Goodyear Reports Increased Earnings From Operations
9 February 1998
Goodyear Reports Increased Earnings From Operations
AKRON, Ohio, Feb. 9 -- The Goodyear Tire & Rubber Company
announced today that it successfully closed out 1997 with a 27th consecutive
quarter-to-previous-year-quarter improvement in earnings from operations.
Income for the 1997 fourth quarter increased 9 percent to $178.3 million
or $1.14 per share, excluding rationalization charges, compared with the 1996
period of $164 million or $1.05 per share. All per-share amounts are basic.
For the year, income in 1997 was $735 million or $4.71 per share compared
with 1996 income of $674.7 million or $4.35 per share, excluding
rationalization charges for both years.
In announcing the 1997 net income results, Goodyear Chairman, Chief
Executive Officer and President Samir G. Gibara emphasized that, "This year,
we weathered currency turmoil in Southeast Asia, economic slowdowns in Europe
and Brazil, and a 19-day strike at our U.S. production facilities without
breaking our short-term stride or drawing our attention away from our long-
term ability to compete.
"Proactive attention to cost issues played a role in allowing us to
deliver improved earnings in the face of these negative factors," Gibara said.
Goodyear recorded charges in the fourth quarter of 1997 totaling
$265.2 million ($176.3 million after tax or $1.13 per share) related to the
worldwide optimization, downsizing or consolidation of certain production and
distribution facilities, and the withdrawal of support for the Formula 1
racing series.
Including rationalization charges, fourth quarter 1997 net income was
$2 million or 1 cent per share compared with a 1996 period loss of
$408.2 million or $2.63 per share after the effect of an asset writedown and
rationalization charges.
Including charges, net income in 1997 was $558.7 million or $3.58 per
share compared with 1996 net income of $101.7 million or 66 cents per share.
Net income for all of 1996 included an asset writedown of $755.6 million,
rationalization charges of $148.5 million and net gains on asset sales of
$32.1 million. These items amounted to $872 million or $573 million after tax
and $3.69 per share. For the 1996 fourth quarter, net income included charges
of $872.5 million or $572.2 million after tax or $3.68 per share.
Sales for 1997 were $13.16 billion, up slightly from $13.11 billion in
1996. Unit sales increased by 5 percent to record levels led by increases in
replacement and original equipment tire shipments and stronger volume in tires
in North America, Europe and Latin America.
Revenues were adversely affected by competitive pricing pressures
worldwide and the continued strengthening of the U.S. dollar. The company
estimates that the stronger U.S. dollar reduced sales by $380 million.
Record fourth-quarter sales of $3.28 billion compared with $3.27 billion
in the 1996 period were achieved despite competitive pricing pressures,
economic turmoil in Asia, and the strengthening of the U.S. dollar as unit
sales rose 6.5 percent from the previous year.
For the year, worldwide capital expenditures were $699 million compared
with $617.5 million in 1996. In addition, $285 million of free cash flow was
used for high-impact investments, including $156 million for acquisitions and
joint ventures and $129 million to buy back either Goodyear stock or stock in
subsidiary companies. Capital expenditures for the quarter were
$321.4 million compared with $212.1 million.
Debt as a percent of total capitalization dropped to 28.5 percent at
December 31, 1997, versus 29.6 percent at December 31, 1996, and the lowest
year-end level since 1984.
Depreciation expense for the year was $469.3 million compared with
$460.8 million in the 1996 period. Depreciation expense for the quarter was
$118.4 million compared with $119.6 million.
BUSINESS SEGMENTS
Consolidated segment operating income in the fourth 1997 quarter of
$42.7 million compared with a loss of $576.4 million in 1996. The 1997
operating income included $265.2 million in charges related to rationalization
while the 1996 operating income included $872.5 million of fourth-quarter
asset writedowns and rationalization costs.
Segment operating income for the year was $1.04 billion, including the
previously mentioned charges of $265.2 million. For 1996, comparable
operating income was $366.4 million, including $914.3 million of previously
mentioned charges.
TIRES
(In millions)
FOURTH QUARTER 12 MONTHS
1997 1996 1997 1996
Sales $2,838.8 $2,804.8 $11,269.3 $11,204.3
Operating Income (15.6) 143.8 780.4 893.3
Rationalization 259.2 94.4 259.2 131.9
Margin -- 5.1% 6.9% 8.0%
Despite higher tire unit sales, tire segment revenues for the fourth
quarter reflected continuing pricing pressures and the unfavorable translation
of international currencies. Operating income in 1997 benefited from lower
raw-material costs but was adversely affected by increased costs resulting
from a 19-day strike in the U.S.
