Goodyear reports results for third quarter, nine months
22 October 1999
Goodyear reports results for third quarter, nine months
Third Quarter Net Income is 61 Cents Per Share
Global Tire Unit Sales Increase 8.1% in Third Quarter
Dunlop Tire Integration Process Begins
AKRON, Ohio, Oct. 21 -- The Goodyear Tire & Rubber Company
today reported net income of $97.2 million (61 cents per share) for the third
quarter of 1999. This compares with $185 million ($1.17 per share) achieved
in the third quarter of 1998. All per-share amounts are diluted.
The results include $142.9 million of after-tax gains on the sale of
assets, net rationalization charges of $15.7 million after tax and operating
charges, primarily inventory write-offs, of $100.4 million after tax.
Third quarter earnings reflect under-performance in the company's North
American Tire business, including an inability to address stronger-than-
anticipated demand in North America; the impact of integrating the Dunlop tire
businesses in North America and Europe; and on-going weak economic conditions
in Latin America.
"The benefits gained from the swift integration of the Dunlop tire
businesses and the changes we are making should result in improved earnings in
the year 2000 and beyond," said Samir G. Gibara, chairman, president and chief
executive officer.
"With the addition of the Dunlop tire brand, which became available to us
in September, we are making significant changes in our global distribution
strategy," he said.
"In the United States -- the world's largest tire market -- we are
returning our flagship Goodyear brand to its position in the premium market
segment, with Dunlop occupying the mid-market range. Our Kelly-Springfield
brands will meet consumer demand in the value segment. Individual tire lines
that fall outside of this well-defined structure are being eliminated."
Worldwide, Goodyear's third quarter sales were $3.3 billion in 1999,
versus $3.2 billion in 1998. The Dunlop joint ventures contributed more than
$200 million in sales. Tire unit sales were up almost 4 million units or 8.1
percent from 1998's third quarter, reflecting the addition of the company's
Dunlop joint ventures, as well as strong performances in Europe and Asia.
While North American volume increased more than 1 million units, performance
was limited by severe capacity constraints in several product lines.
On Sept. 1, Goodyear completed a global alliance with Sumitomo Rubber
Industries Ltd. (SRI), and gained control of its Dunlop tire operations in
North America and Europe. The company made a payment to SRI of $915.5 million
on Sept. 1. As part of this alliance, Goodyear recorded, in other income, a
one-time gain of $137.8 million ($131.8 million after tax, 83 cents per share)
resulting from the creation of its European joint venture with SRI.
During the quarter, Goodyear posted operating charges totaling
$151.7 million ($100.4 million after tax, 63 cents per share), principally
related to inventory write-offs associated with the realignment of its North
American tire brand and replacement market distribution strategies and the
cost of exiting an activity.
According to Rubber Manufacturers Association data, consumer tire demand
is up 4 percent versus the same 1998 period. Demand for performance tires is
up 9 percent and 8 percent for radial light truck tires. North American light
vehicle sales will reach a record high of 18 million units this year, up from
16.9 million in 1998.
Responding to this higher-than-expected demand in North America and the
company's inability to increase production during the last two quarters, the
decision was made to resume passenger tire production at the Gadsden, Ala.,
plant. The company had planned to end tire production there during 1999.
This change resulted in a reversal of $33.4 million ($21.7 million after tax,
14 cents per share) of charges recorded in 1999's first quarter.
Also during the third quarter, the company recorded a rationalization
charge of $34.8 million ($34.8 million after tax, 22 cents per share), related
to the shutdown of a production facility in Latin America.
In the year-ago third quarter, the company recognized, in other income, a
gain of $53.2 million ($32 million after tax, 20 cents per share) related to
the disposition of real estate.
Sales for the first nine months of 1999 were $9.3 billion compared with
$9.4 billion in 1998. The negative effect of currency translation reduced
sales by an estimated $275 million in the period. Tire unit volume was up
3.8 percent in the nine-month period, led by Europe and Asia. Net income was
$188.4 million ($1.18 per share) compared with $560.8 million ($3.53 per
share) last year.
The 1999 nine months included net rationalization charges of $163.9
million ($125.7 million after tax, 80 cents per share) compared with a credit
of $29.7 million ($19.6 million after tax, 12 cents per share) in 1998. The
1998 period also included a loss of $34.7 million (22 cents per share) from
the sale of the company's discontinued oil transportation business.
