<PAGE> 1
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
COMMISSION FILE NUMBER: 1-1927
THE GOODYEAR TIRE & RUBBER COMPANY
(Exact name of Registrant as specified in its charter)
OHIO 34-0253240
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1144 EAST MARKET STREET, AKRON, OHIO 44316-0001
(Address of Principal Executive Offices) (Zip Code)
(330) 796-2121
(Registrant's Telephone Number, Including Area Code)
-----------------------------------
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
---- ----
-----------------------------------
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Number of Shares of Common Stock,
Without Par Value, Outstanding at March 31, 1999: 155,990,154
===============================================================================
<PAGE> 2
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Unaudited
(In millions, except per share)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
--------- ---------
<S> <C> <C>
NET SALES $ 2,991.2 $ 3,094.0
Cost of Goods Sold 2,331.4 2,331.2
Selling, Administrative and General Expense 444.8 459.0
Rationalizations 167.4 (61.1)
Interest Expense 37.7 30.3
Other Expense 5.3 7.1
Foreign Currency Exchange (34.6) (5.3)
Minority Interest in Net Income of Subsidiaries 4.5 8.8
--------- ---------
Income from Continuing Operations before Income Taxes 34.7 324.0
United States and Foreign Taxes on Income 9.2 112.5
--------- ---------
INCOME FROM CONTINUING OPERATIONS 25.5 211.5
Discontinued Operations -- (34.7)
--------- ---------
NET INCOME 25.5 176.8
Retained Earnings at Beginning of Period 3,477.8 2,983.4
CASH DIVIDENDS (46.9) (47.0)
--------- ---------
Retained Earnings at End of Period $ 3,456.4 $ 3,113.2
========= =========
PER SHARE OF COMMON STOCK - BASIC:
INCOME FROM CONTINUING OPERATIONS $ 0.16 $ 1.35
Discontinued Operations -- (0.22)
--------- ---------
NET INCOME $ 0.16 $ 1.13
========= =========
Average Shares Outstanding 156.0 156.8
PER SHARE OF COMMON STOCK - DILUTED:
INCOME FROM CONTINUING OPERATIONS $ 0.16 $ 1.33
Discontinued Operations -- (0.22)
--------- ---------
NET INCOME $ 0.16 $ 1.11
========= =========
Average Shares Outstanding 157.8 159.0
CASH DIVIDENDS PER SHARE $ 0.30 $ 0.30
========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 1 -
<PAGE> 3
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Unaudited
<TABLE>
<CAPTION>
(Dollars in millions)
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS: -- --
CURRENT ASSETS:
Cash and cash equivalents $ 191.0 $ 239.0
Accounts and notes receivable,
less allowance - $55.3 ($54.9 in 1998) 1,930.2 1,770.7
Inventories:
Raw materials 302.7 369.9
Work in process 82.8 87.5
Finished product 1,718.9 1,707.1
--------- ---------
2,104.4 2,164.5
Prepaid expenses and other current assets 327.5 354.9
--------- ---------
TOTAL CURRENT ASSETS 4,553.1 4,529.1
Long Term Accounts and Notes Receivable 146.3 173.5
Sumitomo 1.2% Convertible Note Receivable Due 8/00 110.4 --
Investments in Affiliates, at equity 109.1 111.4
Other Assets 114.1 99.5
Deferred Charges 1,343.5 1,317.3
Properties and Plants,
less accumulated depreciation - $5,367.0 ($5,394.6 in 1998) 4,242.0 4,358.5
--------- ---------
TOTAL ASSETS $10,618.5 $10,589.3
========= =========
LIABILITIES:
CURRENT LIABILITIES:
Accounts payable - trade $ 1,075.1 $ 1,131.7
Compensation and benefits 726.1 751.0
Other current liabilities 383.6 351.9
United States and foreign taxes 220.6 252.6
Notes payable to banks 846.0 763.3
Long term debt due within one year 22.1 26.0
--------- ---------
TOTAL CURRENT LIABILITIES 3,273.5 3,276.5
Compensation and Benefits 1,906.1 1,945.9
Long Term Debt 1,366.0 1,186.5
Sumitomo 1.2% Convertible Note Payable Due 8/00 110.4 --
Other Long Term Liabilities 146.4 175.6
Minority Equity in Subsidiaries 247.4 259.0
--------- ---------
TOTAL LIABILITIES 7,049.8 6,843.5
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value:
Authorized 50,000,000 shares, unissued -- --
Common Stock, no par value:
Authorized 300,000,000 shares
Outstanding shares - 155,990,154 (155,943,535 in 1998)
after deducting 39,688,514 treasury shares (39,735,133 in 1998) 156.0 155.9
Capital Surplus 1,016.6 1,015.9
Retained Earnings 3,456.4 3,477.8
Accumulated Other Comprehensive Income (1,060.3) (903.8)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 3,568.7 3,745.8
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,618.5 $10,589.3
========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-2-
<PAGE> 4
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Unaudited
<TABLE>
<CAPTION>
(In millions) Accumulated Other
Comprehensive Income
------------------------
Common Capital Retained Foreign Minimum Total
Stock Surplus Earnings Currency Pension Shareholders'
Translation Liability Equity
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 155.9 $ 1,015.9 $ 3,477.8 $ (877.6) $ (26.2) $ 3,745.8
COMPREHENSIVE INCOME FOR 1999:
NET INCOME 25.5
FOREIGN CURRENCY TRANSLATION (161.1)
MINIMUM PENSION LIABILITY 4.6
TOTAL COMPREHENSIVE INCOME (131.0)
Cash dividends (46.9) (46.9)
Common stock transactions 0.1 0.7 0.8
-------------------------------------------------------------------------------
Balance at March 31, 1999 $ 156.0 $ 1,016.6 $ 3,456.4 $(1,038.7) $ (21.6) $ 3,568.7
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income
------------------------
Common Capital Retained Foreign Minimum Total
Stock Surplus Earnings Currency Pension Shareholders'
Translation Liability Equity
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 156.6 $ 1,061.6 $ 2,983.4 $ (778.0) $ (28.1) $ 3,395.5
COMPREHENSIVE INCOME FOR 1998:
NET INCOME 176.8
FOREIGN CURRENCY TRANSLATION (15.0)
MINIMUM PENSION LIABILITY (1.7)
TOTAL COMPREHENSIVE INCOME 160.1
Cash dividends (47.0) (47.0)
Common stock transactions 0.6 24.0 24.6
------------------------------------------------------------------------------------
Balance at March 31, 1998 $ 157.2 $ 1,085.6 $ 3,113.2 $ (793.0) $ (29.8) $ 3,533.2
====================================================================================
</TABLE>
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE> 5
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED
MARCH 31,
1999 1998
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: -- --
NET INCOME $ 25.5 $176.8
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation 133.5 114.3
Rationalizations 116.0 --
Discontinued operations -- 42.9
Asset sales -- (37.9)
Changes in operating assets and liabilities, net of acquisitions, asset
sales and noncash rationalizations:
Accounts and notes receivable (226.3) (195.5)
Inventories (0.5) (268.8)
Accounts payable-trade (24.5) (102.9)
Other assets and liabilities (124.5) (80.9)
------ ------
Total adjustments (126.3) (528.8)
------ ------
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES (100.8) (352.0)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (148.8) (118.3)
Asset acquisitions -- (58.9)
Asset sales -- 73.5
Other transactions (47.7) (0.8)
------ ------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (196.5) (104.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term debt incurred 380.8 185.3
Short term debt paid (70.0) (9.6)
Long term debt incurred 14.7 309.5
Long term debt paid (16.1) (103.7)
Common stock issued 0.7 24.6
Dividends paid (46.9) (47.0)
------ ------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 263.2 359.1
Effect of Exchange Rate Changes on Cash and Cash Equivalents (13.9) (0.9)
------ ------
Net Change in Cash and Cash Equivalents (48.0) (98.3)
Cash and Cash Equivalents at Beginning of the Period 239.0 258.6
------ ------
Cash and Cash Equivalents at End of the Period $191.0 $160.3
====== ======
</TABLE>
The accompanying notes are an integral part of this financial statement.
-4-
<PAGE> 6
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
All per share amounts in these Notes to Financial Statements are diluted
unless otherwise indicated.
RATIONALIZATIONS
- ----------------
1999 PROGRAM - As a result of continued competitive conditions in the markets
served by the Company and continuing unfavorable economic conditions in Latin
America and Asia, a number of rationalization actions were approved in the first
quarter of 1999 to reduce costs and increase productivity and efficiency. These
actions consisted primarily of the downsizing and consolidation of tire
manufacturing facilities at Gadsden, Alabama and Freeport, Illinois and 12 other
production facilities in Europe, South Africa and Latin America. A charge of
$167.4 million ($116.0 million after tax or $.74 per share) was recorded, of
which $28.4 million related to non-cash writeoffs and $139.0 million related to
future cash outflows, primarily for associate severance costs. The remaining
balance of these provisions totaled $139.5 million at March 31, 1999.
