Goodyear Reports First Quarter Results, Announces Rationalizations
21 April 1999
Goodyear Reports First Quarter Results, Announces Rationalizations
Net income before rationalization charges is 90 cents per share
$150 million in annual savings anticipated from rationalizations
AKRON, Ohio, April 21 -- The Goodyear Tire & Rubber Company
today reported net income before rationalization charges of $141.5 million
(90 cents per share) for the first quarter of 1999. This compares to
$173.6 million ($1.09 per share) in the 1998 quarter. All per-share amounts
are diluted.
During the 1999 quarter, Goodyear curtailed production to better align its
inventories and continued to confront weak economic conditions in emerging
markets around the world.
Worldwide, first quarter sales were $3 billion in 1999, versus
$3.1 billion in 1998. The strengthening of the U.S. dollar versus
international currencies amounted to an estimated $100 million, accounting for
the decline in revenues.
The company recorded rationalization charges of $167.4 million
($116 million after tax, or 74 cents per share) as part of its plan to be the
low-cost producer of the three global tiremakers. When fully implemented, the
rationalization programs are expected to yield annual savings of about
$150 million and reduce employment by approximately 4,200.
"Our cost leadership strategy is not only focused on better utilizing our
low-cost manufacturing operations around the world, but also on making our
global production capability more cost competitive," said Chairman and Chief
Executive Officer Samir G. Gibara.
"Our second quarter results will continue to be negatively impacted by the
completion of our inventory realignment program and the lingering weakness in
emerging market economies," he added. "However, the benefits of our growth
and rationalization initiatives, and the progressive economic recovery in
emerging markets, should be reflected in the company's second-half results."
After recording the rationalization charges, Goodyear's net income for the
first quarter of 1999 was $25.5 million (16 cents per share), down from
$176.8 million ($1.11 per share) a year ago. The 1998 first quarter included
special items consisting of a gain of $37.9 million (24 cents per share) from
the sale of a latex plant in Calhoun, Ga., and a loss of $34.7 million
(22 cents per share) from the company's discontinued All American Pipeline and
Celeron operations.
Foreign currency exchange increased pre-tax income by $34.6 million in
1999, principally related to Brazil.
Capital expenditures for the quarter were $148.8 million, compared to
$118.3 million in the 1998 period as the company continued its focus on
productivity and quality improvements.
Depreciation expense was $133.5 million in the 1999 quarter, up from
$114.3 million a year ago.
Business Segments
First quarter segment operating income was $229.7 million in 1999 and
$316.6 million in 1998. Segment operating margin was 7.4 percent in 1999
versus 9.8 percent a year ago. Operating income does not reflect the
rationalization charges in 1999 or the special items in 1998. Worldwide unit
sales were up 1 percent versus 1998, despite a 2.3 percent decrease in North
America. International unit sales were up 5.4 percent.
North American Tire First Quarter
(in millions of dollars) 1999 1998
Sales $1,507.1 $1,523.3
Operating Income 91.7 110.2
Margin 6.1% 7.2%
Tire unit sales in 1999 were down 2.3 percent from 1998, principally as a
result of the company's strategy to put greater emphasis on a more-profitable
product mix. Revenues for the quarter were comparable to 1998, reflecting the
impact of a stronger U.S. dollar on Canadian sales.
The previously mentioned rationalization charges include $95.5 million for
initiatives at North American Tire plants in Gadsden, Ala., and Freeport,
Ill., that will reduce employment at these locations by 1,600 and annual
capacity by almost nine million units. These programs are anticipated to
result in annual savings of $100 million.
Europe Tire First Quarter
(in millions of dollars) 1999 1998
Sales $684.7 $671.5
Operating Income 55.1 75.8
Margin 8.0% 11.3%
Led by strong volume in the replacement market, European tire unit sales
increased over 1998. Revenue grew in 1999 as a result of the higher volume.
Revenue in both periods was hurt by the effects of currency translation and
competitive pricing. Operating income decreased in 1999 primarily due to
increased production costs, competitive pricing and lower income in Turkey and
South Africa.
The rationalization charges include $8.8 million for planned reductions in
employment levels in the region related to production realignment and
redundancy programs. Employment will be reduced by almost 300. Annual cost
savings are expected to total $4 million.
Latin America Tire First Quarter
(in millions of dollars) 1999 1998
Sales $240.6 $335.5
Operating Income 30.1 60.2
Margin 12.5% 17.9%
Latin American tire unit sales decreased from 1998. Revenues in 1999 were
down as a result of the lower unit sales resulting from the continuing
unfavorable economic conditions in the region, the adverse effects of currency
translation and competitive pricing. Operating income decreased accordingly.
The rationalization charges include $42.5 million for productivity
improvements that result in the reduction of 1,500 associates in Latin
America. Annualized savings of $40 million are anticipated. These actions
are expected to improve competitiveness and allow the company to better
utilize the region's manufacturing operations as an export base.