Global capital expenditures in 1999's third quarter were $206.6 million
compared with $199.9 million in the 1998 period. For the nine-month period,
capital expenditures were $560.0 million in 1999 and $490.6 million in 1998.
Depreciation expense in 1999's third quarter was $140.2 million compared
with $121.4 million in the 1998 period. For the nine-month period,
depreciation expense was $393.6 million in 1999 and $351.8 million in 1998.
Business Segments
Third quarter segment operating income was $10.6 million in 1999 and $264.8
million in 1998. For the first nine months, segment operating income was
$396.1 million in 1999 and $883.3 million in 1998. Segment operating income
does not reflect the rationalization charges or the other income items in 1999
and 1998.
North American Tire Third Quarter Nine Months
(in millions of dollars) 1999 1998 1999 1998
Sales $1,622.5 $1,603.8 $4,709.4 $4,678.0
Operating Income (Loss) (108.6) 94.9 7.4 294.3
Margin NA 5.9% NA 6.3%
Tire unit sales in 1999's third quarter and first nine months were up 4.2
percent and 3.2 percent from 1998. Revenue increased in both periods on
higher unit volume. Competitive pricing and a change in product mix had a
negative impact on revenues in both periods.
Operating income was down in the quarter due to charges totaling $134.7
million primarily related to inventory write-offs associated with the
realignment of its North American replacement market distribution strategy.
Operating income in both periods reflected a change in product mix to lower-
margin tires, as well as increases in production, transportation and research
and development costs.
European Union Tire Third Quarter Nine Months
(in millions of dollars) 1999 1998 1999 1998
Sales $644.1 $514.4 $1,597.4 $1,471.7
Operating Income 40.2 38.5 124.4 147.5
Margin 6.2% 7.5% 7.8% 10.0%
Tire unit sales were up 29.8 percent for the quarter, and 12.9 percent for
the nine-month period. Sales increased as a result of increased volume and
the joint venture with SRI, but pricing remained competitive. Operating
income increased in the quarter, but was down in the nine months due to
increased costs to align production with inventory and the negative impact of
currency translations.
Eastern Europe, Africa, Third Quarter Nine Months
Middle East Tire
(in millions of dollars) 1999 1998 1999 1998
Sales $229.7 $231.9 $621.2 $649.4
Operating Income 15.6 32.9 33.2 78.8
Margin 6.8% 14.2% 5.3% 12.1%
Tire unit sales were up 6.7 percent for the quarter, and 7.4 percent for
the nine-month period. Sales and operating income fell as a result of
currency translation, competitive pricing and the earthquake in Turkey.
Operating income decreased in both periods due to the costs of programs to
align capacity with demand and reduce inventories and weak economic conditions
in the region.
Latin America Tire Third Quarter Nine Months
(in millions of dollars) 1999 1998 1999 1998
Sales $234.7 $302.6 $694.5 $965.1
Operating Income 12.5 40.1 58.6 154.0
Margin 5.3% 13.3% 8.4% 16.0%
Weak economic conditions continue to depress results in Latin America.
Tire unit sales decreased 10 percent for the quarter and 16.2 percent for the
nine-month period from 1998. Revenues in both periods were down as a result
of competitive pricing and lower volume. Operating income decreased
accordingly. Revenues and operating income were adversely affected by
currency translation.
Asia Tire Third Quarter Nine Months
(in millions of dollars) 1999 1998 1999 1998
Sales $150.0 $123.8 $439.8 $358.2
Operating Income 5.5 1.6 16.9 9.4
Margin 3.7% 1.3% 3.8% 2.6%
Gains in both the original equipment and replacement markets resulted in
third quarter and nine-month Asian tire unit sales increasing over the 1998
periods by 12.7 percent and 14.6 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. Third
quarter operating income, however, was negatively impacted by a $5.2 million
operating charge to write-off obsolete equipment in India.
Engineered Products Third Quarter Nine Months
(in millions of dollars) 1999 1998 1999 1998
Sales $297.9 $311.9 $935.3 $970.5
Operating Income 8.9 22.3 60.2 89.9
Margin 3.0% 7.1% 6.4% 9.3%
Engineered Products revenues in 1999's third quarter and first nine months
decreased primarily because of lower sales to the depressed mining industry
and the adverse economic conditions in Latin America. Operating income
decreased as a result of the lower revenues in both periods. Third quarter
operating income was further impacted by an $11.8 million charge for product
adjustments.