The impact of higher tire unit sales for the year was offset by
competitive pricing worldwide and the effects of currency translation.
GENERAL PRODUCTS
(In millions)
FOURTH QUARTER 12 MONTHS
1997 1996 1997 1996
Sales $429.2 $435.0 $1,796.0 $1,781.3
Operating Income 48.7 20.3 208.2 162.9
Rationalization 6.0 22.5 6.0 26.8
Margin 11.3% 4.7% 11.6% 9.1%
Engineered products sales were up for the quarter and year on higher unit
volume of automotive and industrial rubber products resulting in part from the
acquisition of Contred in South Africa. Operating income also was up for both
the quarter and year due to increased sales volume, improved productivity and
on-going cost-containment measures.
Chemical sales decreased during the quarter and year due to lower selling
prices and reduced volume. Chemical operating income benefited from lower
raw-material costs.
OIL TRANSPORTATION
(In millions)
FOURTH QUARTER 12 MONTHS
1997 1996 1997 1996
Sales $16.2 $30.3 $89.8 $127.2
Operating Income 9.6 (740.5) 55.8 (689.8)
Asset Writedown -- 755.6 -- 755.6
Margin 59.3% -- 62.1% --
Operating income in both 1997 periods reflected lower throughput and the
average distance oil was transported, as well as reduced spreads in crude oil
purchasing, selling and exchanging activities.
GEOGRAPHIC SEGMENTS
UNITED STATES
(In millions) FOURTH QUARTER 12 MONTHS
1997 1996 1997 1996
Sales $1,690.6 $1,708.1 $6,920.8 $7,009.9
Operating Income 40.9 (693.4) 491.2 (296.7)
Rationalization 113.6 826.0 113.6 845.3
Margin 2.4% -- 7.1% --
Results for the quarter reflected a 4 percent increase in tire unit sales
and increased shipments of engineered products, but were adversely affected by
competitive pricing pressures and reduced volume in chemical products and the
oil pipeline business.
For the year, results reflected lower raw material costs, lower selling,
administrative and general expenses, and the effects of on-going cost
containment measures.
EUROPE
(In millions) FOURTH QUARTER 12 MONTHS
1997 1996 1997 1996
Sales $840.5 $802.3 $3,160.8 $3,059.8
Operating Income (18.8) 47.2 214.9 302.0
Rationalization 95.1 14.4 95.1 29.4
Margin -- 5.9% 6.8% 9.9%
Results in 1997 reflected the adverse effects of translation and
competitive pricing pressures, and benefited from increased unit volume, lower
raw material costs and the inclusion of South Africa.
LATIN AMERICA
(In millions) FOURTH QUARTER 12 MONTHS
1997 1996 1997 1996
Sales $386.8 $376.8 $1,575.0 $1,527.5
Operating Income 18.7 47.0 224.2 246.0
Rationalization 44.5 18.3 44.5 24.0
Margin 4.8% 12.5% 14.2% 16.1%
Sales increased in the quarter and year on higher unit sales of tires and
engineered products. Operating income in both 1997 periods reflected lower
raw material costs.
ASIA
(In millions) FOURTH QUARTER 12 MONTHS
1997 1996 1997 1996
Sales $162.4 $215.9 $772.7 $845.4
Operating Income (6.6) 25.1 65.3 99.3
Rationalization 8.0 -- 8.0 1.8
Margin -- 11.6% 8.5% 11.7%
Higher tire unit sales for the year were more than offset by the negative
impact of currency translations, severe economic conditions in many countries
in the region, competitive pricing pressures and lower results in natural
rubber operations.
CANADA
(In millions) FOURTH QUARTER 12 MONTHS
1997 1996 1997 1996
Sales $203.9 $167.0 $725.8 $670.2
Operating Income 8.5 (2.3) 48.8 15.8
Rationalization 4.0 13.8 4.0 13.8
Margin 4.2% -- 6.7% 2.4%
Results reflected higher tire and engineered product unit sales, lower raw
material costs and reduced selling, administrative and general costs.
SOURCE The Goodyear Tire & Rubber Company