Goodyear Reports Q2 & First Half 2000 Results
24 July 2000
Earnings before rationalizations are 41 cents per share, up 11% from 1999 Global tire unit volume up 20% Global sales up 14%
AKRON, Ohio - he Goodyear Tire & Rubber Company today reported net income
of $59.7 million (38 cents per share) for the second quarter of 2000. This
compares with $65.7 million (41 cents per share) in the second quarter of 1999.
Earnings before net rationalization charges were 41 cents per share
($64.9 million) for the second quarter of 2000. Earnings before
rationalization charge reversals were 37 cents per share ($59.7 million) for
the 1999 quarter. All per-share amounts are diluted.
"Second quarter 2000 earnings reflect the positive impact of the company's
Dunlop tire operations, cost containment initiatives and improved
manufacturing efficiency, offset by higher raw material costs and increasingly
competitive market conditions around the world," said Samir G. Gibara,
chairman, chief executive officer and president. "These results were further
impacted by currency movements, particularly in continental Europe and the
United Kingdom."
Worldwide, Goodyear's second quarter sales were $3.5 billion in 2000, up
14 percent from the $3 billion reported in 1999. The Dunlop operations
contributed $564 million in sales.
Tire unit volume was up 20 percent from 1999's second quarter, due
primarily to the addition of the Dunlop business. Price increases implemented
in the second quarter were met with marketplace resistance and, as a result,
negatively impacted volume in North America and Europe.
During the second quarter of 2000, the company recorded net rationalization
charges of $4.7 million ($5.2 million after tax, 3 cents per share) primarily
related to the previously announced closure of a tire plant in Italy, sales
office consolidation in Europe and the reversal of rationalization reserves
related to activities that have been completed at costs less than those
anticipated.
Net income in the second quarter of 1999 included $9.6 million ($6 million
after tax, 4 cents per share) resulting from the reversal of rationalization
charges that were no longer needed.
Sales for the first six months of 2000 were $7 billion, up 16 percent from
$6 billion in 1999. The Dunlop operations contributed $1.14 billion in sales
for the first six months.
Tire unit volume was up 20 percent from 1999's first half, due to the
addition of the Dunlop business.
Net income for the first six months of 2000 was $123.3 million (78 cents
per share) compared with $91.2 million (57 cents per share) last year. Net
income for the 2000 half included net rationalization charges of $4.7 million
($5.2 million after tax, 3 cents per share). The 1999 period included net
rationalization charges of $157.8 million ($110 million after tax, 70 cents
per share).
Global capital expenditures in 2000's second quarter were $139 million
compared with $204.6 million last year. For the six-month period, capital
expenditures totaled $266.7 million in 2000 and $353.4 million in 1999.
Depreciation and amortization expense in 2000's second quarter was
$159.8 million compared with $125.3 million in the 1999 period. For the six-
month period, depreciation and amortization expense was $320.2 million in 2000
and $265.4 million in 1999.
Interest expense rose 77 percent in the 2000 quarter and 71 percent in the
six months due to higher debt levels incurred primarily to fund the
acquisition of the Dunlop operations, and higher interest rates.
The company estimates that the impact of currency translations on
international sales had an adverse impact of approximately $74 million in the
second quarter and $127 million in the first half, due primarily to a weak
Euro versus the U.S. dollar.
"As we move into the second half of the year, we anticipate the
marketplace will remain competitive with raw material costs and the Euro
exchange rate staying at current levels. However, we see significant
opportunities to gain market share through new product introductions and
enhanced customer service. Overall, we expect second half operating earnings
to show limited improvement over the first half," Gibara said.
"Goodyear is steadfast in its strategies of profitable growth and low-cost
production coupled with a conservative financial structure. We remain
committed to reduce debt levels through working capital management, sales of
non-strategic assets and enhanced operating earnings," he added.
Business Segments
Second quarter segment operating income was $193.2 million in 2000, up 24
percent from $155.8 million in 1999. Segment operating margin was 5.3 percent
in 2000 versus 4.9 percent a year ago. For the first six months, segment
operating income was $403.1 million in 2000, increasing 4.6 percent from
$385.5 million in 1999. First half margins were 5.5 percent for 2000 and
6.1 percent for 1999. Segment operating income does not reflect
rationalization charges.