Asia Tire First Quarter
(in millions of dollars) 1999 1998
Sales $141.0 $116.8
Operating Income 3.6 3.0
Margin 2.6% 2.6%
Gains in both the original equipment and replacement markets resulted in
Asian tire unit sales increasing over the 1998 period. Revenues increased on
the higher volume. Competitive pricing pressures continued in the region.
Operating income increased due to the higher tire unit sales.
Engineered Products First Quarter
(in millions of dollars) 1999 1998
Sales $308.7 $328.7
Operating Income 20.5 33.1
Margin 6.6% 10.1%
Engineered Products revenues in 1999 decreased primarily because of lower
sales to the depressed mining industry and the effects of currency
translation. Operating income decreased as a result of the lower revenues and
higher production costs related to adjusting inventory.
Chemical Products First Quarter
(in millions of dollars) 1999 1998
Sales $228.4 $260.7
Operating Income 28.7 34.3
Margin 12.6% 13.2%
Revenues in the Chemical Products business decreased in the 1999 quarter
due to reduced unit volume and competitive pricing pressures. Operating
income was down primarily because of the lower revenues.
The previously mentioned rationalization charges include $20.6 million
that was recorded for programs underway in the company's Engineered Products,
Chemical Products and Asia Tire segments and corporate operations. It is
anticipated that these programs will reduce employment by 800.
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statement of Income (unaudited)
(Millions of dollars, except per share) Three Months Ended March 31
1999 1998
Net Sales $2,991.2 $3,094.0
Cost of Goods Sold 2,331.4 2,331.2
Selling, Administrative and General Expenses 444.8 459.0
Rationalizations 167.4 (61.1)
Interest Expense 37.7 30.3
Other Expense 5.3 7.1
Foreign Currency Exchange (34.6) (5.3)
Minority Interest in Net Income of Subsidiaries 4.5 8.8
Income From Continuing Operations Before
Income Taxes 34.7 324.0
United States and Foreign Taxes on Income 9.2 112.5
Income From Continuing Operations 25.5 211.5
Discontinued Operations -- (34.7)
Net Income $25.5 $176.8
Per Share of Common Stock -- Basic
Income from Continuing Operations $0.16 $1.35
Discontinued Operations -- (0.22)
Net Income $0.16 $1.13
Average Shares Outstanding 156.0 156.8
Per Share of Common Stock -- Diluted
Income from Continuing Operations $0.16 $1.33
Discontinued Operations -- (0.22)
Net Income $0.16 $1.11
Average Shares Outstanding 157.8 159.0
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheet (unaudited)
(Millions of dollars) March 31 Dec. 31
Assets 1999 1998
Current Assets
Cash and Cash Equivalents $191.0 $239.0
Accounts and Notes Receivable,
less allowance - $55.3 ($54.9 in 1998) 1,930.2 1,770.7
Inventories
Raw Materials 302.7 369.9
Work in Process 82.8 87.5
Finished Product 1,718.9 1,707.1
Total 2,104.4 2,164.5
Prepaid Expenses and Other Current Assets 327.5 354.9
Total Current Assets 4,553.1 4,529.1
Long Term Accounts and Notes Receivable 146.3 173.5
Sumitomo 1.2% Convertible Note Receivable Due 8/00 110.4 --
Investments in Affiliates, at Equity 109.1 111.4
Other Assets 114.1 99.5
Deferred Charges 1,343.5 1,317.3
Properties and Plants,
Less Accumulated Depreciation -
$5,367.0 ($5,394.6 in 1998) 4,242.0 4,358.5
Total Assets $10,618.5 $10,589.3
Liabilities
Current Liabilities
Accounts Payable - Trade $1,075.1 $1,131.7
Compensation and Benefits 726.1 751.0
Other Current Liabilities 383.6 351.9
United States and Foreign Taxes 220.6 252.6
Notes Payable to Banks 846.0 763.3
Long Term Debt due within One Year 22.1 26.0
Total Current Liabilities 3,273.5 3,276.5
Compensation and Benefits 1,906.1 1,945.9
Long Term Debt 1,366.0 1,186.5
Sumitomo 1.2% Convertible Note Payable Due 8/00 110.4 --
Other Long Term Liabilities 146.4 175.6
Minority Equity in Subsidiaries 247.4 259.0
Total Liabilities 7,049.8 6,843.5
Shareholders' Equity
Preferred Stock, no par value
Authorized 50,000,000 shares, unissued -- --
Common Stock, no par value
Authorized 300,000,000 shares
Outstanding Shares -- 155,990,154
(155,943,535 in 1998) After Deducting
39,688,514 Treasury Shares
(39,735,133 in 1998) 156.0 155.9
Capital Surplus 1,016.6 1,015.9
Retained Earnings 3,456.4 3,477.8
Accumulated Other Comprehensive Income (1,060.3) (903.8)
Total Shareholders' Equity 3,568.7 3,745.8
Total Liabilities and Shareholders' Equity $10,618.5 $10,589.3