AKRON—Tire-related companies reporting second-quarter results produced a topsy-turvy, mixed bag on their balance sheets.
Of the seven reported on below, all but one—TBC Corp.—either saw sales rise or earnings rise, but not both at the same time.
Goodyear's net income in the second quarter fell 9.1 percent to $59.7 million, despite higher sales and increased tire shipments provided by its recently acquired Dunlop operations.
The Akron-based tire maker said sales rose 14 percent to $3.47 billion during the period ended June 30, compared with $3.05 billion last year.
The addition of the Dunlop business, which Goodyear acquired from Japan's Sumitomo Rubber Industries Ltd. last year, contributed significantly to the higher sales and shipment totals.
The Dunlop operations in North America and Europe provided $564 million in sales during the period and were a prime factor in Goodyear's 20-percent improvement in tire unit volume, the company said.
"Second quarter 2000 earnings reflect the positive impact of the company's Dunlop tire operations, cost containment initiatives and improved manufacturing efficiency, offset by higher raw material costs and increasingly competitive market conditions around the world," said Samir G. Gibara, Goodyear chairman, CEO and president.
Earnings also were negatively affected by net rationalization charges of $4.7 million the tire maker took during the quarter, related primarily to the closure of a tire plant in Italy and sales office consolidation in Europe.
In the 1999 quarter, earnings were boosted $9.6 million by the reversal of rationalization charges previously recorded that turned out to be less than expected.
In North America, Goodyear's sales grew 6.1 percent to $1.68 billion in the 2000 quarter, bolstered by a 5.2-percent increase in tire unit volume to 28.9 million units. The Dunlop business sold 3.1 million units during the quarter and 6 million units in the first half, the company said.
Sales increased in both periods because of the higher volume, but were negatively impacted by volume shortfalls in some segments due to competitive pricing pressures, a change in product mix to lower-priced tires and a shift towards less-profitable channels of distribution, Goodyear said.
Operating income for the North American unit grew to $69 million in the quarter from $24.3 million a year ago, which Goodyear said "reflects the addition of the Dunlop business, cost reductions and increased manufacturing efficiencies, as well as increased raw material costs and less favorable product and channel mix."
For the first half, net income rose 35.2 percent to $123.3 million, compared with $91.2 million last year. The 1999 results included net rationalization charges of $157.8 million.
Sales for the six months improved 16.1 percent to $7.01 billion from $6.04 billion in 1999, with the Dunlop operations contributing $1.14 billion to the 2000 figures.
Goodyear noted that interest expense rose 77 percent in the 2000 quarter and 71 percent in the six months due to higher debt levels incurred primarily to fund acquisition of the Dunlop operations, as well as higher interest rates.
Group Michelin reported 13.7-percent higher sales for the first six months of 2000 over 1999's first half, although the rate of growth slowed in the second quarter.
The Clermont-Ferrand, France-based company also said operating earnings will fall short of the $665.1 million reported a year ago, putting it behind its operating margin goals for the year.
Michelin blamed the earnings erosion on the impact of rising raw materials prices and fluctuations in exchange rates.
The company will not release earnings figures until mid-September. Earlier, it had set a goal of achieving a 9.5-percent operating margin this year.
For the half-year, Michelin reported sales of $7.09 billion. The increase resulted from a 7.5-percent rise in tonnage sold and a 5.9-percent improvement in exchange rate movements, most notably involving the U.S. dollar.
The company's tonnage sales in North America grew 6.5 percent during the period, although slackening demand for truck tires led to slower growth in the second quarter, Michelin said.
Michelin said the slowdown in demand became particularly evident in June in both Europe and North America. Sales volume was up 4.2 percent during April-June, compared with 11 percent during the January-March period.
TBC Corp.'s net earnings soared during the three months ended June 30 as sales hit a new quarterly high.
The Memphis, Tenn.-based company reported income of $5 million during the year's second period—more than doubling the $2.3 million earned a year ago.
Sales rose 10-percent to $206.4 million during the quarter vs. $187.7 million in 1999.
Larry Day, TBC president and CEO, said the firm's shipments of tires outpaced the industry during the quarter and increased 5.3 percent for the half.
"This gain represents a tangible, positive return on the actions we have taken to strengthen our marketing program with an emphasis on delivering consistently superior customer service," he said.
