Goodyear Sets Third Quarter Net Income Record
21 October 1997
Goodyear Sets Third Quarter Net Income Record
AKRON, Ohio, Oct. 21 -- The Goodyear Tire & Rubber Company
today announced its highest ever third-quarter net income despite competitive
tire pricing pressures worldwide and the unfavorable effects of the
strengthening U.S. dollar on the translation of other currencies.
Net income for the 1997 third quarter of $194.1 million or $1.25 per share
was up more than 14 percent from the 1996 third quarter's $170.2 million or
$1.09 per share, marking the 26th consecutive quarter-to-previous-year-quarter
improvement in earnings from operations.
Goodyear's worldwide tire unit sales in the quarter rose 7.4 percent over
1996 on increased volume in North America and all international regions.
Volume increased in both the original equipment and replacement markets.
Sales for the quarter were $3.32 billion, compared with $3.27 billion in
the 1996 quarter. Revenues were adversely affected by competitive pricing and
currency translation. Revenues would have been $127 million higher if
international sales had been translated at the exchange rates in effect during
the third quarter of 1996.
For the nine months, net income was $556.7 million or $3.57 per share, up
from $509.9 million or $3.29 per share. Sales of $9.87 billion compared with
$9.84 billion in 1996.
The earnings improvement in both periods reflected lower raw material
costs and ongoing cost containment measures.
The company is actively managing all elements of the income statement,
which has contributed to improving the ratio of net income to sales, according
to Samir G. Gibara, chairman and chief executive officer.
Interest expense decreased in both periods due to average lower debt,
while foreign currency exchange gains in both periods were the result of
hedging strategies.
In addition, Goodyear's effective tax rate was lower as a result of third-
quarter events that reduced U.S. taxes on foreign-source income.
Operating cash flow in the 1997 quarter and nine months was $285.3 million
and $534 million respectively, compared with $375 million for the quarter and
$312 million in the 1996 periods.
Global capital expenditures in the quarter were $146.9 million, compared
with $137.5 million in the 1996 quarter. For the nine months, worldwide
capital expenditures were $377.6 million compared with $405.4 million in the
1996 period.
Depreciation expense was $113.5 million for the quarter, down from
$115.2 million in 1996. Depreciation expense for the nine months was
$350.9 million compared with $341.2 million in 1996.
Debt-to-debt-plus-equity was 29.2 percent at September 30, compared with
33.2 percent the prior year, and return on equity increased to 21 percent from
18.3 percent in 1996.
Market capitalization has been closing in on the $11 billion mark, up
about $3 billion from the end of 1996.
"Goodyear continued its trend of earnings growth in the third quarter
through the individual and collective dedication by our associates to quality,
cost containment and sustainable, profitable growth," Gibara said.
BUSINESS SEGMENTS
Consolidated segment operating income rose to $333.5 million in the third
quarter of 1997 compared to $313.6 million in 1996. Segment operating margin
was 10 percent compared with 9.6 percent in the year-ago period.
For the year-to-date period, segment operating income increased to
$1 billion from $942.8 million. Segment operating margin was 10.1 percent in
1997 versus 9.6 percent in 1996.
TIRES
(In millions) THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
Sales $2,849.3 $2,796.7 $8,430.5 $8,399.5
Operating Income 264.0 248.7 796.0 749.5
Margin 9.3% 8.9% 9.4% 8.9%
For the quarter, worldwide tire unit sales increased by 7.4 percent over
1996 levels. International unit sales increased by 11.7 percent over 1996,
and U.S. tire unit sales increased 3.4 percent. Tire unit sales in the nine
months increased 4.4 percent worldwide, with international unit sales up
7.9 percent and U.S. sales up 1.2 percent.
Revenues for the 1997 quarter increased on higher tire unit sales, but
were adversely affected by continued pricing pressures and the unfavorable
translation of international currencies.
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 $10.7 million.
GENERAL PRODUCTS
(In millions) THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
Sales $449.4 $440.3 $1,366.8 $1,346.3
Operating Income 54.7 49.6 159.5 142.6
Margin 12.2% 11.3% 11.7% 10.6%
Engineered products sales and operating income increased in both 1997
periods on higher volume and improved productivity. Chemical sales were lower
due to pricing pressures and reduced shipments, but operating income rose on
lower costs in both 1997 periods.
OIL TRANSPORTATION
(In millions) THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
Sales $23.5 $30.7 $73.6 $96.9
Operating Income 14.8 15.3 46.2 50.7
Margin 63.0% 49.8% 62.8% 52.3%
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
(In millions) THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
Sales $1,797.6 $1,783.0 $5,230.2 $5,301.8
Operating Income 169.5 136.4 450.3 396.7
Margin 9.4% 7.7% 8.6% 7.5%
Revenues increased on higher tire unit sales, although pricing pressures
and reduced volume in Chemical Products and Oil Transportation had an adverse
impact on results.
U.S. operating income increased on lower raw material costs and
productivity improvements. The 1996 quarter included rationalization charges
totaling $6.8 million.
EUROPE
(In millions) THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
Sales $750.5 $727.5 $2,320.3 $2,257.5
Operating Income 62.4 88.1 233.7 254.8
Margin 8.3% 12.1% 10.1% 11.3%
While sales increased on higher tire unit volume, results reflected the
unfavorable effects of currency translation and competitive pricing pressures
in both 1997 periods.
LATIN AMERICA
(In millions) THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
Sales $403.2 $378.9 $1,188.2 $1,150.7
Operating Income 65.4 60.6 205.5 199.0
Margin 16.2% 16.0% 17.3% 17.3%
Sales and operating income increased on higher unit sales of tires and
engineered products and lower raw material costs. The 1996 quarter included
rationalization charges totaling $2.1 million.
ASIA
(In millions) THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
Sales $201.6 $211.3 $610.3 $629.5
Operating Income 21.6 23.0 71.9 74.2
Margin 10.7% 10.9% 11.8% 11.8%
Despite higher unit sales, revenues and operating income in both periods
decreased due to unfavorable currency translation and lower results in natural
rubber operations. The 1996 quarter included rationalization charges totaling
$1.8 million.
CANADA
(In millions) THIRD QUARTER NINE MONTHS
1997 1996 1997 1996
Sales $169.3 $167.0 $521.9 $503.2
Operating Income 14.6 5.5 40.3 18.1
Margin 8.6% 3.3% 7.7% 3.6%
Improved margins and lower selling, administrative and general expenses
contributed to the improvement in operating income in both periods.
SOURCE Goodyear Tire & Rubber Company