Chemical Products Third Quarter Nine Months
(in millions of dollars) 1999 1998 1999 1998
Sales $231.5 $236.6 $683.1 $741.3
Operating Income 36.5 34.5 95.4 109.4
Margin 15.8% 14.6% 14.0% 14.8%
Sales in the Chemical Products business decreased in 1999's third quarter
and first nine months due to competitive pricing. Operating income increased
in the third quarter, but remained below 1998 levels for the nine months.
Goodyear is the world's largest tire and rubber company. Headquartered in
Akron, Ohio, the company manufactures tires, engineered rubber products and
chemicals in more than 90 facilities in 30 countries. It has marketing
operations in almost every country around the world. Goodyear, with the
addition of its Dunlop tire joint ventures, employs more than 105,000 people
worldwide.
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) Third Quarter Nine Months
Ended Sept. 30 Ended Sept. 30
1999 1998 1999 1998
Net Sales $3,288.8 $3,191.7 $9,328.7 $9,423.2
Cost of Goods Sold 2,764.6 2,469.8 7,531.2 7,193.7
Selling, Administrative and
General Expenses 515.4 471.5 1,435.4 1,382.4
Rationalizations 6.1 -- 163.9 (29.7)
Interest Expense 46.2 41.4 123.5 105.7
Other (Income) Expense (147.3) (44.3) (136.3) (72.5)
Foreign Currency Exchange (1.3) (0.3) (34.8) (14.8)
Minority Interest in
Net Income of Subsidiaries 12.1 9.7 23.1 25.6
Income from Continuing
Operations before
Income Taxes 93.0 243.9 222.7 832.8
United States and Foreign Taxes
on Income (4.2) 58.9 34.3 237.3
Income from Continuing Operations 97.2 185.0 188.4 595.5
Discontinued Operations -- -- -- (34.7)
Net Income $97.2 $185.0 $188.4 $560.8
Per Share of Common Stock - Basic
Income from Continuing
Operations $0.63 $1.19 $1.21 $3.80
Discontinued Operations -- -- -- (0.22)
Net Income $0.63 $1.19 $1.21 $3.58
Average Shares Outstanding 156.3 156.4 156.1 156.8
Per Share of Common Stock - Diluted
Income from Continuing
Operations $0.61 $1.17 $1.18 $3.75
Discontinued Operations -- -- -- (0.22)
Net Income $0.61 $1.17 $1.18 $3.53
Average Shares Outstanding 159.5 157.8 159.0 158.7
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheet (unaudited)
(In millions) Sept. 30 Dec. 31
Assets 1999 1998
Current Assets
Cash and Cash Equivalents $ 233.4 $ 239.0
Accounts and Notes Receivable, less
allowance - $90.6 ($54.9 in 1998) 2,639.4 1,770.7
Inventories
Raw Materials 378.0 369.9
Work in Process 100.0 87.5
Finished Product 1,807.0 1,707.1
Total 2,285.0 2,164.5
Investment in Sumitomo 136.1 --
Prepaid Expenses and Other Current Assets 334.4 354.9
Total Current Assets 5,628.3 4,529.1
Long Term Accounts and Notes Receivable 172.8 173.5
Investments in Affiliates, at Equity 127.4 111.4
Other Assets 75.0 99.5
Goodwill 625.1 259.0
Deferred Charges 983.4 1,058.3
Properties and Plants,
Less Accumulated Depreciation - $5,499.2
($5,394.6 in 1998) 5,512.0 4,358.5
Total Assets $13,124.0 $10,589.3
Liabilities
Current Liabilities
Accounts Payable - Trade $1,310.5 $1,131.7
Compensation and Benefits 812.0 751.0
Other Current Liabilities 375.9 351.9
United States and Foreign Taxes 141.4 252.6
Notes Payable to Banks 1,613.8 763.3
Sumitomo Cross-Investment 123.5 --
Long Term Debt due within One Year 157.1 26.0
Total Current Liabilities 4,534.2 3,276.5
Compensation and Benefits 2,189.4 1,945.9
Long Term Debt 1,673.3 1,186.5
Other Long Term Liabilities 173.0 175.6
Minority Equity in Subsidiaries 886.7 259.0
Total Liabilities 9,456.6 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 1,029.0 1,015.9
Retained Earnings 3,525.6 3,477.8
Accumulated Other Comprehensive Income (1,043.5) (903.8)
Total Shareholders' Equity 3,667.4 3,745.8
Total Liabilities and Shareholders' Equity $13,124.0 $10,589.3