Goodyear Income Continues Growth Trend
15 April 1998
Goodyear Income Continues Growth Trend
AKRON, Ohio, April 15 -- The Goodyear Tire & Rubber Company
today announced that its income before non-recurring gains and losses topped
the previous year's quarter, for the 28th consecutive time, by 8.4 percent
with diluted earnings per share climbing to $1.09 compared with $1.01 in 1997.
Chairman, CEO and President Samir G. Gibara said, "Our earnings
improvement was achieved despite severe economic conditions in Asia and a
challenging environment around the world. This outstanding performance is a
tribute to our associates, our products and our technology."
Goodyear's worldwide sales were $3.1 billion compared to $3.2 billion in
1997. The severely depressed markets in Asia weakened overall sales growth
while the translation of foreign currencies into U.S. dollars, particularly
Europe and Asia, had an unfavorable impact of $124 million.
Net income of $176.8 million or $1.11 per share diluted compared favorably
with $170.4 million or $1.08 per share diluted in 1997. All succeeding per
share amounts are diluted. The 1998 net income included a gain of $37.9
million or 24 cents per share from the sale of a latex plant in Calhoun, Ga.,
and a loss of $34.7 million or 22 cents per share associated with the
discontinued operations created by the pending sale of the All American
Pipeline System and related assets.
"These transactions represent a very significant stage in our strategy to
dispose of non-core assets and utilize the proceeds to partially fund our
growth and productivity objectives," Gibara said.
Net income for 1998 also included $10.4 million of additional expenses in
cost of goods sold ($6.9 million after taxes or 4 cents per share) related to
changing certain tire production facilities in North America to seven-day
operations in order to take advantage of market growth for higher margin
products and improve productivity.
Goodyear's consolidated worldwide tire unit sales were up slightly from
the 1997 first quarter. Domestic volume increased 2.2 percent with gains
recorded in both original equipment and replacement markets. International
volume was off slightly due primarily to a 50 percent reduction in OE unit
sales in the Asian region.
The earnings improvement in operations reflected lower raw material costs
and ongoing productivity improvement activities. Gross margin was 24.7
percent compared with 23.5 percent for the 1997 quarter.
Selling, administrative and general expense was down in dollars but
increased as a percent to sales due to the lower revenues.
Segment operating income excluding one-time gains was $328 million
compared with $313.2 million in the 1997 quarter. Operating margin improved
to 10.6 percent from 9.8 percent in 1997.
Global capital expenditures in the quarter were $118.3 million, compared
with $93.7 million in the 1997 quarter.
Depreciation expense was $124.4 million for the quarter compared with
$111.8 million in 1997.
Debt-to-debt-plus-equity was 32.7 percent at March 31, 1998, compared with
33.9 percent the prior year.
BUSINESS SEGMENTS
Consolidated segment operating income rose to $389.1 million in the 1998
first quarter compared to $313.2 million in 1997. Segment operating margin
was 12.6 percent compared to 9.8 percent in the year-ago period. The 1998
period included a gain of $61.1 million from the sale of the company's latex
plant at Calhoun, Ga.
Prior periods have been restated to reflect the pending sale of the oil
transportation segment.
TIRES FIRST QUARTER
(Dollars in millions) 1998 1997
Sales $ 2,658.7 $ 2,752.2
Operating Income 279.2 266.9
Operating Margin 10.5% 9.7%
Revenues for the 1998 quarter reflected the unfavorable translation of
international currencies into U.S. dollars and continued pricing pressures. A
slight increase in unit volume was more than offset by these factors.
Lower raw material costs and the effects of ongoing cost containment
measures benefited operating income, however, the company incurred additional
expenses of $10.4 million at certain North American tire production facilities
as it made the transition to continuous seven-day operations.
GENERAL PRODUCTS FIRST QUARTER
(Dollars in millions) 1998 1997
Sales $435.3 $456.5
Operating Income 109.9 46.3
Operating Margin 25.2% 10.1%
Engineered products sales were down due to the absence of the Jackson,
Ohio, plant, which was sold in the third quarter of 1997. Engineered products
operating income increased due to improved margins and productivity. The
company's previously announced acquisition of SAVA's engineered products
business, in Slovenia, Europe, is now in the startup mode.
Chemical sales were lower due to competitive pricing and reduced
shipments, but operating income rose $61.1 million due to the aforementioned
gain on the sale of the Calhoun, Ga., latex plant.
GEOGRAPHIC SEGMENTS
UNITED STATES FIRST QUARTER
(Dollars in millions) 1998 1997
Sales $1,669.4 $1,687.7
Operating Income 207.1 126.4
Operating Margin 12.4% 7.5%
Revenues reflected continued competitive conditions in the United States
despite higher volume. Operating income increased on lower material costs,
tight cost controls, and the gain on the sale of the latex plant. The costs
of transitioning to continuous seven-day operations at certain tire production
facilities also negatively impacted operating income.
EUROPE FIRST QUARTER
(Dollars in millions) 1998 1997
Sales $733.6 $764.5
Operating Income 90.1 79.6
Operating Margin 12.3% 10.4%
Sales reflected the negative effect of currency translations into U.S.
dollars and lower tire unit volume. Operating income was up due to improved
product mix and lower raw material costs.
LATIN AMERICA FIRST QUARTER
(Dollars in millions) 1998 1997
Sales $375.7 $383.1
Operating Income 68.5 68.3
Operating Margin 18.2% 17.8%
Sales decreased and operating income was flat despite higher unit sales of
tires and engineered products. Tire unit volume increased in both the
original equipment and replacement markets but competitive conditions exist
throughout the region.
ASIA FIRST QUARTER
(Dollars in millions) 1998 1997
Sales $137.5 $199.3
Operating Income 9.7 27.5
Operating Margin 7.1% 13.8%
Revenues and operating income decreased from the year ago period due to
continuing adverse effects of that region's economic conditions. Results also
were negatively impacted by currency translation and significantly reduced
tire unit volume.
CANADA FIRST QUARTER
(Dollars in millions) 1998 1997
Sales $177.8 $174.1
Operating Income 13.7 11.4
Operating Margin 7.7% 6.5%
Sales and operating income increased on higher unit sales of tires and
engineered products and tight cost controls.
SOURCE Goodyear Tire & Rubber Company