Goodyear Reports Results for Second Quarter, First Half
21 July 1999
Goodyear Reports Results for Second Quarter, First Half
Second quarter net income is 41 cents per share
Inventories reduced $145 million during first half
North American tire unit sales increase 7.9% in second quarter
AKRON, Ohio, July 21 -- The Goodyear Tire & Rubber Company
today reported net income of $65.7 million (41 cents per share) for the second
quarter of 1999. This compares with $199 million ($1.25 per share) achieved
in the second quarter of 1998. The 1999 income is within the range announced
on June 24. All per-share amounts are diluted.
Second quarter earnings reflect the impact of weak emerging market
economies in the company's European, Latin American and Engineered Products
business units. Lower levels of capacity utilization attributable to
inventory reduction and manufacturing rationalization programs also impacted
earnings negatively.
"Our aggressive program to reduce inventories in the second quarter has
achieved the anticipated results," said Chairman and Chief Executive Officer
Samir G. Gibara. During 1999, the company has reduced its worldwide
inventories by $145 million, with $85 million of this being achieved during
the second quarter.
"The benefits of this effort and our growth initiatives should be
reflected in our results going forward," he said.
"We expect third quarter operating income to improve 30 percent to
40 percent over the second quarter period. If the economies in Latin America
stabilize, we should be able to see favorable comparisons in the fourth
quarter of 1999 compared with the same period in 1998," Gibara said.
Goodyear expects to start integrating the North American and European
Dunlop tire operations of Sumitomo Rubber Industries Ltd. by the end of the
third quarter, pending regulatory approval. The company anticipates recording
a one-time gain in connection with the closing of this transaction.
"The organizational changes we are making this month are designed to
prepare us for the Dunlop integration as well as to enhance our overall global
capabilities today, and in the 21st century," Gibara said.
Worldwide, Goodyear's second quarter sales were $3 billion in 1999, versus
$3.1 billion in 1998. The weakening of various international currencies
versus the U.S. dollar amounted to an estimated $100 million. Sales in the
first quarter of 1999 were $3 billion.
Tire unit sales were up 2 percent from 1998's second quarter, reflecting
strong performances in both the North American and Asian replacement and
original equipment markets. Strong unit shipments resulted in improved
replacement market share in North America, Europe and Asia.
During the second quarter, the company recorded a reversal of $9.6 million
of rationalization charges ($6 million after tax, 4 cents per share) from the
1996 and 1997 programs that were no longer needed. In the year-ago quarter,
the company reversed $29.7 million ($19.6 million after tax, 12 cents per
share) in rationalization charges and recorded a $17.4 million charge
($11.4 million after tax, 7 cents per share) related to the settlement of
labor lawsuits.
Sales for the first six months of 1999 were $6 billion compared with
$6.2 billion in 1998. The negative effect of currency translation reduced
first half sales by an estimated $200 million. Net income was $91.2 million
(57 cents per share) compared with $375.8 million ($2.36 per share) last year.
The 1999 first half included net rationalization charges of $157.8 million
($110 million after tax, 70 cents per share) compared with gains of
$90.8 million ($57.5 million after tax, 36 cents per share) in 1998. The 1998
half also included a loss of $34.7 million (22 cents per share) from the sale
of the company's discontinued oil transportation business.
As a result of increased focus on product and process improvements, global
capital expenditures in 1999's second quarter were $204.6 million compared
with $172.4 million in the 1998 period. For the six-month period, capital
expenditures were $353.4 million in 1999 and $290.7 million in 1998.
Depreciation expense in 1999's second quarter was $119.9 million compared with
$116.1 million in the 1998 period. For the six-month period, depreciation
expense was $253.4 million in 1999 and $230.4 million in 1998.
Business Segments
Second quarter segment operating income was $155.8 million in 1999 and
$301.9 million in 1998. Segment operating margin was 4.9 percent in 1999
versus 9.2 percent a year ago. For the first half, segment operating income
was $385.5 million in 1999 and $618.5 million in 1998. First half margins were
6.1 percent for 1999 and 9.5 percent for 1998. Segment operating income does
not reflect the rationalization charges in 1999 or the special items in 1998.
