Goodyear Results Improve
AKRON, Ohio, July 23 The Goodyear Tire & Rubber Company today reported net income of $28.9 million (18 cents per share) for the second quarter of 2002. Net income in the second quarter of 2001 was $7.8 million (5 cents per share). All per share amounts are diluted.
Worldwide, Goodyear's second quarter sales were $3.5 billion in 2002, versus $3.6 billion in 2001. Tire unit volume in 2002's second quarter was 53.3 million units, down 4 percent from last year.
"Our earnings more than tripled despite volatile and difficult economic and market conditions in much of the world," said Sam G. Gibara, chairman and chief executive officer. "Cost reduction programs and rationalization activities are paying off. We are also benefiting from lower raw material costs. While we still face challenges, this was our best earnings performance since the second quarter of 2000," he said.
"Six of our seven businesses showed significant improvements in earnings and margins in the second quarter. If the benefit from last year's Ford tire recall program is excluded, North American Tire showed improvement as well."
The company estimates that the effects of currency movements positively impacted worldwide sales by approximately $20 million in the second quarter of 2002 and had a negligible effect on earnings.
Second quarter 2001 results include $20 million in pre-tax earnings resulting from the company's participation in the Ford Motor Co. tire replacement program and $4 million in pre-tax earnings contributed by the Specialty Chemical business, which was sold in December 2001.
Capital expenditures in the 2002's second quarter were $97.1 million compared with $117.3 million in the 2001 period.
Depreciation and amortization expense in 2002's second quarter was $155.4 million compared with $162.6 million in the 2001 period.
Year-to-Date Results
The company's net loss for the first six months of 2002 was $34.3 million (21 cents per share). For the first six months of 2001, the company had a net loss of $38.9 million (25 cents per share).
First half 2002 results include $10 million in pre-tax earnings resulting from the company's participation in the Ford tire replacement program and a pre-tax charge of $10 million principally related to the April 2002 closure of Penske Automotive Centers in the United States.
First half 2001 results included after-tax rationalization charges of $57.1 million and an after-tax gain of $13.9 million in the first quarter of that year.
Sales for the first six months of 2002 were $6.8 billion compared with $7.0 billion in 2001. Tire unit volume was 106.3 million units, down 1.7 percent in the six-month period.
The company estimates that the effects of currency movements negatively impacted worldwide sales by approximately $75 million and earnings by $15 million in the first half.
Global capital expenditures for the six months were $172.9 million in 2002 and $221.2 million in 2001. Depreciation and amortization expense was $302.2 million in 2002 and $323.0 million in 2001.
Goodyear adopted Statement of Financial Accounting Standards No. 142 on Jan. 1, 2002. Earnings in 2001's second quarter and first half included amortization expense for goodwill and certain intangible assets of $7.4 million and $14.6 million, respectively.
Business Segments
Second quarter segment operating income was $168.5 million in 2002, up 43.4 percent from $117.5 million in 2001. For the first six months, segment operating income was $201.4 million in 2002, down 9.6 percent from $222.8 million in 2001. Segment operating income does not reflect rationalizations and certain other items in 2002 and 2001.
North American Tire Second Quarter Six Months
(in millions) 2002 2001 2002 2001
Tire Units 26.4 28.9 52.6 54.7
Sales $1,698.4 $1,828.0 $3,350.2 $3,452.4
Operating Income 39.3 49.0 (12.0) 64.4
Margin 2.3% 2.7% (0.4)% 1.9%
North American Tire unit volume in 2002's second quarter was down 8.8 percent from 2001 and down 4.0 percent for the first six months. Unit sales to the replacement market decreased 15.8 percent for the quarter and 9.5 percent for the six months. Shipments to original equipment customers were up 6.8 percent for the quarter and 8.5 percent for the six months.
Sales in both 2002 periods decreased due to reduced volume in the replacement market, which was adversely affected by certain distributors postponing purchases. Shipments to original equipment customers increased in the quarter and half as automakers increased production. Higher selling prices favorably impacted sales in both 2002 periods.
Sales resulting from the Ford tire replacement program, which ended March 31, 2002, benefited the second quarter of 2001 and the first quarter of 2002. During the second quarter of 2001, North American Tire supplied about 1 million tires for this program. Approximately 500,000 tires were supplied during 2002's first quarter.
Operating income in the second quarter was negatively impacted by the decline in replacement market sales, a negative change in replacement market brand mix, the change in product mix toward lower-margin original equipment tires, the conclusion of the Ford tire replacement program and reduced factory utilization. Income benefited from lower raw material costs, higher selling prices and cost reduction programs.
For the six months, operating income decreased due to reduced factory utilization, the change in product mix toward lower-margin original equipment tires, lower replacement market volume and the closure of the Penske Automotive Center outlets. These factors offset the impact of lower raw material costs and higher selling prices.