North American Tire
(in millions of Second Quarter Six Months
dollars) 2000 1999 2000 1999
Sales $1,676.9 $1,579.8 $3,330.3 $3,086.9
Operating Income 69.0 24.3 140.6 116.0
Margin 4.1% 1.5% 4.2% 3.8%
Tire unit volume in 2000's second quarter was up 5.2 percent from 1999 to
28.9 million units, and up 8.6 percent to 57.4 million units for the half due
to the addition of the Dunlop operation. The Dunlop business sold 3.1 million
units in the second quarter and 6 million units in the first half. Sales
increased in both periods because of the higher volume, but were negatively
impacted by volume shortfalls in some market segments due to competitive
pricing pressures, a change in mix to lower-priced tires and a shift towards
less-profitable channels of distribution. Operating income in both periods
reflects the addition of the Dunlop business, cost reductions and increased
manufacturing efficiencies, as well as increased raw material costs and a
less-favorable product and channel mix.
European Union Tire
(in millions of Second Quarter Six Months
dollars) 2000 1999 2000 1999
Sales $774.1 $470.8 $1,620.6 $974.3
Operating Income 39.7 35.3 83.5 80.6
Margin 5.1% 7.5% 5.2% 8.3%
Tire unit volume was up 75.8 percent to 15.2 million units for the
quarter, and 67.8 percent to 30.3 million units for the half, due to the
addition of the Dunlop operations. The Dunlop business sold 6.8 million units
in the second quarter and 12.7 million units in the first half. Sales
increased in both periods because of the higher volume, but were negatively
impacted by competitive pricing, especially in England and Germany, volume
shortfalls in some market segments and a change in mix to lower-priced tires.
Operating income increased in both periods, due to the addition of the Dunlop
business, despite being negatively impacted by the effects of currency
movements, costs associated with the ongoing relocation of tire production
from England to the European continent and closing a tire plant in Italy. The
company estimates that the effects of currency movements, especially the weak
Euro versus the U.S. dollar and British pound, reduced operating income by
approximately $11 million in the second quarter and $28 million in the
six months.
Eastern Europe, Africa
and Middle East Tire
(in millions of Second Quarter Six Months
dollars) 2000 1999 2000 1999
Sales $189.7 $189.3 $376.9 $370.5
Operating Income 12.1 11.4 27.4 21.2
Margin 6.4% 6.0% 7.3% 5.7%
Tire unit volume increased 11.3 percent for the quarter and 5.2 percent
for the half, reflecting growth in both replacement and original equipment
markets. Sales in both periods increased due to the higher volume and general
economic improvement in the region. Despite the adverse impact of an
industry-wide strike in Turkey, operating income increased in both periods
primarily due to the higher sales and increased factory utilization.
Latin America Tire
(in millions of Second Quarter Six Months
dollars) 2000 1999 2000 1999
Sales $259.8 $219.2 $513.1 $459.8
Operating Income 21.4 16.0 44.8 46.1
Margin 8.2% 7.3% 8.7% 10.0%
Tire unit volume increased 21.6 percent for the quarter and 11.2 percent
for the half, reflecting growth in both replacement and original equipment
markets. Despite adverse economic conditions and competitive pricing
pressures, sales in both periods increased on higher volume. Operating income
increased for the second quarter due to the increased volume, but was lower
for the half due to higher raw material costs.
Asia Tire Second Quarter Six Months
(in millions of dollars) 2000 1999 2000 1999
Sales $134.8 $148.8 $269.5 $289.8
Operating Income 6.3 7.8 16.1 11.4
Margin 4.7% 5.2% 6.0% 3.9%
Second quarter tire unit volume in 2000 was level with 1999. For the
half, volume was up 2.5 percent over last year. Both periods reflect the
exclusion of replacement market sales that were transferred to the company's
Japanese joint venture with Sumitomo Rubber Industries and stronger original
equipment sales. Sales decreased in both the quarter and half as a result of
the Japanese joint venture, as well as competitive pricing, a less-favorable
product mix and currency translations. Operating income decreased in the
second quarter primarily due to competitive pricing conditions in the region
and a change in product mix. For the half, operating income was up due to
higher volume.
Engineered Products Second Quarter Six Months
(in millions of dollars) 2000 1999 2000 1999
Sales $299.4 $328.7 $614.0 $637.4
Operating Income 20.7 30.8 44.2 51.3
Margin 6.9% 9.4% 7.2% 8.0%
Sales in 2000's second quarter and first half decreased primarily because
of the company's exit from the interior trim business and lower conveyor belt
sales to the mining and agriculture industries. Although the second quarter
reflected reduced demand for power transmission products in the North American
replacement market, sales were up for the first half. Operating income
decreased as a result of the lower revenues, higher raw material costs and
reduced capacity utilization.