The Company recorded a charge of $130.6 million for the release of
approximately 4,000 associates around the world. Most of the associates to be
released under the plan are or were production and support associates at
manufacturing locations, primarily in the United States and Latin America. At
March 31, 1999, approximately 300 associates, primarily in production and
support operations in Latin America, had been released at a total cost of $4.5
million. The remaining balance of these provisions totaled $126.1 million at
March 31, 1999.
Rationalization costs, other than associate-related costs, were recorded,
and were incurred through March 31, 1999, as follows:
<TABLE>
<CAPTION>
(In millions)
Recorded Incurred
-------- --------
<S> <C> <C>
Plant downsizing and consolidation $26.7 $18.3
Asset sales and other exit costs 10.1 5.1
----- -----
$36.8 $23.4
</TABLE>
Costs associated with downsizing and consolidation activities were
primarily for the writeoff of scrapped equipment and obligations under
noncancellable contracts, primarily utility contracts, both at the Gadsden,
Alabama manufacturing facility. Asset sales and other exit costs included a loss
on the sale of a rubber plantation in Asia expected to be completed in 1999 and
additional costs associated with the Company's exit from the Formula 1 racing
series. The remaining balance of these provisions totaled $13.4 million at March
31, 1999.
The Company expects that the major portion of these actions will be
completed during 1999 with the balance to be completed in 2000.
1998 ASSET SALE - In the first quarter of 1998 the Company recorded a gain of
$61.1 million ($37.9 million after tax or $.24 per share) on the sale of the
Calhoun, Georgia latex processing facility.
Portions of the items described above were not charged (credited) to
segment EBIT but were attributable to the segments as follows:
<TABLE>
<CAPTION>
(In millions) NORTH LATIN
AMERICAN EUROPE AMERICAN ASIA ENGINEERED CHEMICAL TOTAL
TIRE TIRE TIRE TIRE PRODUCTS PRODUCTS
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 $95.5 $8.8 $42.5 $1.5 $9.1 $ 3.1 $160.5
1998 - - - - - (61.1) (61.1)
</TABLE>
-5-
<PAGE> 7
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RATIONALIZATIONS (CONTINUED)
- ----------------------------
During 1999, the Company continued to implement the 1997 and 1996
rationalization programs. The following reflects the activity and progress of
those programs in the first quarter of 1999.
1997 PROGRAM - During the first quarter of 1999, approximately 200 associates,
primarily hourly associates, were released at a cost of $6.4 million. The
Company plans to release approximately 1,200 more associates, employed primarily
at manufacturing and distribution operations in North America, and had reserved
$52.9 million for that cost at March 31, 1999, compared to $59.3 million at
December 31, 1998.
Optimization, downsizing, consolidation and withdrawal costs of the 1997
program, other than associate-related costs, were recorded, and were incurred
through March 31, 1999, as follows:
<TABLE>
<CAPTION>
(In millions)
Recorded Incurred
-------- --------
<S> <C> <C>
Withdrawal of support for the Formula 1 racing series $ 63.4 $43.2
Plant downsizing and closure activities 23.0 12.9
Kelly-Springfield consolidation 12.9 1.5
Consolidation of North American
distribution facilities 12.3 8.9
Commercial tire outlet consolidation 4.7 3.7
Production realignments 2.8 2.8
------ -----
$119.1 $73.0
</TABLE>
During the first quarter of 1999, $12.5 million was charged to the reserve.
At March 31, 1999, the remaining balance of the provision for these costs
totaled $16.4 million, compared to $28.9 million at December 31, 1998. During
1998, the Company reversed certain reserves totaling $29.7 million due to the
favorable settlement of Formula 1 obligations and a change in the 1997 program.
The Company expects that the major portion of the 1997 program will be
completed during 1999 with the balance to be completed in 2000.
1996 PROGRAM - During the first quarter of 1999, approximately 30 associates,
primarily at North American distribution facilities, were released at a cost of
$1.3 million. The Company plans to release approximately 90 more associates
under the plan and had reserved $4.4 million for that cost at March 31, 1999,
compared to $5.7 million at December 31, 1998.
Rationalization costs, other than for associate-related costs, were
recorded, and were incurred through March 31, 1999, as follows:
<TABLE>
<CAPTION>
(In millions)
Recorded Incurred
-------- --------
<S> <C> <C>
Discontinuance of PVC production $10.6 $10.6
Canadian retail store closures 9.0 5.9
International production rationalization 8.5 7.9
North American Tire production rationalization 7.1 7.6
----- -----
$35.2 $32.0
</TABLE>
During the first quarter of 1999, $.2 million was charged to the reserve.
The remaining balance of these provisions at March 31, 1999 totaled $3.2
million, compared to $3.4 million at December 31, 1998.
The Company plans to complete the 1996 program in 1999.
-6-
<PAGE> 8
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DISCONTINUED OPERATIONS
- -----------------------
On March 21, 1998 the Company reached an agreement to sell, and on July 30,
1998, the Company completed the sale of, substantially all of the assets and
liabilities of its oil transportation business to Plains All American Inc., a
subsidiary of Plains Resources Inc. Proceeds from the sale were $422.3 million,
which included distributions to the Company of $25.1 million prior to closing.
The principal assets of the oil transportation business included the All
American Pipeline System, a heated crude oil pipeline system consisting
primarily of a 1,225 mile mainline segment extending from Las Flores and
Gaviota, California, to McCamey, Texas, a crude oil gathering system located in
California's San Joaquin Valley and related terminal and storage facilities.
The transaction was accounted for as a sale of discontinued operations.
Operating results and the loss on sale of discontinued operations follow:
<TABLE>
<CAPTION>
(In millions, except per share) THREE MONTHS ENDED
MARCH 31, 1998
------------------
<S> <C>
NET SALES $ 22.4
======
Income before Income Taxes $ 12.9
United States Taxes on Income 4.7
------
Income from Discontinued Operations 8.2
Loss on Sale of Discontinued Operations, including estimated income from
operations during the disposal period (3/21/98-7/30/98)of $10.0
(net of tax of $24.1) (42.9)
------
DISCONTINUED OPERATIONS $(34.7)
======
INCOME (LOSS) PER SHARE - BASIC:
Income from Discontinued Operations $ .05
Loss on Sale of Discontinued Operations (.27)
------
DISCONTINUED OPERATIONS $ (.22)
======
INCOME (LOSS) PER SHARE - DILUTED:
Income from Discontinued Operations $ .05
Loss on Sale of Discontinued Operations (.27)
------
DISCONTINUED OPERATIONS $ (.22)
======
</TABLE>
PER SHARE OF COMMON STOCK
- -------------------------
Basic earnings per share have been computed based on the average number of
common shares outstanding. For purposes of diluted per share amounts, the
incremental number of average shares resulting from outstanding stock options,
computed using the treasury stock method, was 721,260 in 1999 and 2,028,259 in
1998, and the incremental average shares resulting from performance units was
392,918 in 1999 and 252,175 in 1998. The Company's 1.2% Convertible Note
resulted in 760,372 average shares in 1999.
-7-
<PAGE> 9
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NON-CONSOLIDATED OPERATIONS - SOUTH PACIFIC TYRE
- ------------------------------------------------
In addition to its consolidated operations in the Asia region, the Company
owns a 50% interest in South Pacific Tyres Ltd (SPT), a partnership with Pacific
Dunlop Ltd of Australia. SPT is the largest tire manufacturer, marketer and
exporter in Australia and New Zealand. The Company is required to use the equity
method to account for its interest in the results of operations and financial
position of SPT.
The following table presents sales and EBIT of the Company's Asia Tire
segment and 100% of the operations of SPT:
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED MARCH 31
---------------------------
ASIA
TIRE SPT TOTAL
---- --- -----
<S> <C> <C> <C>
NET SALES:
1999 $141.0 $154.6 $295.6
1998 116.8 161.5 278.3
EBIT:
1999 $ 3.6 $ 8.8 $ 12.4
1998 3.0 9.2 12.2
</TABLE>
INVESTMENTS AND NONCASH INVESTING ACTIVITIES
- --------------------------------------------
In connection with the Company's planned strategic alliance with Sumitomo
Rubber Industries, Ltd., on February 25, 1999 the Company issued to Sumitomo at
par its 1.2% Convertible Note Due August 16, 2000, in the principal amount of
(Y)13,073,070,934 (equivalent to $110.4 million at March 31, 1999). The
Company's Note is convertible, if not earlier redeemed, during the period
beginning July 16, 2000 through August 15, 2000 into 2,281,115 shares of the
Common Stock, without par value, of the Company at a conversion price of
(Y)5,731 per share, subject to certain adjustments. In addition, on February 25,
1999, the Company purchased at par from Sumitomo a 1.2% Convertible Note Due
August 16, 2000, in the principal amount of (Y)13,073,070,934 (also equivalent
to $110.4 million at March 31, 1999). The Sumitomo Note is convertible, if not
earlier redeemed, during the period beginning July 16, 2000 through August 15,
2000 into 24,254,306 shares of the Common Stock, (Y)50 par value per share, of
Sumitomo at a conversion price of (Y)539 per share, subject to certain
adjustments. Information in the Consolidated Statement of Cash Flows is
presented net of the effects of these transactions.