North American Tire Second Quarter Six Months
(in millions of dollars) 1999 1998 1999 1998
Sales $1,579.8 $1,550.9 $3,086.9 $3,074.2
Operating Income 24.3 89.2 116.0 199.4
Margin 1.5% 5.8% 3.8% 6.5%
Tire unit sales in 1999's second quarter and half were up 7.9 percent and
2.7 percent from 1998. Revenue increased in both periods on higher unit
volume. Competitive pricing and a change in product mix resulting from
inventory reductions had a negative impact on revenues in both periods.
Operating income was down in both periods due to a less-profitable product
mix. Inventory reduction efforts and execution issues associated with product
rationalization programs also depressed earnings in the 1999 quarter and half.
Capacity utilization was down significantly versus 1998 for both the quarter
and half.
Europe Tire Second Quarter Six Months
(in millions of dollars) 1999 1998 1999 1998
Sales $660.1 $703.3 $1,344.8 $1,374.8
Operating Income 46.7 79.1 101.8 154.9
Margin 7.1% 11.2% 7.6% 11.3%
European tire unit sales were down 1.8 percent for the quarter, but up
5.1 percent for the half. Sales fell as a result of currency translation and
competitive pricing. Operating income decreased in both periods primarily due
to increased costs to align production with inventory and weak economic
conditions in emerging markets.
Latin America Tire Second Quarter Six Months
(in millions of dollars) 1999 1998 1999 1998
Sales $219.2 $327.0 $459.8 $662.5
Operating Income 16.0 53.7 46.1 113.9
Margin 7.3% 16.4% 10.0% 17.2%
Ongoing weak economic conditions continue to depress results in Latin
America. Tire unit sales decreased 24 percent for the quarter and
19.1 percent for the half from 1998. Revenues in both periods were down as a
result. This was compounded by the adverse effects of currency translation
and competitive pricing. Operating income decreased accordingly.
Asia Tire Second Quarter Six Months
(in millions of dollars) 1999 1998 1999 1998
Sales $148.8 $117.6 $289.8 $234.4
Operating Income 7.8 4.8 11.4 7.8
Margin 5.2% 4.1% 3.9% 3.3%
Gains in both the original equipment and replacement markets resulted in
second quarter and first half Asian tire unit sales increasing over the 1998
periods by 15.9 percent and 15.7 percent, respectively. Revenues increased on
the higher volume, however, competitive pricing pressures continued in the
region. Operating income increased due to the higher tire unit sales.
Engineered Products Second Quarter Six Months
(in millions of dollars) 1999 1998 1999 1998
Sales $328.7 $329.9 $637.4 $658.6
Operating Income 30.8 34.5 51.3 67.6
Margin 9.4% 10.5% 8.0% 10.3%
Engineered Products revenues in 1999's second quarter and first half
decreased primarily because of lower sales to the depressed mining industry
and the adverse economic conditions and currency translation in Latin America.
Operating income decreased as a result of the lower revenues and higher
production costs related to adjusting inventory.
Chemical Products Second Quarter Six Months
(in millions of dollars) 1999 1998 1999 1998
Sales $223.2 $244.0 $451.6 $504.7
Operating Income 30.2 40.6 58.9 74.9
Margin 13.5% 16.6% 13.0% 14.8%
Sales and operating income in the Chemical Products business decreased in
1999's second quarter and first half due to reduced unit volume and
competitive pricing pressures.