European Union Tire Second Quarter Six Months
(in millions) 2002 2001 2002 2001
Tire Units 14.8 15.0 29.9 30.6
Sales $806.9 $759.7 $1,551.8 $1,559.0
Operating Income 34.5 17.6 51.1 49.0
Margin 4.3% 2.3% 3.3% 3.1%
European Union Tire unit volume in 2002's second quarter was down 1.8 percent from 2001 and 2.5 percent for the first six months. Unit sales to the replacement market decreased 4.1 percent for the quarter and 5.5 percent for the six months. Shipments to original equipment customers increased 2.9 percent for the quarter and 3.5 percent for the six months.
Sales in the second quarter of 2002 increased compared to 2001 primarily due to the effect of currency translation and higher price levels. Sales were adversely affected by lower volume.
For the six months, sales decreased compared to 2001 due to lower volume in the replacement market, but benefited from the favorable effect of currency translation.
The company estimates that the effects of currency movements positively impacted sales by approximately $65 million in the second quarter and $35 million in the first half.
Operating income increased in both the 2002 quarter and six months due to lower raw material costs, cost reduction programs and currency translation, which more than offset the impact of lower volumes and reduced factory utilization.
The company estimates that the effects of currency movements positively impacted operating income by approximately $5 million in the second quarter.
Eastern Europe, Africa, Second Quarter Six Months
Middle East Tire
(in millions) 2002 2001 2002 2001
Tire Units 3.7 3.4 7.5 6.7
Sales $193.2 $177.9 $367.7 $341.3
Operating Income 21.5 3.5 32.3 9.4
Margin 11.1% 2.0% 8.8% 2.8%
Eastern Europe, Africa and Middle East Tire unit volume in 2002's second quarter was up 10.9 percent from 2001 and 11.5 percent for the first six months. Unit sales to the replacement market increased 16.8 percent for the quarter and 17.6 percent for the six months. Shipments to original equipment customers decreased 9.0 percent for the quarter and 8.0 percent for the six months.
Sales in both periods increased from 2001 due to higher replacement market volume particularly in Turkey and the Middle East, and increased selling prices.
The company estimates that currency movements negatively impacted sales by approximately $10 million in the quarter and $35 million in the half.
Operating income increased in both 2002 periods due to higher replacement market volume, improved factory utilization, price increases and cost containment programs.
Latin American Tire Second Quarter Six Months
(in millions) 2002 2001 2002 2001
Tire Units 5.2 5.0 10.1 10.0
Sales $254.0 $250.7 $499.6 $508.4
Operating Income 25.5 19.4 50.9 42.2
Margin 10.0% 7.7% 10.2% 8.3%
Latin American Tire unit volume in 2002's second quarter was up 4.4 percent from 2001 and up 1.4 percent for the first six months. Unit sales to the replacement market increased 5.0 percent for the quarter and 1.1 percent for the six months. Shipments to original equipment customers increased 3.1 percent for the quarter and 2.0 percent for the six months.
Sales increased in the 2002 quarter due to improved pricing and product mix as well as higher volume. They were negatively impacted by currency translation, particularly in Argentina, Brazil and Venezuela. Sales were down in the 2002 half due to currency translation, which offset the benefits of higher volume, price increases and an improved product mix.
The company estimates that currency movements negatively impacted sales by approximately $45 million in the 2002 quarter and $80 million in the six months.
Operating income in both 2002 periods reflected the favorable impact of price increases, improved product mix, cost reduction programs, rationalizations and lower raw material costs.
The company estimates that currency movements negatively impacted operating income by approximately $10 million in the 2002 quarter and $15 million in the six months.
Asia Tire Second Quarter Six Months
(in millions) 2002 2001 2002 2001
Tire Units 3.2 3.2 6.2 6.1
Sales $134.8 $128.4 $256.5 $247.4
Operating Income 12.1 6.7 19.7 10.6
Margin 9.0% 5.2% 7.7% 4.3%
Asia Tire unit volume in 2002's second quarter was about equal with 2001's and up 3.0 percent for the first six months. Unit sales to the replacement market decreased 0.5 percent for the quarter and increased 2.4 percent for the six months. Shipments to original equipment customers increased 4.6 percent for the quarter and 4.8 percent for the six months.
Sales increased in both 2002 periods due to higher original equipment shipments.
Operating income increased in both periods due to lower raw material costs, cost containment efforts and improved factory utilization.
Engineered Products Second Quarter Six Months
(in millions) 2002 2001 2002 2001
Sales $303.9 $300.9 $587.0 $600.3
Operating Income 16.9 8.4 27.1 17.9
Margin 5.6% 2.8% 4.6% 3.0%
Engineered Products sales in 2002's second quarter were up from last year due to strong military, industrial and automotive shipments. For the six months, sales were down in all major product lines due to economic weakness in the United States.
Operating income increased in both 2002 periods as a result of cost containment and productivity improvement programs.
Chemical Products Second Quarter Six Months
(in millions) 2002 2001 2002 2001
Sales $224.4 $271.6 $420.7 $563.2
Operating Income 18.7 12.9 32.3 29.3
Margin 8.3% 4.7% 7.7% 5.2%
Chemical Products sales were down in both 2002 periods, reflecting lower selling prices and the sale of the company's Specialty Chemical business in December 2001.
