It's A Good Year for Goodyear (so far)
AKRON, Ohio, Oct. 30,2002; The Goodyear Tire & Rubber Company today reported net income of $33.7 million (20 cents per share) for the third quarter of 2002. Net income in the third quarter of 2001 was $9.3 million (6 cents per share). All per share amounts are diluted.
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The company estimates that the effects of currency movements negatively impacted worldwide sales by approximately $4 million and earnings by $10 million in the third quarter of 2002.
"Our international business units demonstrate that our initiatives to achieve top line growth and substantial earnings improvement are delivering results," said Sam G. Gibara, chairman and chief executive officer. "Our focus is now to drive this change throughout North America and regain our momentum in the consumer replacement market. We expect our sharpened market approach and effective execution will lead to improved financial performance."
Gibara added, "While economic conditions in our key markets and rising raw material costs are a concern, we remain committed to generating significant cash flow through continued concentration on working capital reduction in the fourth quarter."
Net income in the 2002 third quarter included an after-tax gain of $8.2 million (4 cents per share) resulting primarily from the sale of land in Mexico and after-tax rationalization charges of $8.9 million (5 cents per share) related chiefly to a manufacturing facility consolidation in Europe and the closure of a mold manufacturing facility in the United States.
Income tax for the quarter was $22.7 million compared to $2.0 million in 2001. During the third quarter, the company determined it would be appropriate to establish a U.S. tax provision of $43 million (26 cents per share) related to the repatriation of international earnings. Also in the quarter, the company recorded a tax benefit of $20.3 million (12 cents per share), which reflects the impact through nine months of the favorable settlement of prior-year liabilities, carryback of a U.S. loss to prior years taxes and the ongoing tax provision for foreign operations.
Foreign currency exchange was a gain of $26 million in the 2002 third quarter compared to a gain of $2.6 million in the 2001 quarter. Foreign currency exchange in the 2002 quarter benefited chiefly from currency movements on U.S. dollar denominated monetary items in Brazil.
Third quarter 2001 results included $50 million in pre-tax earnings resulting from the company's participation in the Ford Motor Co. tire replacement program and $2 million in pre-tax earnings contributed by the Specialty Chemical business, which was sold in December 2001.
Capital expenditures in 2002's third quarter were $120.4 million compared with $94.7 million in the 2001 period. Depreciation and amortization expense in 2002's third quarter was $149.1 million compared with $154.1 million in the 2001 period.
Year-to-Date Results
The company had near-break-even performance for the first nine months of 2002, reporting a net loss of $0.6 million (0 cents per share). For the first nine months of 2001, the company had a net loss of $29.6 million (19 cents per share).
In addition to the third quarter adjustments, 2002's nine-month results included $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.
Results for the first nine months of 2001 included after-tax rationalization charges of $57.1 million (36 cents per share) and an after-tax gain from asset sales of $13.9 million (9 cents per share) in the first quarter of that year.
The 2001 nine-month results also included $70 million in pre-tax earnings resulting from the company's participation in the Ford tire replacement program and $12 million in pre-tax earnings contributed by the Specialty Chemical business, which was sold in December 2001.
Sales for the first nine months of 2002 were $10.3 billion compared with $10.7 billion in 2001. Tire unit volume was 160.7 million units, down 2.5 percent.
The company estimates that the effects of currency movements negatively impacted worldwide sales by approximately $80 million and earnings by $23 million in the first nine months of 2002.
Global capital expenditures for the nine months were $293.3 million in 2002 and $315.9 million in 2001. Depreciation and amortization expense was $451.3 million in 2002 and $477.1 million in 2001.
Goodyear adopted Statement of Financial Accounting Standards No. 142 on Jan. 1, 2002. Earnings in 2001's third quarter and first nine months included pre-tax amortization expense for goodwill and certain intangible assets of $7 million and $21.6 million, respectively.
