Goodyear Announces Q2 Results
22 July 1997
Goodyear Announces Record Second Quarter Net Income
AKRON, Ohio, July 22 -- The Goodyear Tire & Rubber Company
today announced its highest ever second-quarter net income despite the effects
of an 18-day strike by the United Steelworkers of America at 10 of its U.S.
tire and engineered products plants.
"Our associates worldwide aggressively sought to offset as much of the
strike costs as possible, and as a result, we have perpetuated our more than
six-year streak of consecutive quarter-to-previous-year-quarter improvements
in earnings from operations," said Samir G. Gibara, chairman and chief
executive officer.
"Our stock price continues to reflect the confidence of investors," Gibara
said. "Our market capitalization as of June 30 was up by $1.9 billion to
almost $9.9 billion for a total stock price return of 22.4 percent
substantially out performing the Standard & Poor's 500 and the Dow Jones
Industrial Index."
Record net income for the 1997 second quarter of $192.2 million or $1.23
per share was the second highest for any quarter in Goodyear's history, up
2.3 percent from 1996 second quarter of $187.9 million or $1.22 per share.
Goodyear's worldwide tire unit sales in the quarter rose 4.4 percent over
1996 on increased volume in all international regions. Sales for the quarter
were flat at $3.32 billion, compared to $3.33 billion in the 1996 quarter.
Revenues were adversely affected by the impact of the USWA strike and strikes
at certain plants of various U.S. original equipment manufacturers. Also
impacting revenues were the strengthening of the U.S. dollar and competitive
pricing.
For the six months, net income was $362.6 million or $2.32 per share, up
from $339.7 million or $2.20 per share. Sales of $6.55 billion compared to
$6.57 billion in 1996.
The earnings improvement in both periods reflected ongoing cost
containment measures, lower raw material costs, and a lower effective tax
rate. Cost of goods sold increased as a percent to sales in the quarter due
to strike costs, which were not fully recovered through productivity gains.
The 1996 second quarter included a net pretax gain of $1.6 million
resulting from rationalization charges totaling $31.2 million, which were
offset by a gain of $32.8 million from the sale of a business property in
Asia.
Operating cash flow in the quarter and first half improved by more than
$130 million and $310 million, respectively, from the comparable 1996 periods.
Global capital expenditures in the quarter were $136.3 million, compared
with $140 million in the 1996 quarter. For the six months, worldwide capital
expenditures were $230.7 million compared with $267.9 million in the first
half of 1996.
Depreciation expense was $121.3 million for the quarter, up from
$114.4 million in 1996. Depreciation expense for the year was $237.4 million
compared with $226 million in the 1996 period.
Debt-to-debt-plus-equity was 31.6 percent at June 30, 1997, compared with
35.9 percent the prior year, and return on equity increased to 20.8 percent
from 19.1 percent in 1996.
BUSINESS SEGMENTS
Consolidated segment operating income rose to $339.2 million in the second
quarter of 1997 compared to $318.4 million in 1996. Segment operating margin
was 10.2 percent compared to 9.6 percent in the year-ago period. The 1996
quarter included rationalization charges totaling $31.2 million.
For the year-to-date period, segment operating income increased to
$668.2 million from $629.2 million. Segment operating margin was 10.2 percent
in 1997 versus 9.6 percent in 1996.
TIRES SECOND QUARTER SIX MONTHS
(in millions) 1997 1996 1997 1996
Sales $2,829.1 $2,829.0 $5,581.2 $5,602.8
Operating Income 265.1 248.4 532.0 500.8
Margin 9.4% 8.8% 9.5% 8.9%
For the quarter, worldwide tire unit sales increased by 4.4 percent over
1996 levels. International unit sales increased by 9.8 percent over 1996, but
U.S. tire unit sales decreased slightly. Tire unit sales in the six months
increased 4 percent worldwide, with international unit sales up 6.8 percent
and U.S. sales up 1.2 percent.
Despite higher unit sales, revenues for the 1997 quarter were flat,
reflecting the strikes, unfavorable translation of international currencies
and continued pricing pressures.
