material costs, as well as the adverse effect of currency translation and a
change in product mix to lower-margin original equipment tires.
The company estimates that currency movements negatively impacted
operating income by approximately $10 million in the 2001 quarter and
$25 million in the nine months.
Asia Tire Third Quarter Nine Months
(in millions) 2001 2000 2001 2000
Tire Units 3.1 3.0 9.2 9.1
Sales $122.8 $128.9 $370.2 $404.8
Operating Income 5.1 3.5 15.7 19.6
Margin 4.2% 2.7% 4.2% 4.8%
Tire unit volume in 2001's third quarter was up 4.2 percent from 2000 and
up 0.6 percent for the first nine months. Replacement market volumes
decreased 0.3 percent for the quarter and 3.8 percent for the nine months.
Shipments to original equipment customers increased 17.4 percent for the
quarter and 14.2 percent for the nine months.
Sales revenue decreased in both 2001 periods due to weak economic
conditions, the adverse impact of currency translation and competitive pricing
pressures.
The company estimates that currency movements negatively impacted sales by
approximately $10 million in the 2001 quarter and $35 million in the nine
months.
Operating income increased in the third quarter of 2001 as the adverse
effect of price competition and currency translation was offset by the
benefits of cost containment efforts. For the nine months, it decreased due
to the adverse effects of currency translation and intense price competition,
which exceeded the benefits of cost containment efforts.
The company estimates that currency movements negatively impacted
operating income by approximately $5 million in the 2001 quarter and
$15 million in the nine months.
Engineered Products Third Quarter Nine Months
(in millions) 2001 2000 2001 2000
Sales $267.4 $282.7 $867.7 $910.1
Operating Income (Loss) (1.2) 2.3 16.7 46.6
Margin (0.4)% 0.8% 1.9% 5.1%
Sales revenue in 2001's third quarter was down slightly from last year due
to unit volume decreases in the air springs, power transmission product and
molded product businesses resulting from weak economic conditions and
production cutbacks by automobile and commercial truck manufacturers. Sales
of conveyor belts and hose products were up for the quarter.
For the nine months, sales revenue decreased due to weak economic
conditions and unit volume decreases in the hose, air springs, power
transmission product and molded products businesses resulting from production
cutbacks by automobile and commercial truck manufacturers as well as general
global economic decline and price competition.
Operating income decreased in both 2001 periods as a result of lower
volume and the increased cost associated with manufacturing inefficiencies
resulting from production cutbacks due to reduced demand and higher product
liability costs.
Chemical Products Third Quarter Nine Months
(in millions) 2001 2000 2001 2000
Sales $260.9 $275.7 $824.1 $847.5
Operating Income 16.4 7.0 45.7 60.4
Margin 6.3% 2.5% 5.5% 7.1%
Sales revenue decreased in 2001's third quarter as higher volumes were
offset by lower prices caused by a decrease in raw material costs. For the
nine months, it decreased due to lower volumes.
Operating income increased in the 2001 quarter primarily due to lower raw
material costs and gains in productivity. For the nine months, it was down as
increases in raw material and energy costs outpaced the inability to recover
them due to competitive pricing conditions.