Business Segments
Third quarter segment operating income was $139.9 million in 2002, up 2.3 percent from $136.8 million in 2001. Segment margins were 3.8 percent for the 2002 quarter and 3.6 percent for the 2001 period. For the first nine months, segment operating income was $341.3 million in 2002, down 5.1 percent from $359.6 million in 2001. Nine-month segment margins were 3.2 percent for both 2002 and 2001. Segment operating income does not reflect rationalizations and certain other items in 2002 and 2001.
North American Tire Third Quarter Nine Months
(in millions) 2002 2001 2002 2001
Tire Units 26.5 30.2 79.1 84.9
Sales $1,738.1 $1,957.2 $5,088.3 $5,409.6
Operating Income 10.1 87.9 (1.9) 152.3
Margin 0.6% 4.5% 0.0% 2.8%
North American Tire unit volume in 2002's third quarter was down 12.1 percent from 2001 and down 6.9 percent for the first nine months. Excluding the effects of the 2001 Ford tire replacement program, unit volume was down 2.6 percent for the quarter and down 2.5 percent for the nine months.
Unit sales to the replacement market decreased 18.8 percent for the quarter and 13 percent for the nine months. Excluding the effects of the 2001 Ford tire replacement program, unit sales to the replacement market were down 6.6 percent for the quarter and 7.2 percent for the nine months.
Shipments to original equipment customers were up 7.7 percent for 2002's third quarter and 8.3 percent for the nine-month period.
Sales in both 2002 periods decreased due to reduced volume in the replacement market, lower tire units delivered in connection with the Ford tire replacement program and an unfavorable product mix. Shipments to original equipment customers increased in the quarter and nine months as automakers increased production.
Sales resulting from the Ford tire replacement program, which ended March 31, 2002, benefited the third quarter and nine-month period of 2001, as well as the first quarter of 2002. During the third quarter of 2001, North American Tire supplied about 3 million tires for this program. For 2001's first nine months, about 4 million tires were supplied. Approximately 500 thousand tires were supplied during 2002's first quarter.
Operating income in the third quarter was negatively impacted by the decline in replacement market sales, a change in replacement market mix away from premium brands, the change in product mix toward lower-margin original equipment tires and the conclusion of the Ford tire replacement program. Income benefited from lower raw material costs and cost reduction programs.
For the nine months, operating income decreased due to lower replacement market volume, lower tire units delivered in connection with the Ford tire replacement program and the change in product mix toward lower-margin original equipment tires. These factors offset the impact of lower raw material costs.
European Union Tire Third Quarter Nine Months
(in millions) 2002 2001 2002 2001
Tire Units 15.4 15.0 45.3 45.6
Sales $846.8 $770.7 $2,398.5 $2,329.7
Operating Income 30.2 3.1 81.3 52.1
Margin 3.6% 0.4% 3.4% 2.2%
European Union Tire unit volume in 2002's third quarter was up 3 percent from 2001 and down 0.7 percent for the first nine months. Unit sales to the replacement market increased 2.5 percent for the quarter but decreased 2.7 percent for the nine months. Shipments to original equipment customers increased 4.2 percent for the quarter and 3.7 percent for the nine months.
Sales in the third quarter of 2002 increased compared to 2001 due to the favorable effect of currency translation, improved product mix and higher volumes.
For the nine months, sales increased compared to 2001 due to the favorable effect of currency translation, higher selling prices, higher original equipment volume and increased sales of high performance tires.
The company estimates that the effects of currency movements positively impacted sales by approximately $69 million in the third quarter and $103 million in the first nine months.
Operating income increased in both the 2002 quarter and nine months due to lower raw material costs, higher selling prices and currency translation.
The company estimates that the effects of currency movements positively impacted operating income by approximately $4 million in the nine-month period.
Eastern Europe, Africa, Third Quarter Nine Months
Middle East Tire
(in millions) 2002 2001 2002 2001
Tire Units 4.2 3.5 11.7 10.3
Sales $211.3 $181.7 $579.0 $523.0
Operating Income 30.3 6.2 62.6 15.6
Margin 14.3% 3.4% 10.8% 3.0%
Eastern Europe, Africa and Middle East Tire unit volume in 2002's third quarter was up 19.9 percent from 2001 and 14.4 percent for the first nine months. Unit sales to the replacement market increased 24 percent for the quarter and 19.9 percent for the nine months. Shipments to original equipment customers decreased 0.2 percent for the quarter and 5.9 percent for the nine months.