The Company has classified its investment in the Sumitomo 1.2% Convertible
Note as held-to-maturity, as provided in Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Sumitomo Note is reported in the Consolidated Balance Sheet at
the March 31, 1999 U.S. dollar/Yen exchange rate plus accrued interest. The
effect of exchange rate changes on the Sumitomo Note are reported in the
Consolidated Statement of Income as Foreign Currency Exchange, and are offset by
the effect of exchange rate changes on the Company's 1.2% Convertible Note. The
fair value of both the Company's Note and the Sumitomo Note was $101.8 million
at March 31, 1999.
ADJUSTMENTS
- -----------
All adjustments, consisting of normal recurring adjustments, necessary for
a fair statement of the results of these unaudited interim periods have been
included.
RECLASSIFICATION
- ----------------
Certain items previously reported in specific financial statement captions
have been reclassified to conform to the 1999 presentation.
-8-
<PAGE> 10
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
(In millions)
THREE MONTHS ENDED
MARCH 31,
1999 1998
-------- --------
<S> <C> <C>
SALES:
North American Tire $1,507.1 $1,523.3
Europe Tire 684.7 671.5
Latin American Tire 240.6 335.5
Asia Tire 141.0 116.8
-------- --------
TOTAL TIRES 2,573.4 2,647.1
Engineered Products 308.7 328.7
Chemical Products 228.4 260.7
-------- --------
TOTAL SEGMENT SALES 3,110.5 3,236.5
Inter-SBU Sales (120.4) (143.4)
Other 1.1 0.9
-------- --------
NET SALES $2,991.2 $3,094.0
======== ========
INCOME:
North American Tire $ 91.7 $ 110.2
Europe Tire 55.1 75.8
Latin American Tire 30.1 60.2
Asia Tire 3.6 3.0
-------- --------
TOTAL TIRES 180.5 249.2
Engineered Products 20.5 33.1
Chemical Products 28.7 34.3
-------- --------
TOTAL SEGMENT INCOME (EBIT) 229.7 316.6
Rationalizations (167.4) 61.1
Interest expense (37.7) (30.3)
Foreign currency exchange 34.6 5.3
Minority interest in net income of subsidiaries (4.5) (8.8)
Inter-SBU income (14.0) (17.3)
Other (6.0) (2.6)
-------- --------
INCOME FROM CONTINUING OPERATIONS $ 34.7 $ 324.0
BEFORE INCOME TAXES ======== ========
</TABLE>
-9-
<PAGE> 11
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
CONSOLIDATED
- ------------
(All per share amounts are diluted)
Sales in the first quarter of 1999 were $2.99 billion, decreasing 3.3% from
$3.09 billion in the 1998 quarter. Income from continuing operations in the 1999
quarter was $25.5 million or $.16 per share, compared to $211.5 million or $1.33
per share in the 1998 period.
Income from continuing operations in 1999 included rationalization charges
totaling $167.4 million ($116.0 million after tax or $.74 per share), as
discussed below. The 1998 period included a gain of $61.1 million ($37.9 million
after tax or $.24 per share) on the sale of the Calhoun, Georgia latex
processing facility.
Net income in the 1999 quarter was $25.5 million or $.16 per share,
compared to $176.8 million or $1.11 per share in the 1998 quarter. Net income in
the 1998 quarter reflected the loss on the sale of the Company's oil
transportation business segment, as discussed below.
Worldwide tire unit sales in the 1999 quarter were 1.0% higher than in
1998. North American (U.S. and Canada) volume decreased 2.3% while international
unit sales increased 5.4% in the 1999 quarter. Replacement unit sales increased
3.4% from the 1998 quarter, primarily in Europe. Original equipment unit sales
decreased 4.2%, due primarily to adverse economic conditions in Latin America.
Revenues decreased in the 1999 quarter due primarily to the adverse effect
of currency translations on international results. The Company estimates that
versus the first quarter of 1998, currency movements adversely affected revenues
in 1999 by approximately $100 million. In addition, revenues decreased due to
continued worldwide competitive pricing pressures, lower tire unit sales in
Latin America and North America and lower unit sales of other automotive and
industrial rubber products. Revenues were favorably affected by a change in mix.
EBIT (net sales less cost of goods sold and selling, administrative and
general expense) was also reduced by the adverse effect of currency movements
versus 1998. The Company estimates the impact of currency fluctuations to be
approximately $20 million in the 1999 quarter.
-10-
<PAGE> 12
The Company is unable to predict the impact of currency fluctuations on its
sales and EBIT in future periods. If the dollar continues to strengthen,
reported sales and EBIT in future periods are likely to be unfavorably impacted.
Similarly, the continuing economic downturn in Latin America is expected to
adversely affect the Company's sales and operating income in future periods.
The following table presents cost of goods sold (CGS) and selling, general
and administrative expense (SAG) as a percent of sales:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---- ----
<S> <C> <C>
CGS 77.9% 75.3%
SAG 14.9 14.8
</TABLE>
Cost of goods sold increased as a percent to sales in the 1999 period due
primarily to the impact of competitive pricing pressures on revenues. SAG
decreased in the 1999 quarter but increased as a percent to sales due primarily
to lower revenues.
Interest expense rose in 1999 due primarily to higher debt levels incurred
to fund acquisitions and support increased working capital levels.
Foreign currency exchange increased pretax income by $34.6 million in 1999,
due primarily to the impact of currency movements on U.S. dollar denominated
monetary items in Brazil.
U.S. and foreign taxes on income in 1999 reflected a reduction in the
Company's estimated annual effective tax rate, as the Company continued to
benefit from strategies which allowed it to manage global cash flows and
minimize tax expense.
1999 RATIONALIZATION PROGRAM - As a result of continued competitive
conditions in the markets served by the Company and continuing unfavorable
economic conditions in Latin America and Asia, a number of rationalization
actions were approved in the first quarter of 1999 to reduce costs and increase
productivity and efficiency. These actions consisted primarily of the downsizing
and consolidation of tire manufacturing facilities at Gadsden, Alabama and
Freeport, Illinois and 12 other production facilities in Europe, South Africa
and Latin America. A charge of $167.4 million ($116.0 million after tax or $.74
per share) was recorded, of which $28.4 million related to non-cash writeoffs
and $139.0 million related to future cash outflows, primarily for associate
severance costs. The remaining balance of these provisions at March 31, 1999,
totaled $139.5 million.
The Company recorded a charge of $130.6 million for the
-11-
<PAGE> 13
expected release of approximately 4,000 associates around the world. The
majority of the associates to be released under the plan are or were production
and support associates at manufacturing locations, primarily in the United
States and Latin America. At March 31, 1999, approximately 300 associates,
primarily production and support associates located at plants in Latin America,
had been released pursuant to the plan at a total cost of $4.5 million. The
remaining balance of these provisions totaled $126.1 million at March 31, 1999.
Rationalization costs, other than associate-related costs, of $36.8
million were recorded, of which $23.4 million were incurred through March
31, 1999. The costs were primarily associated with the writeoff of scrapped
equipment and obligations under noncancellable contracts, primarily utility
contracts, both at the Gadsden, Alabama manufacturing facility, the loss on
the sale of a rubber plantation in Asia expected to be completed in 1999
and additional costs associated with the Company's exit from the Formula 1
racing series. The remaining balance of these provisions totaled $13.4
million at March 31, 1999.
The Company expects that the major portion of these actions will be
completed during 1999 with the balance to be completed in 2000. Annual pretax
savings of approximately $150 million are expected when the planned actions have
been fully implemented.
During 1999, the Company continued to implement the 1997 and 1996
rationalization programs. Following is a discussion of the activity and progress
of these programs in the first quarter of 1999.
1997 RATIONALIZATION PROGRAM - During the first quarter of 1999,
approximately 200 associates were released at a cost of $6.4 million. The
Company plans to release approximately 1,200 more associates under the 1997
program and had reserved $52.9 million for that cost at March 31, 1999, compared
to $59.3 million at December 31, 1998.
Rationalization costs, other than for associate-related costs, totaling
$12.5 million were incurred during the first quarter of 1999. At March 31, 1999,
a total of $16.4 million was reserved for these costs, compared to $28.9 million
at December 31, 1998.
