Goodyear Tops '97 Net Income by 22 Percent
3 February 1999
Goodyear Tops '97 Net Income by 22 Percent
AKRON, Ohio, Feb. 3 -- The Goodyear Tire & Rubber Company
today reported fourth quarter net income of $121.5 million or
78 cents per share, versus $2 million or 1 cent per share in the year-ago
period. Net income for 1998 was $682.3 million or $4.31 per share, up
22 percent over 1997 net income of $558.7 million or $3.53 per share. All
per-share amounts are diluted.
Goodyear's 1998 fourth quarter worldwide sales were $3.2 billion compared
to $3.3 billion in 1997. Worldwide tire unit sales were up 1.8 percent over
the 1997 fourth quarter. North American tire units increased 2.6 percent, and
international units increased .9 percent, reflecting strong replacement market
sales.
"In 1998, it proved to be a challenging year," said Chairman and Chief
Executive Officer Samir G. Gibara. "Weak emerging markets, volatile foreign
currencies and brutal competitive actions impacted our results.
"In response to these challenging conditions, we accelerated our programs
to streamline operations through worldwide rationalization, implemented
effectively our global sourcing strategy, used prudent investment in product
and process technologies and made some strategic acquisitions. "
He noted that although results could have been stronger, the company's
strategy, including cost containment measures and worldwide rationalization,
minimized the impact of detrimental environmental factors.
Fourth quarter 1998 included gains from the sale of assets of $6.5 million
after taxes or 4 cents per share. The 1997 fourth period included income of
$6.3 million or 4 cents per share from the discontinued Celeron operations and
a charge for business rationalization, which totaled $176.3 million or
$1.12 per share.
The sale of various assets and the reversal of unused rationalization
reserves benefited full-year results by $96.0 million or 60 cents per share.
Net income reflected a loss of a $34.7 million or 22 cents per share on the
sale of the discontinued Celeron operations. For 1997, net income included
fourth-quarter rationalization charges and the operating results of the
discontinued Celeron operations.
Net sales for 1998 were $12.6 billion, a decrease of 3.4 percent from the
$13.1 billion recorded in 1997. Although many international currencies
strengthened against the U.S. dollar in the latter part of 1998, the company
estimated foreign currency translation impacted revenues by approximately
$470 million, offsetting the company's strategic revenue growth programs.
Weak emerging markets and an influx of inexpensive products from Asia into
Western Europe, North America and Latin America also had an impact, as did
worldwide competitive pricing pressures, lower unit sales in Asia and Latin
America and original equipment sales lost during strikes against General
Motors earlier in the year.
Goodyear worldwide tire unit sales in 1998 were up 1.7 percent over 1997
with North American units growing 2.3 percent and international units up
.9 percent.
Earnings in 1998 reflected lower raw material costs and ongoing cost
containment efforts. Cost of goods sold was lower in dollars and as a
percentage of sales.
Selling, administrative and general expenses, although lower in dollars
for the year, increased as a percent to sales in 1998.
Global capital expenditures in the quarter were $347.8 million, compared
with $321.4 million in the 1997 quarter. For the year, capital expenditures
were $838.4 million and $699 million, respectively.
Depreciation expense was $136 million for the quarter compared to
$110.3 million in 1997. For 1998 and 1997, depreciation was $487.8 million
and $453.9 million, respectively.
SEGMENTS
The Financial Accounting Standards Board issued Statement 131, "Disclosures
about Segments of an Enterprise and Related Information," which is effective
for 1998. This new accounting standard requires displaying operating segments
in the same manner that management organizes the segments within the entity to
make operating decisions and assess business performance.
Segment sales and operating income will be based on Strategic Business
Unit performance. Prior period information has been restated to this new
format.
Segment sales were $3.31 billion in the 1998 fourth quarter and
$13.14 billion for the year, compared to $3.4 billion in the 1997 fourth
quarter and $13.63 billion for the year.
Segment operating income was $242.4 million in the 1998 fourth quarter and
$1.13 billion for the year, compared to $296.1 million in the 1997 fourth
quarter and $1.2 billion for the year. Segment operating margin was
7.3 percent and 8.6 percent in the 1998 fourth quarter and year, respectively,
compared to 8.7 percent in the year-ago fourth period and 8.8 percent for all
of 1997.
Revenues and operating income of tire operations in Asia, Latin America
and Europe were impacted by currency translation and competitive pricing.
NORTH AMERICAN TIRE
FOURTH QUARTER TWELVE MONTHS
(in millions) 1998 1997 1998 1997
Sales $ 1,557.2 $ 1,554.5 $6,235.2 $ 6,207.5
Operating Income 84.4 104.3 378.6 382.5
Margin 5.4% 6.7% 6.1% 6.2%
This segment includes operations in the United States and Canada as
well as Kelly-Springfield. Results include higher unit sales but reflected
continuing pricing pressures in both periods. Operating income for both
periods decreased due to costs associated with the transition to seven-day
operations at certain production facilities and the consolidation of
warehouse operations.
EUROPE TIRE
FOURTH QUARTER TWELVE MONTHS
(in millions) 1998 1997 1998 1997
Sales $ 789.9 $783.5 $ 2,911.0 $2,927.2
Operating Income 75.8 67.4 302.1 269.1
Margin 9.6% 8.6% 10.4% 9.2%
Revenues for the quarter and year reflected higher replacement tire unit
sales. Operating income for both periods increased due to higher unit volume,
lower raw material costs, productivity improvements and the effects of
cost-containment measures.
LATIN AMERICAN TIRE
FOURTH QUARTER TWELVE MONTHS
(in millions) 1998 1997 1998 1997
Sales $ 280.5 $ 350.7 $1,245.6 $1,413.4
Operating Income 32.1 57.1 186.1 233.5
Margin 11.4% 16.3% 14.9% 16.5%
Results in both periods reflected lower original equipment tire unit sales
resulting from unfavorable economic conditions in the region.
ASIA TIRE
FOURTH QUARTER TWELVE MONTHS
(in millions) 1998 1997 1998 1997
Sales $ 143.7 $ 138.0 $ 501.8 $ 666.9
Operating Income (1.9) 1.7 7.5 58.6
Margin -- 1.2% 1.5% 8.8%
Tire unit sales were up in the quarter on strong replacement sales but
down for the year due to a decline in original equipment sales. Lower
revenues and reduced levels of capacity utilization impacted operating
earnings despite lower raw material costs and the benefits of ongoing cost
containment measures.
ENGINEERED PRODUCTS
FOURTH QUARTER TWELVE MONTHS
(in millions) 1998 1997 1998 1997
Sales $308.8 $316.8 $ 1,279.3 $1,324.0
Operating Income 21.9 33.7 111.8 130.1
Margin 7.1% 10.6% 8.7% 9.8%
Engineered Products revenues reflect lower unit sales volume resulting
from adverse economic conditions in Latin America, and operating income
decreased due to lower revenues.
CHEMICAL
FOURTH QUARTER TWELVE MONTHS
(in millions) 1998 1997 1998 1997
Sales $229.6 $261.2 $ 970.8 $ 1,089.1
Operating Income 30.1 31.9 139.6 128.3
Margin 13.1% 12.2% 14.4% 11.8%
Revenues decreased in the quarter and year due to reduced unit volume and
competitive pricing pressures. Operating income increased in the year due to
improved results in natural rubber operations.