Second Quarter Highlights Include:
- Sales increased 6.5% to a record $5.2 billion
- Revenue per tire increased 9%
- Income from Continuing Operations up 159% to $75 million
- Segment operating income increased to $330 million
- International businesses' sales up 18%, segment operating income up 19%, both records
- Raised 4-point cost savings plan target to more than $2 billion
- Announced multi-year investment strategies to modernize facilities, increase high-value-added capacity and expand emerging markets businesses
AKRON, Ohio, July 31 /PRNewswire-FirstCall/ -- The Goodyear Tire & Rubber
Company (NYSE: GT) today reported record second quarter sales driven by the
performance of its international businesses.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050204/GTLOGO )
Goodyear's second quarter sales were a record $5.2 billion, up 6.5 percent
from last year due to improved pricing, a richer product mix and the impact of
favorable foreign currency translation, which offset lower volume in North
America and Europe. Also impacting results was the 2007 divestiture of the
company's T&WA tire mounting business, which had sales of $186 million in last
year's second quarter.
Revenue per tire, excluding the impact of foreign currency translation,
increased 9 percent over the 2007 quarter, reflecting worldwide gains in
pricing and product mix generated by the company's successful strategy to
focus on high-value-added tires. Year-over-year revenue per tire has
increased for 15 consecutive quarters.
The higher level of sales in 2008 reflects strong growth in Goodyear's
international businesses, which collectively increased sales 18 percent over
2007's second quarter and represented approximately 60 percent of total sales
in the quarter. This growth helped to offset lower sales in North American
Tire, which declined 6 percent. Compared to 2007, North American Tire's
second quarter unit volume was down 12 percent, reflecting the weak demand
environment. The decline was most notable in the consumer original equipment
market and in low-value-added segments of the consumer replacement market.
'Our strong second quarter and first half performance demonstrates the
successful execution of our strategies despite the significant economic
challenges we are facing, particularly in North America,' said Robert J.
Keegan, chairman and chief executive officer.
'Robust growth in our international operations, especially in emerging
markets, more than offset the continuing weakness in the North American
market. Our strategy to invest in emerging markets has resulted in a
profitable and growing set of businesses,' he said.
'We remain confident in our ability to manage through the challenging
near-term business conditions and are focused on maximizing business
performance given the environment,' Keegan added. 'At the same time, our
long-term investment strategy positions us to capitalize on available,
attractive market opportunities.'
Total segment operating income from continuing operations was $330
million, up 6.5 percent from the year-ago period, driven by significant
improvement in the company's international business units, each of which
achieved record second quarter results.
Improved pricing and product mix of approximately $249 million in the
second quarter more than offset increased raw material costs of approximately
$124 million.
Second quarter 2008 net income from continuing operations was $75 million
(31 cents per share). This compares to $29 million (14 cents per share) in
the year-ago quarter. Including discontinued operations, Goodyear had net
income of $56 million (26 cents per share) in the 2007 second quarter. All
per share amounts are diluted.
The 2008 quarter was impacted by after-tax rationalization and accelerated
depreciation costs of $87 million (36 cents per share) primarily related to
the planned closure of a tire plant in Australia. The second quarter of 2007
included after-tax debt retirement expenses of $45 million (20 cents per
share), rationalization and accelerated depreciation costs of $15 million (6
cents per share) and an out-of-period tax benefit to correct deferred taxes in
Colombia of $11 million (5 cents per share).
See the table at the end of this release for a list of significant items
impacting continuing operations from the 2008 and 2007 quarters.
Goodyear said it made additional progress during the second quarter on its
four-point cost savings plan and increased its target to more than $2 billion
in gross cost savings from 2006 through 2009. 'We have achieved more than
$1.4 billion in savings since beginning this plan and remain on target to
reach this higher level of savings,' Keegan said.
The company's strategy to drive profitable growth includes significant
plans to capitalize on worldwide increases in demand for its innovative, high-
value-added tires. The company also plans to build on its strength in
emerging markets in Latin America, Eastern Europe and Asia.
Business Segments
Segment operating income from continuing operations increased to $330
million representing the highest level ever achieved in a second quarter. All
three of the international businesses reported record second quarter segment
operating income, with Asia Pacific Tire setting a record for any quarter.
See the note at the end of this release for further explanation and a
segment operating income reconciliation table.