The Company expects that the major portion of the 1997 program will be
completed during 1999 with the balance to be completed in 2000. Annual pretax
savings of approximately $200 million are expected when the planned actions have
been fully implemented.
1996 RATIONALIZATION PROGRAM - During the first quarter of 1999,
approximately 30 associates were released at a cost of $1.3 million. The Company
plans to release approximately 90 more associates under the 1996 program and had
reserved $4.4 million for that cost at March 31, 1999, compared to $5.7 million
at
-12-
<PAGE> 14
December 31, 1998.
Rationalization costs, other than for associate-related costs, totaling $.2
million were incurred during the first quarter of 1999. At March 31, 1999, the
Company had reserved $3.2 million for these costs, compared to $3.4 million at
December 31, 1998.
The Company plans to complete the 1996 program in 1999. Annual pretax
savings of approximately $110 million are expected when the planned actions have
been fully implemented.
1998 ASSET SALE - In the first quarter of 1998 the Company recorded the
previously mentioned gain of $61.1 million ($37.9 million after tax or $.24 per
share) on the sale of the Calhoun, Georgia latex processing facility.
For further information, refer to the note to the financial statements,
Rationalizations.
DISCONTINUED OPERATIONS - On March 21, 1998 the Company reached an
agreement to sell, and on July 30, 1998 the Company completed the sale of,
substantially all of the assets and liabilities of its oil transportation
business. The loss on the sale, net of income from operations during 1998,
totaled $34.7 million after tax or $.22 per share. For further information,
refer to the note to the financial statements, Discontinued Operations.
YEAR 2000
- ---------
The Company has inventoried and assessed all date sensitive technical
infrastructure and information and transaction processing computer systems ("I/T
Systems") and determined that a substantial portion of its software and some
hardware must be modified or replaced in order to make its I/T Systems Year 2000
compliant. The Company has also inventoried and assessed its manufacturing and
other operating systems that may be date sensitive ("Process Systems"),
including those that use embedded technology such as micro-controllers and
micro-processors, and determined the actions required to make its Process
Systems Year 2000 compliant.
The Company monitors its Year 2000 compliance efforts with respect to I/T
Systems and Process Systems in three phases: (1) the identification and
inventory of date sensitive transactions, processes and systems (the "Inventory
Phase"), (2) the determination of repairs and replacements required, if any,
through testing, analysis and design (the "Analysis Phase"), and (3) the repair
or acquisition, installation and testing of Year 2000 compliant systems (the
"Remediation Phase"). The following table indicates the Company's progress in
its Year 2000 compliance program.
-13-
<PAGE> 15
Estimated Percentage of Year 2000 Compliance Activity Completed:
----------------------------------------------------------------
<TABLE>
<CAPTION>
Inventory Phase Analysis Phase Remediation Phase
--------------- -------------- -----------------
Percentage Completed at Percentage Completed at Percentage Completed at
3/31/99 12/31/98 3/31/99 12/31/98 3/31/99 12/31/98
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
I/T Systems 100% 100% 100% 100% 85% 74%
Process Systems 100% 100% 100% 95% 81% 66%
</TABLE>
All I/T Systems and Process Systems are scheduled to have been repaired or
acquired and installed, tested and determined to be Year 2000 compliant by
November of 1999.
The cost of modifying the Company's existing I/T Systems in order to
achieve Year 2000 compliance is estimated to be $75 million to $90 million.
Approximately $63 million has been expended to modify existing I/T Systems
through March 31, 1999, including approximately $5 million expended during the
first quarter of 1999. The remaining $12 million to $27 million will be spent
during the balance of 1999. All of the costs of repairing such existing I/T
Systems will be expensed in the period incurred. The cost of new hardware has
been and will be capitalized.
In addition, for several years the Company has been designing, acquiring,
and installing various business transactions processing I/T Systems, which in
each case provide significant new functionality and in some instances, replace
non-compliant I/T Systems with Year 2000 compliant I/T Systems. Due to the
integrated nature of these I/T Systems enhancement projects, it is not
practicable to segregate the costs associated with the elements of these new I/T
Systems that may have been accelerated to facilitate Year 2000 compliance. The
Company estimates that prior to January 1, 2000 it will have spent approximately
$210 million to $240 million for consulting, software and hardware costs
incurred in connection with the I/T Systems enhancement projects in process
since 1996. Approximately $167 million has been expended on these projects
through March 31, 1999, including approximately $22 million during the first
quarter of 1999. The Company anticipates that costs incurred in respect of these
projects will be approximately $43 million to $73 million during the balance of
1999. Through March 31, 1999, approximately $24 million of these costs have been
expensed and $143 million of these costs have been capitalized. Substantially
all of the remaining consulting, software and hardware costs for these I/T
Systems enhancement projects will be capitalized.
The Company is modifying or replacing and testing its Process Systems at an
anticipated cost of between $30 million and $40 million, substantially all of
which is for the acquisition of replacement systems. The cost of Process Systems
has been and will be capitalized. Through March 31, 1999, the cost of Process
Systems installed by the Company has totaled $23 million, of which $3 million
was incurred during the first quarter of 1999.
-14-
<PAGE> 16
The Company's Year 2000 compliance costs (including the cost of all I/T
Systems enhancement projects) are expected to total approximately $315 million
to $370 million. Through March 31, 1999, Year 2000 compliance costs have totaled
$253 million, of which $30 million was incurred during the first quarter of
1999. All Year 2000 costs have been and will be funded from operations.
For 1999, costs for repairing existing I/T Systems for Year 2000 compliance
is expected to be approximately 11% of Company's budget for information
technology. The total cost of repairing existing I/T Systems and of the I/T
Systems enhancement projects is expected to represent 30% of the Company's
information technology budget during 1999.
The Company surveyed its significant suppliers to determine the extent to
which the Company may be vulnerable to their failure to correct their own Year
2000 issues. Based on responses to its survey and other communications the
Company has assessed the Year 2000 readiness of approximately 30% of its
significant suppliers. Failure of the Company's significant trading partners to
address Year 2000 issues could have a material adverse effect on the Company's
operations, although it is not possible at this time to quantify the amount of
revenues and profits that might be lost or costs that could be incurred by the
Company.
The Company is preparing contingency plans for its critical operational
areas, which plans include identification of critical processes, risk assessment
and response techniques in the event of a system failure. Planned responses to
system failures include emergency response teams designed to produce prompt
corrective action, identification of alternate sources of supply, manual
processing of transactions, manual control of production processes and the stock
piling of raw materials and finished goods in those instances where a high risk
of a supply failure is suspected. The Company's contingency plans were 15%
complete at March 31, 1999, and are expected to be completed by June 30, 1999.
In certain cases, especially global infrastructure failures, there may be no
practical alternative course of action available to the Company that will permit
resumption of an interrupted business activity.
The foregoing discussion regarding Year 2000 project timing, effectiveness,
implementation and costs are based on management's current evaluation using
available information. Factors that might cause material changes include, but
are not limited to, the readiness of third parties and the Company's ability to
respond to unforeseen Year 2000 complications.
NEW ACCOUNTING STANDARDS
- ------------------------
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). SFAS
-15-
<PAGE> 17
133 requires all derivatives to be recognized as either assets or liabilities on
the balance sheet and be measured at fair value. Changes in such fair value are
required to be recognized in earnings to the extent the derivatives are not
effective as hedges. SFAS 133 is effective for fiscal years beginning after June
15, 1999, and is effective for interim periods in the initial year of adoption.
At the present time the Company has not yet determined the financial statement
impact of the adoption of SFAS 133.
SEGMENT INFORMATION
- -------------------
Segment EBIT was $229.7 million in the first quarter of 1999, decreasing
27.4% from $316.6 million in the 1998 quarter. Segment operating margin in the
first quarter of 1999 was 7.4%, compared to 9.8% in the 1998 period. Segment
EBIT did not include rationalization charges attributable to operating segments
totaling $160.5 million.
NORTH AMERICAN TIRE
- -------------------
In North America, sales in the first quarter of 1999 were $1.51 billion,
decreasing 1.1% from $1.52 billion in the 1998 quarter.
Unit sales in 1999 decreased 2.3% from the 1998 period. Replacement unit
sales decreased 3.0% and original equipment volume decreased 1.1%.
Revenues decreased in 1999 due to lower unit sales, competitive pricing
pressures and the impact of currency translation on Canadian results. Revenues
were favorably affected by a change in mix.
EBIT in North America was $91.7 million in the first quarter of 1999,
decreasing 16.8% from $110.2 million in the 1998 quarter. Operating margin in
1999 was 6.1%, compared to 7.2% in 1998.