Sales in both periods increased from 2001 due to higher replacement volume and improved pricing.
The company estimates that currency movements, principally in South Africa, negatively impacted sales by approximately $7 million in the quarter and $42 million in the nine-month period.
Operating income increased in both 2002 periods due to improved factory utilization, higher replacement market volume, cost reduction programs and price increases.
Latin American Tire Third Quarter Nine Months
(in millions) 2002 2001 2002 2001
Tire Units 4.9 4.9 15.0 14.8
Sales $220.0 $246.4 $719.6 $754.8
Operating Income 24.3 19.3 75.2 61.5
Margin 11.0% 7.8% 10.5% 8.1%
Latin American Tire unit volume in 2002's third quarter was flat from the 2001 period and up slightly for the first nine months. Unit sales to the replacement market increased 6.8 percent for the quarter and 2.9 percent for the nine months. Shipments to original equipment customers decreased 14.6 percent for the quarter and 3.6 percent for the nine months.
Sales decreased in the 2002 quarter and nine months due to the negative impact of currency translation, particularly in Brazil, Argentina, Mexico and Venezuela.
The company estimates that currency movements negatively impacted sales by approximately $74 million in the 2002 quarter and $154 million in the nine months.
Operating income in both 2002 periods reflected the favorable impact of price increases, improved product mix, lower raw material costs and cost reduction programs.
The company estimates that currency movements negatively impacted operating income by approximately $14 million in the 2002 quarter and $29 million in the nine months.
Asia Tire Third Quarter Nine Months
(in millions) 2002 2001 2002 2001
Tire Units 3.3 3.1 9.6 9.2
Sales $136.5 $122.8 $393.0 $370.2
Operating Income 11.9 5.1 31.6 15.7
Margin 8.7% 4.2% 8.0% 4.2%
Asia Tire unit volume in 2002 increased 7.4 percent for the quarter and 4.5 percent for the first nine months. Unit sales to the replacement market increased 6.8 percent for the quarter and 3.8 percent for the nine months. Shipments to original equipment customers increased 9.1 percent for the quarter and 6.4 percent for the nine months.
Sales increased in both 2002 periods due to higher volume and increased selling prices.
Operating income increased in both periods due to lower raw material costs, increased selling prices, an improved product mix and cost reduction programs.
Engineered Products Third Quarter Nine Months
(in millions) 2002 2001 2002 2001
Sales $274.5 $267.4 $861.5 $867.7
Operating Income 10.9 (1.2) 38.0 16.7
Margin 4.0% (0.4)% 4.4% 1.9%
Engineered Products sales in 2002's third quarter were up from last year due to strong demand for military and custom products. Shipments of replacement products also improved, while sales of industrial products declined. For the nine months, sales decreased due to customers' efforts to reduce inventories and currency translation.
Operating income increased in the 2002 quarter due to improved pricing and cost reduction programs. For 2002's first nine months, operating income increased due to improved productivity and cost reduction programs.
Chemical Products Third Quarter Nine Months
(in millions) 2002 2001 2002 2001
Sales $237.5 $260.9 $658.2 $824.1
Operating Income 22.2 16.4 54.5 45.7
Margin 9.3% 6.3% 8.3% 5.5%
Chemical Products sales decreased in both 2002 periods primarily due to the impact of selling the Specialty Chemical business in December 2001. This business contributed approximately $35 million in sales in 2001's third quarter and $100 million in the nine-month period. Sales in 2002's nine months were also unfavorably impacted by lower net selling prices, which resulted from decreased raw material costs.
Operating income increased in the quarter due to higher volume. For the nine months, operating income increased due to higher volume, lower plant utility costs and cost reduction programs. Both periods were negatively impacted by the sale of the Specialty Chemical business, which contributed approximately $2 million in pre-tax earnings in 2001's third quarter and $12 million to the nine-month period.