North American Tire Second Quarter Six Months
(in millions) 2008 2007 2008 2007
Tire Units 18.3 20.8 36.1 40.1
Sales $2,130 $2,276 $4,127 $4,293
Segment Operating Income 24 53 56 33
Segment Operating Margin 1.1% 2.3% 1.4% 0.8%
North American Tire's second quarter sales were down 6 percent compared to
the 2007 period. Impacting results was the 2007 divestiture of the company's
T&WA tire mounting business, which had sales of $186 million in the second
quarter of 2007. Also, tire volume declined by 2.5 million units reflecting
significantly weaker demand compared to last year, particularly in the
consumer original equipment market and in low-value-added segments of the
consumer replacement market. Sales in the 2008 quarter were positively
impacted by improved pricing and product mix, market share gains in Goodyear-
branded consumer replacement tires, and the success of the company's other
high-value-added tire lines.
Second quarter segment operating income was $24 million, down from the
2007 quarter as continued improvements in pricing, product mix and structural
costs were more than offset by the effects of market weakness, higher
inflation and costs related to modernizing factories and training new
manufacturing associates. Improved pricing and product mix of $107 million
more than offset increased raw material costs of $59 million.
Europe, Middle East Second Quarter Six Months
and Africa Tire
(in millions) 2008 2007 2008 2007
Tire Units 18.8 19.8 38.8 39.9
Sales $2,024 $1,759 $3,974 $3,447
Segment Operating Income 151 126 323 265
Segment Operating Margin 7.5% 7.2% 8.1% 7.7%
Europe, Middle East and Africa Tire's quarterly sales exceeded $2 billion
for the first time, increasing 15 percent compared to the second quarter of
2007. The increase resulted primarily from the favorable impact of foreign
currency translation and improved pricing and product mix that more than
offset lower volume resulting from softer market conditions. Sales in the
2008 quarter were positively impacted by market share gains in Goodyear- and
Dunlop-branded consumer replacement tires.
Segment operating income increased 20 percent due in part to improved
pricing and product mix of $78 million that more than offset $37 million in
higher raw material costs. Favorable foreign currency translation also
benefited the 2008 period. These positive factors were partially offset by
lower volume and higher manufacturing costs partly related to a strike in
Turkey, ongoing labor issues in France and the impact of inflation.
Latin American Tire Second Quarter Six Months
(in millions) 2008 2007 2008 2007
Tire Units 5.4 5.4 10.6 10.7
Sales $572 $458 $1,102 $868
Segment Operating Income 103 90 217 168
Segment Operating Margin 18.0% 19.7% 19.7% 19.4%
Latin American Tire's second quarter sales increased 25 percent compared
to the 2007 quarter primarily due to improved pricing and product mix and the
favorable impact of foreign currency translation. Sales in the 2008 quarter
were positively impacted by market share gains for Goodyear-branded tires in
premium market segments.
Segment operating income increased 14 percent from 2007 due to improved
pricing and product mix of $43 million that more than offset $17 million in
higher raw material costs. Higher inflation impacting manufacturing and
transportation costs as well as favorable foreign currency translation also
affected the quarter.
Asia Pacific Tire Second Quarter Six Months
(in millions) 2008 2007 2008 2007
Tire Units 5.4 4.8 10.3 9.3
Sales $513 $428 $978 $812
Segment Operating Income 52 41 101 70
Segment Operating Margin 10.1% 9.6% 10.3% 8.6%
Asia Pacific Tire's quarterly sales exceeded $500 million for the first
time, increasing 20 percent compared to the 2007 second quarter primarily due
to improved pricing and product mix, higher volume and the favorable impact of
foreign currency translation.
Segment operating income increased 27 percent in the 2008 quarter,
primarily due to improved pricing and product mix of $21 million, which more
than offset raw material cost increases of $11 million. Higher unit volume
also positively impacted the quarter.
Conference Call
Goodyear will hold an investor conference call at 10:30 a.m. today. Prior
to the commencement of the call, the company will post the financial and other
related information that will be presented on its investor relations Web site:
investor.goodyear.com.
Participating in the conference call with Keegan will be W. Mark Schmitz,
executive vice president and chief financial officer, and Darren R. Wells,
senior vice president, finance and strategy.