EBIT in 1999 decreased due primarily to lower revenues. EBIT in both 1999
and 1998 reflected lower SAG, improved productivity and the effects of ongoing
cost containment measures.
EBIT in 1999 did not include rationalization charges totaling $95.5
million. The charges related to production downsizing at the Gadsden, Alabama
and Freeport, Illinois tire plants that will reduce high-cost capacity by almost
nine million passenger tires per year. Approximately 1,600 positions in
production and support operations at those plants will be eliminated, although
approximately 200 associates are expected to transfer to other manufacturing
locations. When fully implemented, these programs are expected to result in
annual savings of approximately $100 million.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to the Canadian dollar. Revenues and
-16-
<PAGE> 18
EBIT in the North American Tire segment may be affected in future periods by
continued competitive pricing pressures and by the effects of currency
translation on Canadian results.
EUROPE TIRE
- -----------
In Europe, sales in the first quarter of 1999 were $684.7 million,
increasing 2.0% from $671.5 million in the 1998 period.
Unit sales in 1999 increased 12.4% from the 1998 period. Replacement unit
sales increased 20.3%, but original equipment volume decreased 6.9%.
Revenues increased in 1999 due to higher tire unit sales resulting in part
from the acquisition of a majority interest in tire manufacturing operations in
Slovenia. Revenues were adversely affected in both 1999 and 1998 by the effects
of currency translation and competitive pricing.
EBIT in Europe was $55.1 million in the first quarter of 1999, decreasing
27.3% from $75.8 million in the 1998 quarter. Operating margin in 1999 was 8.0%,
compared to 11.3% in 1998.
EBIT in 1999 decreased due primarily to competitive pricing pressures,
increased costs to align production with inventory and higher SAG.
EBIT in 1999 did not include rationalization charges totaling $8.8 million.
The charges related to production realignments and redundancy programs that will
result in the release of approximately 300 associates. When fully implemented,
these actions are expected to result in annual savings of approximately $4
million.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to the Euro and other European currencies. Revenues and EBIT in
the Europe Tire segment may be affected in future periods by continued
competitive pricing pressures and by the effects of currency translations.
LATIN AMERICAN TIRE
- -------------------
In Latin America, sales in the first quarter of 1999 were $240.6 million,
decreasing 28.3% from $335.5 million in the 1998 period.
EBIT in Latin America was $30.1 million in the first quarter of 1999,
decreasing 50.0% from $60.2 million in the 1998 quarter. Operating margin in
1999 was 12.5%, compared to 17.9% in 1998.
Unit sales in 1999 decreased 14.2% from the 1998 period. Replacement unit
sales decreased 6.9% and original equipment volume decreased 36.3%.
-17-
<PAGE> 19
Revenues and EBIT in 1999 decreased due primarily to lower tire unit sales
resulting from unfavorable economic conditions in the region, competitive
pricing pressures and the effects of currency translations.
EBIT in 1999 did not include rationalization charges totaling $42.5
million. The charges related to production downsizing and consolidation in
several locations in the region, which will result in the release of
approximately 1,500 production, support and administrative associates. At March
31, 1999, approximately 250 associates, primarily in production and support
operations, had been released pursuant to the plan at a total cost of $4.2
million. When fully implemented, these actions are expected to result in annual
savings of approximately $40 million.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to Latin American currencies, particularly the Brazilian real.
Revenues and EBIT in the Latin American Tire segment in future periods are
likely to be affected by continued competitive pricing pressures, the effects of
currency translations and by the expected continuing unfavorable economic
conditions in the region, especially in Brazil.
ASIA TIRE
- ---------
In Asia, sales in the first quarter of 1999 were $141.0 million, increasing
20.7% from $116.8 million in the 1998 period.
Unit sales in 1999 increased 15.5% from the 1998 period. Replacement unit
sales increased 8.3% and original equipment volume increased 63.2%.
Revenues in 1999 increased due primarily to higher tire unit sales, but
continued to be affected by competitive pricing pressures.
EBIT in Asia was $3.6 million in the first quarter of 1999, increasing
20.0% from $3.0 million in the 1998 quarter. Operating margin in 1999 and 1998
was 2.6%. EBIT in 1999 increased due primarily to increased revenues resulting
from higher tire unit sales.
EBIT in 1999 did not include rationalization charges totaling $1.5 million.
The charges related to production downsizing and will result in the release of
approximately 90 associates. When fully implemented, these actions are expected
to result in annual savings of approximately $1 million.
The Company anticipates continued fluctuations in the value of the U.S.
dollar relative to Asian currencies. Revenues and EBIT in the Asia Tire segment
in future periods are likely to be affected by economic conditions in the
region, continued competitive pricing pressures and by the effects of currency
translations.
-18-
<PAGE> 20
Sales and EBIT of the Asia Tire segment reflect the results of the
Company's majority-owned tire business in the region. In addition, the Company
owns a 50% interest in South Pacific Tyres Ltd. (SPT), the largest tire
manufacturer, marketer and exporter in Australia and New Zealand. Results of
operations of SPT are not reported in segment results, and are reflected in the
Company's Consolidated Statement of Income using the equity method.
The following table presents the sales and EBIT of the Company's Asia
Tire segment together with 100% of the sales and operating income of SPT:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
(In millions) 1999 1998
---- ----
<S> <C> <C>
NET SALES:
Asia Tire $141.0 $116.8
SPT 154.6 161.5
------ ------
$295.6 $278.3
====== ======
EBIT:
Asia Tire $ 3.6 $ 3.0
SPT 8.8 9.2
------ ------
$ 12.4 $ 12.2
====== ======
</TABLE>
ENGINEERED PRODUCTS
- -------------------
Sales in Engineered Products in the first quarter of 1999 were $308.7
million, decreasing 6.1% from $328.7 million in the 1998 period.
Revenues in 1999 decreased due primarily to lower unit sales resulting from
reduced demand from the mining industry and due to adverse economic conditions
and unfavorable currency translations in Latin America.
EBIT in Engineered Products was $20.5 million in the first quarter of 1999,
decreasing 38.1% from $33.1 million in the 1998 quarter. Operating margin in
1999 was 6.6%, compared to 10.1% in 1998. EBIT in 1999 decreased due primarily
to lower revenues and increased unit costs resulting from reduced production
schedules required to lower inventory levels.
Revenues and EBIT in the Engineered Products segment in future periods are
likely to be adversely affected by the expected continuing unfavorable economic
conditions in Brazil.
EBIT in 1999 did not include rationalization charges totaling $9.1 million.
These charges related to production downsizing and consolidation and will result
in the release of approximately 700 production and support associates. When
fully implemented, these actions are expected to result in annual savings of
approximately $3 million.
-19-
<PAGE> 21
CHEMICAL PRODUCTS
- -----------------
Sales in Chemical Products in the first quarter of 1999 were $228.4
million, decreasing 12.4% from $260.7 million in the 1998 period.
Revenues in 1999 decreased due to reduced unit volume, competitive pricing
pressures and the absence of sales produced by the Calhoun, Georgia latex
processing facility that was sold in March 1998.
EBIT in Chemical Products was $28.7 million in the first quarter of 1999,
decreasing 16.3% from $34.3 million in the 1998 quarter. Operating margin in
1999 was 12.6%, compared to 13.2% in 1998. EBIT in 1999 decreased due primarily
to lower revenues and lower results in natural rubber operations.
EBIT in 1999 did not include a rationalization charge of $3.1 million for
the anticipated loss on the sale of a rubber plantation in Asia. EBIT in 1998
did not include the gain of $61.1 million on the sale of the Calhoun, Georgia
latex processing facility.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash used in operating activities was $100.8 million during the first
quarter of 1999, as reported on the Consolidated Statement of Cash Flows.
Working capital requirements increased, primarily for accounts receivable.
Net cash used in investing activities was $196.5 million during the first
quarter of 1999. Capital expenditures were $148.8 million, primarily for plant
modernizations and expansions and new tire molds.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(In millions) 1999 1998
---- ----
<S> <C> <C>
Capital Expenditures $148.8 $118.3
Depreciation 133.5 114.3
</TABLE>
Investing activities in 1998 included the sale of the Calhoun, Georgia
latex processing facility and the acquisition of the remaining minority shares
of the tire and engineered products manufacturing and distribution subsidiary
in South Africa.
Net cash provided by financing activities was $263.2 million during the
first quarter of 1999, which was used primarily to support the previously
mentioned operating and investing activities.
<TABLE>
<CAPTION>
(Dollars in millions) 3/31/99 12/31/98
------- --------
<S> <C> <C>
Consolidated Debt $2,234.1 $1,975.8
Debt to Debt and Equity 38.8% 34.5%
</TABLE>
-20-
<PAGE> 22
In connection with the Company's previously announced strategic alliance
with Sumitomo Rubber Industries, Ltd., on February 25, 1999 the Company issued
to Sumitomo at par a 1.2% Convertible Note Due August 16, 2000 in the principal
amount of (Y)13,073,070,934 (equivalent to $110.4 million at March 31, 1999).