Chemical Products Second Quarter Six Months
(in millions of dollars) 2000 1999 2000 1999
Sales $288.6 $223.2 $561.6 $451.6
Operating Income 24.0 30.2 46.5 58.9
Margin 8.3% 13.5% 8.3% 13.0%
Sales increased in both 2000 periods primarily due to price increases and
higher volume. Approximately half of Chemical Products sales are made to the
company's other business segments. Operating income declined in both periods
primarily due to increased raw material and energy costs.
Goodyear is the world's largest tire company. Headquartered in Akron,
Ohio, the company manufactures tires, engineered rubber products and chemicals
in more than 90 facilities in 27 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.
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
2000 1999 2000 1999
Net Sales $3,474.7 $3,048.7 $7,011.2 $6,039.9
Cost of Goods Sold 2,741.2 2,435.2 5,529.8 4,766.6
Selling, Administrative
and General Expenses 553.3 475.2 1,113.0 920.0
Rationalizations 4.7 (9.6) 4.7 157.8
Interest Expense 69.9 39.6 132.0 77.3
Other Expense 9.1 5.7 13.0 11.0
Foreign Currency Exchange (1.4) 1.1 3.7 (33.5)
Minority Interest in
Net Income of
Subsidiaries 10.9 6.5 27.5 11.0
Income before Income Taxes 87.0 95.0 187.5 129.7
United States and
Foreign Taxes
on Income 27.3 29.3 64.2 38.5
Net Income $59.7 $65.7 $123.3 $91.2
Per Share of Common
Stock - Basic
Net Income $0.38 $0.42 $0.79 $0.58
Average Shares
Outstanding 156.4 156.1 156.4 156.1
Per Share of Common
Stock - Diluted
Net Income $0.38 $0.41 $0.78 $0.57
Average Shares
Outstanding 158.7 159.6 158.7 158.7
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheet (unaudited)
(In millions)
June 30 Dec. 31
Assets 2000 1999
Current Assets
Cash and Cash Equivalents $236.7 $241.3
Accounts and Notes Receivable,
less allowance - $89.5 ($81.9 in 1999) 2,375.5 2,296.3
Inventories
Raw Materials 331.7 389.7
Work in Process 99.7 99.2
Finished Product 2,071.5 1,798.3
Total 2,502.9 2,287.2
Sumitomo 1.2% Convertible Note
Receivable Due 8/00 147.1 107.2
Prepaid Expenses and Other Current Assets 301.0 263.9
Total Current Assets 5,563.2 5,195.9
Long Term Accounts and Notes Receivable 94.9 97.7
Investments in Affiliates, at Equity 103.7 115.4
Other Assets 80.1 79.0
Goodwill 553.2 516.9
Deferred Charges 1,316.2 1,336.7
Properties and Plants,
Less Accumulated Depreciation - $5,707.3
($5,551.4 in 1999) 5,619.5 5,761.0
Total Assets $13,330.8 $13,102.6
Liabilities
Current Liabilities
Accounts Payable - Trade $1,311.1 $1,417.5
Compensation and Benefits 779.5 794.5
Other Current Liabilities 286.7 294.5
United States and Foreign Taxes 189.6 249.0
Notes Payable 1,478.1 862.3
Sumitomo 1.2% Convertible Note Payable Due 8/00 124.1 127.8
Long Term Debt due within One Year 197.7 214.3
Total Current Liabilities 4,366.8 3,959.9
Long Term Debt and Capital Leases 2,243.4 2,347.9
Compensation and Benefits 2,148.5 2,137.4
Other Long Term Liabilities 144.0 149.1
Minority Equity in Subsidiaries 860.8 891.2
Total Liabilities 9,763.5 9,485.5
Shareholders' Equity
Preferred Stock, no par value
Authorized 50 shares, unissued -- --
Common Stock, no par value
Authorized 300 shares
Outstanding Shares - 156.4 (156.3 in 1999)
After Deducting 39.3 Treasury Shares
(39.3 in 1999) 156.4 156.3
Capital Surplus 1,030.9 1,029.6
Retained Earnings 3,560.9 3,531.4
Accumulated Other Comprehensive Income (1,180.9) (1,100.2)
Total Shareholders' Equity 3,567.3 3,617.1
Total Liabilities and Shareholders' Equity $13,330.8 $13,102.6