Investors, members of the media and other interested persons may access
the conference call on the Web site or via telephone by calling (706) 634-5954
before 10:15 a.m. A taped replay will be available at noon by calling (706)
645-9291. The replay will also remain available on the Web site.
Goodyear is one of the world's largest tire companies. Fortune magazine
named Goodyear the World's Most Admired Motor Vehicle Parts Company in its
2008 list of the World's Most Admired Companies. The publication ranked
Goodyear No. 1 in innovation, people management, use of assets and global
orientation. The company is also listed on Forbes magazine's list of the Most
Respected Companies in America and its list of the Most Trustworthy Companies
in America and CRO magazine's ranking of the 100 Best Corporate Citizens.
Goodyear employs about 70,000 people and manufactures its products in more
than 60 facilities in 25 countries around the world. For more information
about Goodyear, go to www.goodyear.com/corporate.
Certain information contained in this press release may constitute
forward-looking statements for purposes of the safe harbor provisions of The
Private Securities Litigation Reform Act of 1995. There are a variety of
factors, many of which are beyond our control, which affect our operations,
performance, business strategy and results and could cause our actual results
and experience to differ materially from the assumptions, expectations and
objectives expressed in any forward-looking statements. These factors
include, but are not limited to: actions and initiatives taken by both current
and potential competitors; increases in the prices paid for raw materials and
energy; our ability to realize anticipated savings and operational benefits
from our cost reduction initiatives or to implement successfully other
strategic initiatives; whether or not the various contingencies and
requirements are met for the establishment of a Voluntary Employees'
Beneficiary Association (VEBA) to provide healthcare benefits for current and
future USW retirees; potential adverse consequences of litigation involving
the company; pension plan funding obligations; as well as the effects of more
general factors such as changes in general market or economic conditions or in
legislation, regulation or public policy. Additional factors are discussed in
our filings with the Securities and Exchange Commission, including our annual
report on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K. In addition, any forward-looking statements represent our estimates
only as of today and should not be relied upon as representing our estimates
as of any subsequent date. While we may elect to update forward-looking
statements at some point in the future, we specifically disclaim any
obligation to do so, even if our estimates change.
Media Contact: Keith Price
330-796-1863
Analyst Contact: Pat Stobb
330-796-6704
(financial statements follow)
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statements of Operations
(unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
(In millions, except
per share amounts) 2008 2007 2008 2007
NET SALES $5,239 $4,921 $10,181 $9,420
Cost of Goods Sold 4,196 3,967 8,157 7,708
Selling, Administrative
and General Expense 735 692 1,370 1,355
Rationalizations 87 7 100 22
Interest Expense 76 120 165 245
Other (Income) and
Expense (22) 39 (28) 19
Income from Continuing
Operations before
Income Taxes and
Minority Interest 167 96 417 71
United States and Foreign
Taxes 74 51 151 114
Minority Interest 18 16 44 38
Income (Loss) from
Continuing Operations 75 29 222 (81)
Discontinued Operations - 27 - (37)
NET INCOME (LOSS) $75 $56 $222 $(118)
Income (Loss) Per
Share - Basic
Income (Loss) from
Continuing
Operations $0.31 $0.15 $0.92 $(0.43)
Discontinued Operations - 0.13 - (0.20)
Net Income (Loss)
Per Share - Basic $0.31 $0.28 $0.92 $ (0.63)
Weighted Average
Shares Outstanding 241 196 240 188
Income (Loss) Per
Share - Diluted
Income (Loss) from
Continuing Operations $0.31 $0.14 $0.91 $(0.43)
Discontinued
Operations - 0.12 - (0.20)
Net Income (Loss)
Per Share - Diluted $0.31 $0.26 $0.91 $(0.63)
Weighted Average
Shares Outstanding 243 231 244 188
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheets
(unaudited)
June 30, December 31,
(In millions) 2008 2007
Assets:
Current Assets:
Cash and Cash Equivalents $2,069 $3,463
Restricted Cash 181 191
Accounts Receivable, less
Allowance - $93 ($88 in 2007) 3,630 3,103
Inventories:
Raw Materials 675 591
Work in Process 153 147