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/investor/events.html or via telephone by calling (706) 634-5954 before 10:25 a.m. Presentation slides that accompany the conference call will be available on the Web site. A taped replay of the conference call will be available at 2 p.m. by calling (706) 645-9291 and entering access code 5547497.
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)
Third Quarter Nine Months
Ended Sept. 30 Ended Sept. 30
2002 2001 2002 2001
Net Sales $3,529.6 $3,677.9 $10,319.6 $10,674.6
Cost of Goods Sold 2,854.9 2,994.3 8,403.4 8,692.0
Selling, Administrative
and General Expense 556.5 568.0 1,643.7 1,681.7
Rationalizations 12.0 -- 12.0 79.0
Interest Expense 61.8 77.7 182.4 220.9
Other (Income) Expense 0.3 21.3 27.7 23.2
Foreign Currency
Exchange (26.0) (2.6) (18.8) (17.9)
Equity in Earnings
of Affiliates 2.0 4.8 8.0 14.0
Minority Interest in
Net Income of
Subsidiaries 11.7 3.1 41.2 19.6
Income (Loss)
before Income Taxes 56.4 11.3 20.0 (37.9)
United States and
Foreign Taxes on Income 22.7 2.0 20.6 (8.3)
Net Income (Loss) $33.7 $9.3 $(0.6) $(29.6)
Per Share of Common
Stock - Basic Net
Income (Loss) $0.20 $0.06 $0.00 $(0.19)
Average Shares
Outstanding 166.5 159.9 164.5 159.0
Per Share of Common
Stock - Diluted
Net Income (Loss) $0.20 $0.06 $0.00 $(0.19)
Average Shares
Outstanding 166.5 161.6 164.5 159.0
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheet
(In millions) Sept. 30 Dec. 31
Assets 2002 2001
(unaudited)
Current Assets:
Cash and Cash Equivalents $548.3 $959.4
Short Term Securities 46.6 --
Accounts and Notes Receivable,
less allowance - $96.1 ($84.9 in 2001) 1,733.6 1,486.8
Inventories:
Raw Materials 425.3 398.8
Work in Process 115.4 112.5
Finished Product 1,852.9 1,869.6
2,393.6 2,380.9
Prepaid Expenses and Other Current Assets 339.2 427.9
Total Current Assets 5,061.3 5,255.0
Long Term Accounts and Notes Receivable 222.0 143.8
Investments in Affiliates, at Equity 83.4 78.2
Other Assets 263.7 251.9
Goodwill and Other Intangible Assets 730.8 706.3
Deferred Income Tax 713.1 674.9
Deferred Charges 1,329.0 1,236.8
Properties and Plants,
Less Accumulated Depreciation -
$6,395.4 ($6,058.2 in 2001) 5,081.5 5,166.0
Total Assets $13,484.8 $13,512.9
Liabilities
Current Liabilities:
Accounts Payable - Trade $1,395.1 $1,359.2
Compensation and Benefits 909.9 897.2
Other Current Liabilities 389.0 396.1
United States and Foreign Taxes 219.9 309.3
Notes Payable 305.4 255.0
Long Term Debt due within One Year 381.6 109.7
Total Current Liabilities 3,600.9 3,326.5
Long Term Debt and Capital Leases 2,943.5 3,203.6
Compensation and Benefits 2,866.9 2,848.9
Other Long Term Liabilities 359.7 482.3
Minority Equity in Subsidiaries 804.9 787.6
Total Liabilities 10,575.9 10,648.9
Shareholders' Equity
Preferred Stock, no par value:
Authorized 50 shares, unissued -- --
Common Stock, no par value:
Authorized 300 shares
Outstanding Shares - 175.3 (163.2 in 2001)
After Deducting 20.4 Treasury
Shares (32.5 in 2001) 175.3 163.2
Capital Surplus 1,390.3 1,245.4
Retained Earnings 3,133.2 3,192.7
Accumulated Other Comprehensive Income (1,789.9) (1,737.3)
Total Shareholders' Equity 2,908.9 2,864.0
Total Liabilities and Shareholders' Equity $13,484.8 $13,512.9