The Company's Note is convertible, if not earlier redeemed, during the period
beginning July 16, 2000 through August 15, 2000 into 2,281,115 shares of the
Common Stock, without par value, of the Company at a conversion price of
(Y)5,731 per share, subject to certain adjustments. In addition, on February 25,
1999 the Company purchased at par from Sumitomo a 1.2% Convertible Note Due
August 16, 2000 in the principal amount of (Y)13,073,070,934 (also equivalent to
$110.4 million at March 31, 1999). The Sumitomo Note is convertible, if not
earlier redeemed, during the period beginning July 16, 2000 through August 15,
2000 into 24,254,306 shares of the Common Stock, (Y)50 par value per share, of
Sumitomo at a conversion price of (Y)539 per share, subject to certain
adjustments. Upon conversion of the Sumitomo Note into Sumitomo Common Stock,
the Company would own 10% of Sumitomo's outstanding shares. Consolidated Debt
and Debt to Debt and Equity as stated above do not reflect the issuance of the
Company's 1.2% Convertible Note.
Substantial short term and long term credit sources are available to the
Company globally under normal commercial practices. At March 31, 1999, the
Company had short term uncommitted credit arrangements totaling $2.1 billion, of
which $.8 billion were unused. The Company also had available long term credit
arrangements at March 31, 1999 totaling $2.1 billion, of which $1.0 billion were
unused.
Funds generated by operations, together with funds available under existing
credit arrangements, are expected to exceed the Company's currently anticipated
funding requirements for operations. As previously discussed, in February 1999
the Company signed a memorandum of understanding to acquire certain businesses
from Sumitomo Rubber Industries, Ltd. Under the terms of the memorandum, the
Company would pay $936 million to Sumitomo. The Company anticipates funding all
or a substantial portion of the acquisition with the issuance of additional debt
in 1999.
-21-
<PAGE> 23
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
INTEREST RATE RISK
- ------------------
The Company actively manages its fixed and floating rate debt mix, within
defined limitations, using refinancings and unleveraged interest rate swaps. The
Company will enter into fixed and floating interest rate swaps to alter its
exposure to the impact of changing interest rates on consolidated results of
operations and future cash outflows for interest. Fixed rate swaps are used to
reduce the Company's risk of increased interest costs during periods of rising
interest rates. Floating rate swaps are used to convert the fixed rates of long
term borrowings into short term variable rates. Interest rate swap contracts are
thus used by the Company to separate interest rate risk management from the debt
funding decision. At March 31, 1999, the interest rate on 46% of the Company's
debt was fixed by either the nature of the obligation or through the interest
rate contracts, compared to 58% at March 31, 1998.
The following table presents interest rate contract information at March
31:
(Dollars in millions)
<TABLE>
<CAPTION>
Interest Rate Contracts 1999 1998
- ----------------------- ---- ----
<S> <C> <C>
Notional principal amount $ 100.0 $ 100.0
Pay fixed rate 6.17% 6.17%
Receive variable LIBOR 5.05% 5.74%
Average years to maturity 1.9 2.9
Fair value - liability $ 1.6 $ .5
Carrying amount - liability .1 .1
Pro forma fair value - liability 2.5 1.9
</TABLE>
The pro forma fair value assumes a 10% decrease in variable market interest
rates at March 31, 1999 and 1998, respectively, and reflects the estimated
fair value of contracts outstanding at that date under that assumption.
Weighted average interest rate contract information follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
(In millions) 1999 1998
---- ----
<S> <C> <C>
Notional principal $ 100.0 $ 100.0
Pay fixed rate 6.17% 6.17%
Receive variable LIBOR 5.13% 5.74%
</TABLE>
-22-
<PAGE> 24
The following table presents fixed rate debt information at March 31:
(In millions)
<TABLE>
<CAPTION>
Fixed Rate Debt 1999 1998
- --------------- ---- ----
<S> <C> <C>
Fair value - liability $ 980.0 $828.7
Carrying amount - liability 955.6 809.5
Pro forma fair value - liability 1,035.2 882.8
</TABLE>
The pro forma fair value assumes a 100 basis point decrease in market
interest rates at March 31, 1999 and 1998, respectively, and reflects the
estimated fair value of fixed rate debt outstanding at that date under that
assumption.
The sensitivity to changes in interest rates of the Company's interest rate
contracts and fixed rate debt was determined with a valuation model based upon
net modified duration analysis. The model assumes a parallel shift in the yield
curve, and the precision of the model decreases as the assumed change in
interest rates increases.
FOREIGN CURRENCY EXCHANGE RISK
- ------------------------------
In order to reduce the impact of changes in foreign exchange rates on
consolidated results of operations and future foreign currency denominated cash
flows, the Company was a party to various foreign currency forward exchange
contracts at March 31, 1999 and 1998. These contracts reduce exposure to
currency movements affecting existing foreign currency denominated assets,
liabilities and firm commitments resulting primarily from trade receivables and
payables, equipment acquisitions, intercompany loans and the Company's Swiss
franc debt. The contract maturities match the maturities of the currency
positions. Changes in the fair value of forward exchange contracts are
substantially offset by changes in the fair value of the hedged positions.
The following table presents foreign exchange contract information at March
31:
<TABLE>
<CAPTION>
(In millions) 1999 1998
---- ----
<S> <C> <C>
Fair value - favorable $73.7 $70.7
Carrying amount - asset 79.9 68.6
Pro forma change in fair value 12.6 14.3
</TABLE>
The pro forma change in fair value assumes a 10% change in foreign exchange
rates at March 31, 1999 and 1998, respectively, and reflects the estimated
change in the fair value of contracts outstanding at that date under that
assumption.
The sensitivity to changes in exchange rates of the Company's foreign
currency positions was determined using current market pricing models.
-23-
<PAGE> 25
FORWARD-LOOKING INFORMATION - SAFE HARBOR STATEMENT
---------------------------------------------------
Certain information set forth herein (other than historical data and
information) may constitute forward-looking statements regarding events and
trends which may affect the Company's future operating results and financial
position. The words "estimate," "expect," "intend" and "project," as well as
other words or expressions of similar meaning, are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date of this quarterly
report. Such statements are based on current expectations, are inherently
uncertain, are subject to risks and should be viewed with caution. Actual
results and experience may differ materially from the forward-looking statements
as a result of many factors, including: changes in economic conditions in the
various markets served by the Company's operations; increased competitive
activity; fluctuations in the prices paid for raw materials and energy; changes
in the monetary policies of various countries where the Company has significant
operations; and other unanticipated events and conditions. It is not possible to
foresee or identify all such factors. The Company makes no commitment to update
any forward-looking statement, or to disclose any facts, events or circumstances
after the date hereof that may affect the accuracy of any forward-looking
statement.
-24-
<PAGE> 26
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
- ------- ------------------------------------------
On February 25, 1999, The Goodyear Tire & Rubber Company (the "Company"
or "Registrant") issued its 1.2% Convertible Note Due August 16, 2000 in the
principal amount of (Y)13,073,070,934 (the "Note") which is convertible, subject
to certain conditions, into 2,281,115 shares of the Common Stock of the Company
at a conversion price of (Y)5,731 per share, subject to certain adjustments. The
Note was purchased by Sumitomo Rubber Industries, Ltd. and is not transferable.
The Company may redeem the Note at par plus accrued interest during the period
July 1, 2000 through July 15, 2000. If the Note is not redeemed, during the
period beginning July 16, 2000 and ending August 15, 2000 Sumitomo may convert
the entire principal amount of the Note into said 2,281,115 shares (subject to
certain adjustments) of the Common Stock of the Company. The Note was sold
directly to Sumitomo at par. No commission or underwriter's discount was paid in
connection with the issuance and sale of the Note and no commission or fee will
be paid upon any conversion of the Note into shares of the Common Stock of the
Company. The proceeds were used to purchase a similar convertible note from
Sumitomo. The Company determined that the sale of the Note was, and any issuance
of the Common Stock of the Company to Sumitomo upon any conversion of the Note
will be, exempt from registration under the Securities Act of 1933, as amended
(the "Act"), pursuant to Section 4(2) of the Act, as transactions by an issuer
not involving any public offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on April 12,
1999 (the "Annual Meeting"). Proxies for the Annual Meeting were solicited
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Act"). There was no solicitation in opposition to the four nominees of the
Board of Directors listed in the Proxy Statement of the Company, dated February
26, 1999, for the Annual Meeting (the "Proxy Statement"), filed with the
Securities and Exchange Commission, and said four nominees were elected.