Lower raw material costs and the effects of ongoing cost containment
measures benefitted operating income in both 1997 periods. The 1996 quarter
included rationalization charges totaling $26.9 million.
GENERAL PRODUCTS SECOND QUARTER SIX MONTHS
(in millions) 1997 1996 1997 1996
Sales $ 460.8 $ 466.2 $ 917.4 $ 906.0
Operating Income 58.5 51.3 104.8 93.0
Margin 12.7% 11% 11.4% 10.3%
Engineered products sales and operating income increased in both 1997
periods on higher volume, lower raw material costs and the effects of ongoing
cost containment measures. Chemical sales were lower due to reduced
shipments, but operating income rose on lower costs in both 1997 periods. The
1996 quarter included rationalization charges totaling $4.3 million.
OIL TRANSPORTATION SECOND QUARTER SIX MONTHS
(in millions) 1997 1996 1997 1996
Sales $ 25.6 $ 34.3 $ 50.1 $ 66.2
Operating Income 15.6 18.7 31.4 35.4
Margin 60.9% 54.5% 62.7% 53.5%
Sales and operating income decreased in the 1997 quarter and year to date
due primarily to lower throughput and reduced spreads in crude oil purchasing,
selling and exchanging activities. Depreciation expense was lower as a result
of the write-down of the All American Pipeline System and related assets in
the fourth quarter of 1996.
GEOGRAPHIC SEGMENTS
UNITED STATES SECOND QUARTER SIX MONTHS
(in millions) 1997 1996 1997 1996
Sales $1,720.4 $1,788.1 $ 3,432.6 $3,518.8
Operating Income 138.6 131.8 280.8 260.3
Margin 8.1% 7.4% 8.2% 7.4%
Revenues reflected lower tire unit sales, pricing pressures and reduced
volume in Engineered Products, Chemical and Oil Transportation in the 1997
quarter.
Results reflected lower raw material costs but were adversely affected by
the strikes. The 1996 quarter included rationalization charges totaling
$12.6 million.
EUROPE SECOND QUARTER SIX MONTHS
(in millions) 1997 1996 1997 1996
Sales $ 805.3 $ 766.2 $1,569.8 $1,530.0
Operating Income 91.7 87.3 171.3 166.7
Margin 11.4% 11.4% 10.9% 10.9%
Results reflected the unfavorable effects of currency translation and
competitive pricing pressures in both 1997 periods. The 1996 quarter included
rationalization charges totaling $15 million. European results include the
company's ownership interest in tire and engineered products operations in
South Africa for 1997.
LATIN AMERICA SECOND QUARTER SIX MONTHS
(in millions) 1997 1996 1997 1996
Sales $ 401.9 $ 390.4 $ 785.0 $ 771.8
Operating Income 71.8 67.2 140.1 138.4
Margin 17.9% 017.2% 17.8% 17.9%
Sales and operating income increased on higher unit sales of tires and
engineered products. The 1996 quarter included rationalization charges
totaling $3.6 million.
ASIA SECOND QUARTER SIX MONTHS
(in millions) 1997 1996 1997 1996
Sales $ 209.4 $ 215.2 $ 408.7 $ 418.2
Operating Income 22.8 25.7 50.3 51.2
Margin 10.9% 11.9% 12.3% 12.2%
Tire unit sales in Asia increased and operating income in the Asian tire
business was higher in both 1997 periods, reflecting lower raw material costs
and lower SAG. Sales and operating income in both periods decreased due to
unfavorable currency translation and lower results in natural rubber
operations.
CANADA SECOND QUARTER SIX MONTHS
(in millions) 1997 1996 1997 1996
Sales $ 178.5 $ 169.6 $ 352.6 $336.2
Operating Income 14.3 6.4 25.7 12.6
Margin 8% 3.8% 7.3% 3.7%
Sales and operating income increased on higher unit sales of tires and
engineered products.
SOURCE Goodyear Tire & Rubber Company