Goodyear reports record in third quarter sales
Posted: Monday, November 10, 2008 10:02 pm
Goodyear Tire & Rubber Co. has reported record third-quarter sales driven by growth in international markets.
The company’s third quarter sales of $5.2 billion increased 2 percent from last year as improved pricing, a richer product mix and strength in international markets more than offset lower volume, most notably in North America and Europe.
Also impacting sales was the 2007 divestiture of the company’s T&WA tire mounting business, which contributed sales of $145 million in last year’s third quarter.
Revenue per tire, excluding the impact of foreign currency translation, increased 8 percent over the 2007 quarter, reflecting worldwide gains in pricing and product mix generated by the company’s strategy to focus on high-value-added tires.
“Goodyear’s solid third quarter concludes a strong nine months of performance, reflecting the successful execution of our business strategies and continued strength in our international businesses,” said Robert J. Keegan, chairman and chief executive officer.
“The tire industry is facing challenging business conditions as the global financial crisis and slowing economic conditions are impacting consumer demand in all regions. Our results reflect the economic reality of weakened industry demand and the associated cost impact of production cuts we initiated during the quarter.
“Our leadership team has the experience to operate effectively under these conditions and is taking decisive actions necessary to lessen the impact of falling industry demand. In this environment, you can expect Goodyear associates to drive business innovation, aggressively target costs and advance our business strategies. The strength of our strategies and the proactive measures we are taking to address economic challenges position Goodyear well to maximize performance now and when industry demand recovers,” Keegan said.
Third-quarter 2008 income from continuing operations was $31 million (13 cents per share). This compares to $159 million (67 cents per share) last year. Goodyear had net income of $668 million ($2.75 per share) in the 2007 third quarter, including a gain of $517 million ($2.12 per share) on the sale of its former Engineered Products business. All per share amounts are diluted.
The 2008 quarter was impacted by net rationalization charges and accelerated depreciation of $46 million (19 cents per share), a loss on settlement of postretirement healthcare obligations in connection with the establishment of a Voluntary Employees’ Beneficiary Association (VEBA) of $13 million (5 cents per share), expenses related to Hurricanes Gustav and Ike of $7 million (3 cents per share), discrete net tax charges related primarily to German operations of $6 million (2 cents per share), charges related to the exit of its Moroccan business of $5 million (2 cents per share) and a gain on asset sales of $2 million (1 cent per share). All amounts are after taxes and minority interest.
The 2007 quarter was impacted by net rationalization charges and accelerated depreciation of $6 million (2 cents per share), tax expense related primarily to a German tax law change of $12 million (5 cents per share) and a gain on asset sales of $10 million (4 cents per share). All amounts are after taxes and minority interest.
Goodyear made significant progress during the third quarter on its four-point plan to achieve more than $2 billion in cost savings from 2006 through 2009.
“We have now achieved $1.6 billion in savings and are clearly on a path to significantly surpass $2 billion,” Keegan said.
During the quarter, Goodyear sought redemption of $360 million invested in the Reserve Primary Fund. This fund has temporarily frozen withdrawals. As a result, Goodyear has reclassified this $360 million in cash to other current assets. On Oct. 31, the company received $183 million from the fund.
North American Tire
North American Tire’s third-quarter sales were down $100 million compared to the 2007 period.
Impacting sales was the 2007 divestiture of the company’s T&WA tire mounting business, which contributed sales of $145 million in the third quarter of 2007. Also, tire volume declined 12.4 percent, reflecting significantly weaker market demand in both the original equipment and consumer replacement markets.
Sales in the 2008 quarter were positively impacted by improved pricing and product mix and market share gains for Goodyear-branded consumer replacement tires.
Third-quarter segment operating income decreased $85 million compared to the 2007 quarter due to lower sales and production levels, which resulted in unabsorbed overhead. Lower SAG costs were a partial offset. Pricing and product mix improvements of $109 million offset increased raw material costs of $109 million.
few sources of extra money, economists say.
“The economic slowdown is cutting sales, corporate earnings and investment earnings and higher gas prices have reduced the amount of fuel taxes paid in Tennessee,” said Matt Murray, associate director at the Center for Business and Economic Research at the University of Tennessee. “TVA payments represent only a tiny fraction of state and local budgets, but it is one of the few growing sources of money.”
TVA has made tax-equivalent payments since its founding in 1933. Most of the money goes directly to state governments. However, much of it is redistributed to local governments according to formulas in each state.
Total payments by TVA to each state for fiscal year 2008 are: Alabama, $112.4 million; Georgia, $6.9 million; Illinois, $425,029; Kentucky, $42.9 million; Mississippi, $24.2 million; North Carolina $2.6 million; Tennessee, $264.8 million; and Virginia, $222,906. Published in The Messenger 11.10.08