The following matters were acted upon by the shareholders of the
Company at the Annual Meeting, at which 136,284,023 shares of the Common Stock,
without par value, of the Company (the "Common Stock", the only class of voting
securities of the Company outstanding), or approximately 87.369 percent of the
155,987,453 shares of Common Stock outstanding and entitled to vote at the
Annual Meeting, were present in person or by proxies:
1. ELECTION OF DIRECTORS. Four persons were nominated by the Board of
Directors of the Company for election as directors of the Company. Samir G.
Gibara, William J. Hudson, Jr.,
-25-
<PAGE> 27
William C. Turner and Martin D. Walker were nominated as Class I directors, each
to hold office for a three year term expiring at the 2002 Annual Meeting of
Shareholders and until his successor shall have been duly elected and qualified.
Each nominee was an incumbent director. No other person was nominated. Each
nominee was elected. The votes cast for, or withheld or abstained with respect
to, each nominee were as follows:
<TABLE>
<CAPTION>
Shares of Common Shares of Common Stock
Name of Director Stock Voted For Withheld or Abstained
---------------- ---------------- ----------------------
<S> <C> <C>
Samir G. Gibara 134,069,553 2,214,470
William J. Hudson, Jr. 134,146,986 2,137,037
William C. Turner 134,148,476 2,135,547
Martin D. Walker 134,169,331 2,114,692
</TABLE>
The seven directors whose terms of office continue after the Annual Meeting are:
(A) Thomas H. Cruikshank, Katherine G. Farley, Steven A. Minter and Agnar Pytte,
whose terms expire in 2000; and (B) John G. Breen, William E. Butler and George
H. Schofield, whose terms expire in 2001.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS. A resolution
proposed by the Board of Directors of the Company that the shareholders ratify
the action of the Board of Directors in selecting and appointing
PricewaterhouseCoopers LLP as independent accountants for the Company for the
year ending December 31, 1999 was submitted to, and voted upon by, the
shareholders of the Company. There were 134,165,096 shares of Common Stock voted
in favor of, and 490,314 shares of Common Stock voted against, said resolution.
The holders of 628,613 shares of Common Stock abstained. There were no "broker
non-votes". The resolution, having received the affirmative vote of the holders
of a majority of the shares of Common Stock outstanding and entitled to vote at
the Annual Meeting, was adopted and, therefore, the appointment of
PricewaterhouseCoopers LLP as the independent accountants for the Company for
1999 was ratified by the shareholders.
ITEM 5. OTHER INFORMATION.
- ------- ------------------
The Company adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information," effective December 31, 1998. As a result of the adoption of SFAS
131, the segment information reflects the six strategic business units of the
Company and its consolidated subsidiaries. Set forth at Exhibit 99.1 to this
Quarterly Report on Form 10-Q is unaudited quarterly segment sales and income
information in respect of the six business segments of the Company and its
consolidated subsidiaries for each of the fiscal quarters during the year ended
December 31, 1998. Set forth at Exhibit 99.2 to this Quarterly Report on Form
10-Q is unaudited segment sales and income information in respect of the six
business segments of the Company and its consolidated subsidiaries for the three
month period
-26-
<PAGE> 28
ended March 31, 1998, the six month period ended June 30, 1998 and the nine
month period ended September 30, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------- ---------------------------------
(a) EXHIBITS. See the Index of Exhibits at page E-1, which is by
specific reference incorporated into and made a part of this Quarterly Report on
Form 10-Q.
(b) REPORTS ON FORM 8-K. No Current Report on Form 8-K was filed by The
Goodyear Tire & Rubber Company during the quarter ended March 31, 1999.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GOODYEAR TIRE & RUBBER COMPANY
(Registrant)
Date: May 14, 1999 By /s/ John W Richardson
----------------------
John W Richardson, Vice President
(Signing on behalf of Registrant as a duly
authorized officer of Registrant and
signing as the Principal Accounting
Officer of Registrant.)
-27-
<PAGE> 29
THE GOODYEAR TIRE & RUBBER COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX OF EXHIBITS (1)
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * Description of Exhibit NUMBER PAGE
---------------- ---------------------- ------ ----
<S> <C> <C> <C>
3 ARTICLES OF INCORPORATION AND BY-LAWS
----------------------------------------------
(a) Certificate of Amended Articles of
Incorporation of The Goodyear Tire & Rubber
Company (the "Registrant"), dated December 20,
1954, and Certificate of Amendment to Amended
Articles of Incorporation of Registrant, dated
April 6, 1993, and Certificate of Amendment to
Amended Articles of Incorporation of Registrant
dated June 4, 1996, three documents comprising
Registrant's Articles of Incorporation as
amended (incorporated by reference, filed with
the Securities and Exchange Commission as
Exhibit 3.1 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996,
File No. 1-1927).
(b) Code of Regulations of The Goodyear Tire &
Rubber Company, adopted November 22, 1955, as
amended April 5, 1965, April 7, 1980, April 6,
1981 and April 13, 1987 (incorporated by
reference, filed as Exhibit 4.1(B) to
Registrant's Registration Statement on Form
S-3, File No. 333-1995).
4 INSTRUMENTS DEFINING
THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
----------------------------------------------
(a) Conformed copy of Rights Agreement, dated
as of June 4, 1996, between Registrant and
First Chicago Trust Company of New York, rights
Agent (incorporated by reference, filed with
the Securities and Exchange Commission as
Exhibit 1 to Registrant's Registration
Statement on Form 8-A dated June 11, 1996 and
as Exhibit 4(a) to Registrant's Current Report
on Form 8-K dated June 4, 1996, File No.
1-1927).
</TABLE>
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-1
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * Description of Exhibit NUMBER PAGE
---------------- ---------------------- ------ ----
<S> <C> <C> <C>
4 (b) Specimen nondenominational Certificate for
shares of the Common Stock, Without Par Value,
of Registrant; First Chicago Trust Company of
New York as transfer agent and registrar
(incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit
4.3 to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996,
File No. 1-1927).
(c) Conformed copy of Revolving Credit Facility
Agreement, dated as of July 15, 1994, among
Registrant, the Lenders named therein and
Chemical Bank, as Agent (incorporated by
reference, filed with the Securities and
Exchange Commission as Exhibit A to
Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994, File No.
1-1927).
(d) Conformed copy of Replacement and
Restatement Agreement, dated as of July 15,
1996, among Registrant, the Lenders named
therein and The Chase Manhattan Bank (formerly
Chemical Bank), as Agent (incorporated by
reference, filed with the Securities and
Exchange Commission as Exhibit 4.5 to
Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, File 1-1927).
(e) Conformed copy of First Amendment to
Replacement and Restatement Agreement, dated as
of March 31, 1997, among Registrant, the
Lenders named therein and The Chase Manhattan
Bank (formerly Chemical Bank), as Agent
(incorporated by reference, filed as Exhibit
4.5 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, File
1-1927).
(f) Form of Indenture, dated as of March 15,
1996, between Registrant and Chemical Bank (now
The Chase Manhattan Bank), as Trustee, as
supplemented on December 3, 1996, March 11,
1998 and March 17, 1998 (incorporated by
reference, filed as Exhibit 4.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, File No. 1-1927).
</TABLE>
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-2
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * Description of Exhibit NUMBER PAGE
---------------- ---------------------- ------ ----
<S> <C> <C> <C>
4 (g) Conformed copy of Second Replacement and
Restatement Agreement dated as of July 13,
1998, among Registrant, the Lenders named
therein and The Chase Manhattan Bank, as Agent
(incorporated by reference, filed with the
Securities and Exchange Commission as Exhibit 4
to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, File
No. 1-1927).
(h) Form of Indenture, dated as of March 1,
1999, between Registrant and The Chase
Manhattan Bank, as Trustee (incorporated by
reference, filed as Exhibit 4.2, with Amendment
No. 1, to Registrant's Registration Statement
on Form S-3, File No.
333-67145).
No other instrument defining the rights of
holders of long-term debt which relates to
securities having an aggregate principal amount
in excess of 10% of the consolidated assets of
Registrant and its subsidiaries was entered
into during the quarter ended March 31, 1999.
In accordance with paragraph (iii) to Part 4 of
Item 601 of Regulation S-K, agreements and
instruments defining the rights of holders of
certain items of long term debt entered into
during the quarter ended March 31, 1999 which
relate to securities having an aggregate
principal amount less than 10% of the
consolidated assets of Registrant and its
Subsidiaries are not filed herewith. The
Registrant hereby agrees to furnish a copy of
any such agreements or instruments to the
Securities and Exchange Commission upon
request.