He attributed part of the unit increase to the June 5 acquisition of Tire Kingdom Inc., the 148-store retail tire chain located primarly in Florida, a deal he called "a highlight of the quarter."
Mr. Day also said the revamped Sigma private label line contributed to the company's success by giving TBC "three strong brands to exploit in both our wholesaling and retailing operations."
For the first half, TBC's net sales improved 9.7 percent to $383.8 million, while net earnings rose 46.4 percent to $9 million compared with 6.1 million a year ago.
The 1999 six-month earnings were impacted by a $2.8 million after-tax charge related to the write-off of a note receivable from a former distributor that had been in litigation since 1998, the company said.
Myers Industries Inc., the parent company of Myers Tire Supply and tread rubber supplier Patch Rubber Co., reported lower net earnings for the second quarter despite a 12.6-percent sales increase.
Income for the period, ended June 30, fell 12.1 percent to $8.1 million, as sales improved to $166.2 million from $147.6 million a year ago.
Akron-based Myers attributed much of the jump in sales to three acquisitions the company made in 1999.
Excluding contributions from acquisitions, total net sales would have increased 1 percent for the second quarter and 2 percent for the year's first half, the company said.
For the first half, Myers earnings slipped 6 percent to $16.4 million. Sales increased 19.5 percent to $327.8 million.
Bandag Inc. reported improved earnings for the second quarter and half year, despite slightly lower sales from the year-earlier periods.
The company, based in Muscatine, Iowa, attributed the improved earnings to "significant operating expense reductions" and an April price increase that partially offset rising raw materials costs.
On a cautionary note, Bandag Chairman and CEO Martin G. Carver said the company experienced a significant slowing in retread sales in North America, due in part to weakened demand for new trucks—which makes more tires available to the aftermarket—and rising imports of low-priced new truck tires.
"Given the softer demand, we anticipate that it will be more difficult to recover future increases in raw materials costs through further price increases," Mr. Carver said.
For the quarter ended June 30, Bandag reported a 9.4-percent gain in net earnings to $17.6 million, while sales fell 1 percent to $249.1 million.
For the six months ended June 30, Bandag's net profits increased 5.7 percent to $27.7 million as sales were off by 1 percent to $473.4 million.
Bandag's second quarter sales decline resulted from a 7-percent drop in global tread volume, offset in part by a 7.7-percent rise in sales by Tire Distribution Systems, the company's commercial tire distribution subsidiary.
TDS more than doubled its pre-tax earnings in the second quarter, to $1.88 million, but the unit was still $1.01 million in the red for the half-year. Through June, TDS's sales had grown 6.9 percent to $194.8 million.
A $24 million gain related to the sale of certain assets to Carlisle Tire and Wheel Co. helped Titan International Inc. post sharply higher earnings in the second quarter.
The Quincy, Ill., maker of tires and wheels earned $18.9 million in the period, ended June 30, compared with $265,000 a year ago.
Sales declined 8.5 percent to $145.6 million from $159 million in the comparable 1999 period.
Titan also attributed most of the revenue downturn to the Carlisle purchase, which included Titan's Clinton, Tenn., tire plant and Slinger, Wis., wheel factory. In addition, Carlisle is leasing Titan's Greenwood, S.C., wheel facility.
For the first half, Titan had income of $19.9 million and sales of $309.9 million. This compares with earnings of $393,000 and sales of $317.7 million in 1999's corresponding period.
Titan CEO and President Maurice Taylor Jr. said the company's decision to drop out of the original equipment market for all terrain vehicles and lawn and garden equipment, as well as on-going cost reductions, have allowed Titan to lower its debt from $303.7 million to $219 million.
Cooper Tire & Rubber Co. posted lower net earnings in the second quarter, while sales soared as a result of several recent acquisitions.
The Findlay, Ohio-based company's net income slipped 6.5 percent to $35.5 million in the period from $38 million a year ago.
Sales, in contrast, rose 79 percent to $886.7 million from $495 million in the 1999 quarter.
Cooper said its recent acquisitions of The Standard Products Co. and Siebe Automotive contributed $393 million in quarterly sales, Cooper said.
The company's tire division also performed well, with sales rising 11.4 percent to $410.4 million. Operating profits in the segement also improved, growing 9.5 percent to $46.1 million.
For the first half, Cooper's earnings fell 3.4 percent to $67 million on sales of $1.8 billion, as sales nearly doubled to $1.8 billion from $963.2 million.