This news release contains certain forward-looking statements based on
current expectations and assumptions that are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed by such statements. These risks and uncertainties include price and
product competition, customer demand for the company's products, the ability
to control costs and expenses, general industry and market conditions and
general domestic and international economic conditions, including interest
rate and currency fluctuations. The company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statement of Income (unaudited)
(In millions, except per share)
Second Quarter Six Months
Ended June 30 Ended June 30
1999 1998 1999 1998
Net Sales $3,048.7 $3,137.5 $6,039.9 $6,231.5
Cost of Goods Sold 2,435.2 2,392.7 4,766.6 4,723.9
Selling,
Administrative and
General Expenses 475.2 451.9 920.0 910.9
Rationalizations (9.6) (29.7) 157.8 (90.8)
Interest Expense 39.6 34.0 77.3 64.3
Other Expense 5.7 25.8 11.0 32.9
Foreign Currency
Exchange 1.1 (9.2) (33.5) (14.5)
Minority Interest in
Net Income of
Subsidiaries 6.5 7.1 11.0 15.9
Income from Continuing
Operations before
Income Taxes 95.0 264.9 129.7 588.9
United States and
Foreign Taxes
on Income 29.3 65.9 38.5 178.4
Income from Continuing
Operations 65.7 199.0 91.2 410.5
Discontinued Operations -- -- -- (34.7)
Net Income $65.7 $199.0 $91.2 $375.8
Per Share of Common
Stock -- Basic
Income from
Continuing
Operations $0.42 $1.26 $0.58 $2.61
Discontinued
Operations -- -- -- (0.22)
Net Income $0.42 $1.26 $0.58 $2.39
Average Shares
Outstanding 156.1 157.2 156.1 157.0
Per Share of Common
Stock -- Diluted
Income from
Continuing
Operations $0.41 $1.25 $0.57 $2.58
Discontinued
Operations -- -- -- (0.22)
Net Income $0.41 $1.25 $0.57 $2.36
Average Shares
Outstanding 159.6 159.3 158.7 159.2
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheet (unaudited)
(In millions)
June 30 Dec. 31
Assets 1999 1998
Current Assets
Cash and Cash Equivalents $295.2 $239.0
Accounts and Notes Receivable, less
allowance - $60.7 ($54.9 in 1998) 1,889.2 1,770.7
Inventories
Raw Materials 310.0 369.9
Work in Process 71.3 87.5
Finished Product 1,638.1 1,707.1
Total 2,019.4 2,164.5
Prepaid Expenses and Other Current Assets 339.0 354.9
Total Current Assets 4,542.8 4,529.1
Long Term Accounts and Notes Receivable 135.0 173.5
Sumitomo 1.2% Convertible Note
Receivable Due 8/00 169.6 --
Investments in Affiliates, at Equity 107.5 111.4
Other Assets 69.0 99.5
Deferred Charges 1,266.7 1,317.3
Properties and Plants,
Less Accumulated Depreciation -
$5,447.0 ($5,394.6 in 1998) 4,331.9 4,358.5
Total Assets $10,622.5 $10,589.3
Liabilities
Current Liabilities
Accounts Payable - Trade $1,101.3 $1,131.7
Compensation and Benefits 732.8 751.0
Other Current Liabilities 315.8 351.9
United States and Foreign Taxes 228.3 252.6
Notes Payable to Banks 845.8 763.3
Long Term Debt due within One Year 33.3 26.0
Total Current Liabilities 3,257.3 3,276.5
Compensation and Benefits 1,891.0 1,945.9
Long Term Debt 1,344.3 1,186.5
Sumitomo 1.2% Convertible Note
Receivable Due 8/00 108.2 --
Other Long Term Liabilities 154.1 175.6
Minority Equity in Subsidiaries 249.6 259.0
Total Liabilities 7,004.5 6,843.5
Shareholders' Equity
Preferred Stock, no par value
Authorized 50 shares, unissued -- --
Common Stock, no par value
Authorized 300 shares
Outstanding Shares -- 156.3 (155.9
in 1998) After Deducting 39.4
Treasury Shares (39.7 in 1998) 156.3 155.9
Capital Surplus 1,024.3 1,015.9
Retained Earnings 3,475.6 3,477.8
Accumulated Other Comprehensive Income (1,038.2) (903.8)
Total Shareholders' Equity 3,618.0 3,745.8
Total Liabilities and
Shareholders' Equity $10,622.5 $10,589.3