Operating income increased in both the quarter and half due to lower raw material costs and cost containment programs.
Goodyear will hold an investor conference call at 10:30 a.m. ET today. Shareholders, members of the media and other interested persons may access the conference call on the Internet at www.goodyear.com/us/investor or via telephone by calling (706) 634-5954 before 10:25 a.m. A taped replay of the conference call will be available at 2 p.m. by calling (706) 645-9291 and entering reference conference code 4751788.
Goodyear is the world's largest tire company. Headquartered in Akron, Ohio, the company manufactures tires, engineered rubber products and chemicals in more than 90 facilities in 28 countries. It has marketing operations in almost every country around the world. Goodyear employs about 95,000 people worldwide.
This news release contains certain forward-looking statements based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed by such statements. These risks and uncertainties include price and product competition, customer demand for the company's products, the ability to control costs and expenses, general industry and market conditions and general domestic and international economic conditions, including interest rate and currency fluctuations. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statement of Income (unaudited)
(In millions,
except per share) Second Quarter Six Months
Ended June 30 Ended June 30
2002 2001 2002 2001
Net Sales $3,478.8 $3,582.5 $6,790.0 $6,996.7
Cost of Goods Sold 2,787.4 2,912.1 5,548.5 5,697.7
Selling, Administrative and
General Expense 557.8 565.8 1,087.2 1,113.7
Rationalizations -- -- -- 79.0
Interest Expense 59.6 74.5 120.6 143.2
Other (Income) Expense 13.5 8.4 27.4 1.9
Foreign Currency Exchange (6.1) (5.4) 7.2 (15.3)
Equity in Earnings of Affiliates 1.4 4.1 6.0 9.2
Minority Interest in
Net Income of Subsidiaries 16.0 8.7 29.5 16.5
Income (Loss) before Income Taxes 49.2 14.3 (36.4) (49.2)
United States and Foreign Taxes
on Income 20.3 6.5 (2.1) (10.3)
Net Income (Loss) $28.9 $7.8 $(34.3) $(38.9)
Per Share of Common Stock - Basic
Net Income (Loss) $0.18 $0.05 $(0.21) $(0.25)
Average Shares Outstanding 163.3 158.8 163.2 158.5
Per Share of Common Stock - Diluted
Net Income (Loss) $0.18 $0.05 $(0.21) $(0.25)
Average Shares Outstanding 164.3 161.2 163.2 158.5
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheet
(In millions) June 30 Dec. 31
Assets 2002 2001
(unaudited)
Current Assets:
Cash and Cash Equivalents $ 680.0 $ 959.4
Short Term Securities 33.2 --
Accounts and Notes Receivable,
less allowance - $96.6 ($84.9 in 2001) 1,740.6 1,486.8
Inventories:
Raw Materials 397.1 398.8
Work in Process 114.0 112.5
Finished Product 1,943.5 1,869.6
2,454.6 2,380.9
Prepaid Expenses and Other Current Assets 426.1 427.9
Total Current Assets 5,334.5 5,255.0
Long Term Accounts and Notes Receivable 191.2 143.8
Investments in Affiliates, at Equity 87.1 82.7
Other Assets 268.9 263.0
Goodwill and Other Intangible Assets 725.9 698.1
Deferred Income Tax 658.9 674.9
Deferred Charges 1,233.9 1,279.3
Properties and Plants,
Less Accumulated Depreciation -
$6,306.1 ($6,030.6 in 2001) 5,125.9 5,116.1
Total Assets $13,626.3 $13,512.9
Liabilities
Current Liabilities:
Accounts Payable - Trade $1,479.4 $1,359.2
Compensation and Benefits 919.1 897.2
Other Current Liabilities 338.2 396.1
United States and Foreign Taxes 254.5 309.3
Notes Payable 298.7 255.0
Long Term Debt due within One Year 426.9 109.7
Total Current Liabilities 3,716.8 3,326.5
Long Term Debt and Capital Leases 2,940.2 3,203.6
Compensation and Benefits 2,873.0 2,848.9
Other Long Term Liabilities 437.2 482.3
Minority Equity in Subsidiaries 815.3 787.6
Total Liabilities 10,782.5 10,648.9
Shareholders' Equity
Preferred Stock, no par value:
Authorized 50 shares, unissued -- --
Common Stock, no par value:
Authorized 300 shares
Outstanding Shares - 163.3 (163.2 in 2001)
After Deducting 32.4
Treasury Shares (32.5 in 2001) 163.3 163.2
Capital Surplus 1,248.0 1,245.4
Retained Earnings 3,119.2 3,192.7
Accumulated Other Comprehensive Income (1,686.7) (1,737.3)
Total Shareholders' Equity 2,843.8 2,864.0
Total Liabilities and Shareholders' Equity $13,626.3 $13,512.9