Finished Products 3,105 2,426
3,933 3,164
Prepaid Expenses and Other Current Assets 292 251
Total Current Assets 10,105 10,172
Goodwill 784 713
Intangible Assets 165 167
Deferred Income Tax 76 83
Other Assets 436 458
Property, Plant and Equipment
less Accumulated Depreciation -
$8,730 ($8,329 in 2007) 5,928 5,598
Total Assets $17,494 $17,191
Liabilities:
Current Liabilities:
Accounts Payable-Trade $2,787 $2,422
Compensation and Benefits 930 897
Other Current Liabilities 812 753
United States and Foreign Taxes 235 196
Notes Payable and Overdrafts 300 225
Long Term Debt and Capital Leases due
within one year 101 171
Total Current Liabilities 5,165 4,664
Long Term Debt and Capital Leases 3,668 4,329
Compensation and Benefits 3,245 3,404
Deferred and Other Noncurrent Income Taxes 305 274
Other Long Term Liabilities 657 667
Minority Equity in Subsidiaries 1,101 1,003
Total Liabilities 14,141 14,341
Commitments and Contingent Liabilities
Shareholders' Equity:
Preferred Stock, no par value:
Authorized, 50 shares, unissued - -
Common Stock, no par value:
Authorized, 450 shares, Outstanding
shares - 241 (240 in 2007)
after deducting 10 treasury
shares (10 in 2007) 241 240
Capital Surplus 2,694 2,660
Retained Earnings 1,824 1,602
Accumulated Other Comprehensive Loss (1,406) (1,652)
Total Shareholders' Equity 3,353 2,850
Total Liabilities and Shareholders' Equity $17,494 $17,191
Non-GAAP Financial Measures
This earnings release presents total segment operating income and net
debt, each of which are important financial measures for the company but are
not financial measures defined by GAAP.
Total segment operating income is the sum of the individual strategic
business units' segment operating income as determined in accordance with
Statement of Financial Accounting Standards No. 131, 'Disclosures about
Segments of an Enterprise and Related Information.' Management believes that
total segment operating income is useful because it represents the aggregate
value of income created by the company's SBUs and excludes items not directly
related to the SBUs for performance evaluation purposes. See the table below
for the reconciliation of total segment operating income.
Net debt is total debt (the sum of long term debt and capital leases,
notes payable, and long-term debt and capital leases due within one year)
minus cash and cash equivalents. Management believes net debt is an important
measure of liquidity, which it uses as a tool to assess the company's capital
structure and measure its ability to meet its future debt obligations. Cash
and cash equivalents are subtracted from the GAAP measure because they could
be used to reduce our debt obligations. See the table below for the
reconciliation of net debt.
Total Segment Operating Income Reconciliation Table
(In millions)
Quarter Ended
June 30,
(unaudited)
2008 2007
Total Segment Operating Income $ 330 $ 310
Rationalizations (87) (7)
Accelerated depreciation (4) (8)
Interest expense (76) (120)
Corporate incentive and stock-based
compensation plans (11) (26)
Intercompany profit elimination (4) 4
Retained net expenses of
discontinued operations -- (9)
Other income and (expense) 22 (39)
Other (3) (9)
Income from continuing operations
before income taxes and minority
interest 167 96
US and foreign taxes 74 51
Minority interest in net income
of subsidiaries 18 16
Income from continuing operations 75 29
Discontinued operations -- 27
Net Income $ 75 $ 56
Net Debt Reconciliation Table
(In millions)
June 30, Dec. 31,
2008 2007
Long term debt and capital leases $ 3,668 $ 4,329
Notes payable and overdrafts 300 225
Long term debt and capital leases
due within one year 101 171
Total debt 4,069 4,725
Less: cash and cash equivalents 2,069 3,463
Net debt $2,000 $1,262
Change in net debt $738
Second Quarter Significant Items (After Tax and Minority Interest)
Impacting Continuing Operations
2008
- Rationalization and accelerated depreciation charges, $87 million (36
cents per share)
- Gain on asset sales, $2 million (1 cent per share)
2007
- Debt retirement expenses, $45 million (20 cents per share)
- Rationalization and accelerated depreciation charges, $15 million (6
cents per share)
- Costs related to fire at factory in Thailand, $4 million (2 cents per
share)
- Impact of USW strike due to lost sales, $5 million (2 cents per share)
- Out of period tax benefit to correct deferred taxes in Colombia, $11
million (5 cents per share)
- Gain on asset sales, $9 million (4 cents per share)
SOURCE The Goodyear Tire & Rubber Company