12 STATEMENT RE COMPUTATION
OF RATIOS
----------------------------------------------
Statement setting forth the computation of
Ratio of Earnings to Fixed Charges. 12 X-12-1
27 FINANCIAL DATA SCHEDULE
----------------------------------------------
(a) Financial Data Schedule for quarter ended
March 31, 1999. 27 X-27-1
</TABLE>
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-3
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
TABLE ITEM NO. * Description of Exhibit NUMBER PAGE
---------------- ---------------------- ------ ----
<S> <C> <C> <C>
99 ADDITIONAL EXHIBITS
------------------------------------------------
(a) Segment Information for Registrant and 99.1 X-99.1-1
Subsidiaries (unaudited) for the three month
quarterly periods ended March 31, 1998, June 30,
1998, September 30, 1998 and December 31, 1998,
respectively.
(b) Segment Information for Registrant and 99.2 X-99.2-1
Subsidiaries (unaudited) for the: (i) three
months ended March 31, 1998; (ii) six months
ended June 30, 1998; and (iii) nine months ended
September 30, 1998.
</TABLE>
- ----------
*Pursuant to Item 601 of Regulation S-K.
E-4
<PAGE> 1
EXHIBIT 12
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<TABLE>
<CAPTION>
3 MONTHS
ENDED TWELVE MONTHS ENDED
MARCH 31, DECEMBER 31,
----------- -----------------------------------------------------------
1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
EARNINGS
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $ 34.7 $ 1,002.7 $ 743.3 $ 811.5 $ 869.8 $ 855.9
Add:
Amortization of previously capitalized interest 2.9 10.7 11.0 11.6 11.7 10.2
Minority interest in net income of
consolidated subsidiaries with fixed charges 5.1 33.6 45.1 45.9 30.1 16.9
Proportionate share of fixed charges of investees
accounted for by the equity method 1.3 4.8 6.5 5.1 5.3 2.5
Proportionate share of net loss of investees
accounted for by the equity method -- 0.2 0.1 2.7 0.5 0.2
--------- --------- --------- --------- --------- ---------
Total additions 9.3 49.3 62.7 65.3 47.6 29.8
Deduct:
Capitalized interest 2.3 6.6 6.2 5.4 5.1 5.7
Minority interest in net loss of consolidated subsidiaries 1.0 2.9 3.6 4.4 3.3 0.3
Undistributed proportionate share of net income
of investees accounted for by the equity method 3.9 -- -- -- 0.2 7.2
--------- --------- --------- --------- --------- ---------
Total deductions 7.2 9.5 9.8 9.8 8.6 13.2
TOTAL EARNINGS $ 36.8 $ 1,042.5 $ 796.2 $ 867.0 $ 908.8 $ 872.5
========= ========= ========= ========= ========= =========
FIXED CHARGES
Interest expense $ 37.7 $ 147.8 $ 119.5 $ 128.6 $ 135.0 $ 129.4
Capitalized interest 2.3 6.6 6.2 5.4 5.1 5.7
Amortization of debt discount, premium or expense 1.4 7.1 0.1 0.3 0.4 0.7
Interest portion of rental expense 14.4 57.7 63.0 68.2 75.8 81.9
Proportionate share of fixed charges of investees
accounted for by the equity method 1.3 4.8 6.5 5.1 5.3 2.5
--------- --------- --------- --------- --------- ---------
TOTAL FIXED CHARGES $ 57.1 $ 224.0 $ 195.3 $ 207.6 $ 221.6 $ 220.2
========= ========= ========= ========= ========= =========
TOTAL EARNINGS BEFORE FIXED CHARGES $ 93.9 $ 1,266.5 $ 991.5 $ 1,074.6 $ 1,130.4 $ 1,092.7
========= ========= ========= ========= ========= =========
RATIO OF EARNINGS TO FIXED CHARGES 1.64 5.65 5.08 5.18 5.10 4.96
</TABLE>
X-12-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE GOODYEAR TIRE &
RUBBER COMPANY AND SUBSIDIARIES EXTRACTED FROM THE CONSOLIDATED STATEMENT OF
INCOME AND RETAINED EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 191
<SECURITIES> 0
<RECEIVABLES> 1,986
<ALLOWANCES> 55
<INVENTORY> 2,104
<CURRENT-ASSETS> 4,553
<PP&E> 9,609
<DEPRECIATION> 5,367
<TOTAL-ASSETS> 10,619
<CURRENT-LIABILITIES> 3,274
<BONDS> 1,366
0
0
<COMMON> 156
<OTHER-SE> 3,413
<TOTAL-LIABILITY-AND-EQUITY> 10,619
<SALES> 2,991
<TOTAL-REVENUES> 2,991
<CGS> 2,331
<TOTAL-COSTS> 2,331
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 35
<INCOME-TAX> 9
<INCOME-CONTINUING> 26
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
<PAGE> 1
EXHIBIT 99.1
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
(In millions) THREE MONTHS ENDED
-----------------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31,
1998 1998 1998 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES:
North American Tire $1,523.3 $1,550.9 $1,603.8 $1,557.2
Europe Tire 671.5 703.3 746.3 789.9
Latin American Tire 335.5 327.0 302.6 280.5
Asia Tire 116.8 117.6 123.8 143.6
-------- -------- -------- --------
TOTAL TIRES 2,647.1 2,698.8 2,776.5 2,771.2
Engineered Products 328.7 329.9 311.9 308.8
Chemical Products 260.7 244.0 236.6 229.5
-------- -------- -------- --------
TOTAL SEGMENT SALES 3,236.5 3,272.7 3,325.0 3,309.5
Inter-SBU Sales (143.4) (131.9) (129.2) (119.8)
Other 0.9 (3.3) (4.1) 13.4
-------- -------- -------- --------
NET SALES $3,094.0 $3,137.5 $3,191.7 $3,203.1
======== ======== ======== ========
INCOME:
North American Tire $ 110.2 $ 89.2 $ 94.9 $ 84.3
Europe Tire 75.8 79.1 71.4 75.8
Latin American Tire 60.2 53.7 40.1 32.1
Asia Tire 3.0 4.8 1.6 (1.9)
-------- -------- -------- --------
TOTAL TIRES 249.2 226.8 208.0 190.3
Engineered Products 33.1 34.5 22.3 21.9
Chemical Products 34.3 40.6 34.5 30.2
-------- -------- -------- --------
TOTAL SEGMENT INCOME (EBIT) 316.6 301.9 264.8 242.4
Rationalizations 61.1 12.3 53.2 11.0
Interest expense (30.3) (34.0) (41.4) (42.1)
Foreign currency exchange 5.3 9.2 0.3 (12.2)
Minority interest in net income (8.8) (7.1) (9.7) (5.9)
of subsidiaries
Inter-SBU income (17.3) (15.5) (16.4) (11.9)
Other (2.6) (1.9) (6.9) (11.4)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS $ 324.0 $ 264.9 $ 243.9 $ 169.9
BEFORE INCOME TAXES ======== ======== ======== ========
</TABLE>
-X-99.1-1-
<PAGE> 1
EXHIBIT 99.2
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS NINE MONTHS
(In millions) ENDED ENDED ENDED
MAR. 31, JUN. 30, SEP. 30,
1998 1998 1998
------------ ---------- -----------
<S> <C> <C> <C>
SALES:
North American Tire $ 1,523.3 $ 3,074.2 $ 4,678.0
Europe Tire 671.5 1,374.8 2,121.1
Latin American Tire 335.5 662.5 965.1
Asia Tire 116.8 234.4 358.2
--------- --------- ---------
TOTAL TIRES 2,647.1 5,345.9 8,122.4
Engineered Products 328.7 658.6 970.5
Chemical Products 260.7 504.7 741.3
--------- --------- ---------
TOTAL SEGMENT SALES 3,236.5 6,509.2 9,834.2
Inter-SBU Sales (143.4) (275.3) (404.5)
Other 0.9 (2.4) (6.5)
--------- --------- ---------
NET SALES $ 3,094.0 $ 6,231.5 $ 9,423.2
========= ========= =========
INCOME:
North American Tire $ 110.2 $ 199.4 $ 294.3
Europe Tire 75.8 154.9 226.3
Latin American Tire 60.2 113.9 154.0
Asia Tire 3.0 7.8 9.4
--------- --------- ---------
TOTAL TIRES 249.2 476.0 684.0
Engineered Products 33.1 67.6 89.9
Chemical Products 34.3 74.9 109.4
--------- --------- ---------
TOTAL SEGMENT INCOME (EBIT) 316.6 618.5 883.3
Rationalizations 61.1 73.4 126.6
Interest expense (30.3) (64.3) (105.7)
Foreign currency exchange 5.3 14.5 14.8
Minority interest in net income (8.8) (15.9) (25.6)
of subsidiaries
Inter-SBU income (17.3) (32.8) (49.2)
Other (2.6) (4.5) (11.4)
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS $ 324.0 $ 588.9 $ 832.8
BEFORE INCOME TAXES ========= ========= =========
</TABLE>
-X-99.2-1-
