AKRON-Several tire and industry-related companies struggled during 2001's first quarter as an economic downturn and currency fluctuations affected most firms' financial results.
Goodyear and Carlisle Companies Inc. reported net losses. Cooper Tire & Rubber Co. and Myers Industries Inc. saw drops in earnings.
Meanwhile, TBC Corp. reported record first-quarter earnings buoyed by its purchase of the Tire Kingdom retail chain in Florida.
Bandag Inc. reported decreased sales and earnings.
Goodyear
Goodyear posted a net loss of $46.7 million in the first quarter vs. net income of $48.2 million in 2000's same period, but said the results showed improved operating performance over the previous quarter.
Among the bright spots, the company said its Goodyear brand gained market share in North America.
The Akron-based tire maker said after-tax rationalization charges of $57.1 million and an after-tax gain of $13.9 million from the sale of land and buildings in the United Kingdom impacted the quarterly results. Excluding these losses and gains, Goodyear posted an after-tax loss from operations of $3.5 million.
Foreign currency fluctuations further reduced operating income by an estimated $20 million.
The company said it expects to realize annual cost savings of about $260 million when the rationalization programs are completed. Approximately $155 million in savings are anticipated during 2001.
The rationalization charges relate to workforce reductions and facility consolidations, the company said. When these are completed, Goodyear anticipates its worldwide employment will shrink by more than 7,800. This is 600 more jobs than the company announced in February. Through the first quarter, Goodyear had slashed its payroll by 2,800 workers.
Worldwide, the company said first-quarter sales were $3.4 billion vs. $3.7 billion in 2000. Goodyear estimated that currency translation reduced sales by about $130 million. Tire volume during the quarter totaled 52.7 million units worldwide-down 2.1 million or 3.8 percent from 2000, mostly due to weak original equipment shipments in North America, the company said.
In North America, Goodyear said its tire shipments fell 9.6 percent to 25.8 million units compared with the same period last year. Sales to OE customers declined 22.1 percent, while replacement sales volume slipped 2.7 percent.
Chairman and CEO Samir G. Gibara said the continued decline in North American orders for original equipment tires and engineered products had a substantial impact on Goodyear's results.
``We significantly reduced our production levels during the quarter but could not offset the rapid market decline in February and March,'' he said. ``Further reductions in production are being made this quarter to bring inventory levels into line with projected sales by the end of June.''
In line with the production cutbacks, Goodyear will layoff a number of employees, a company spokesman said. While he could not provide figures, he said the plants involved are Goodyear facilities in Gadsden, Ala., Union City, Tenn., and Valleyfield, Quebec, Canada, and Kelly-Springfield plants in Fayetteville, N.C., and Tyler, Texas. In February, Goodyear announced production adjustments at plants in Danville, Va., Freeport, Ill., Lawton, Okla., and Napanee, Ontario, Canada, the spokesman said.
While tire shipments slipped industrywide in North America during the quarter, sales of Goodyear-brand tires bucked the trend, the company said.
The company said industry shipments of replacement consumer tires in North America declined 7 percent during the quarter, whereas Goodyear-brand sales of these tires grew more than 4 percent.
In commercial truck tires, shipments of Goodyear-brand tires improved 7.5 percent vs. the industry, which was down 16 percent. The same trend held true in farm tires, where shipments of Goodyear-brand tires fell only 4 percent, while industrywide shipments of these tires declined 9 percent.
Referring to the negative publicity that followed Bridgestone/Firestone Inc.'s August 2000 recall of 6.5 million Firestone tires, Mr. Gibara said continued market-share improvement for the company's Goodyear brand reflect what he termed ``a clear flight to quality on the part of tire consumers.''
While competitive pressures continued to exist in several markets, Goodyear said, price increases enacted earlier this year are providing manufacturers with much-needed relief. However, the company noted that raw material costs, which rose an estimated 3 percent in the first quarter, are still climbing.
Cooper Tire & Rubber Co.
Findlay, Ohio-based Cooper suffered double-digit drops in income and sales in the first quarter, as markets for both tires and automotive parts weakened significantly.
However, Thomas Dattilo, Cooper chairman, president and CEO, called the first quarter result an ``anomaly'' and said the company expects to take advantage of ``a much improved selling environment...throughout the rest of the year....''
First quarter operating profits fell 65.4 percent to $25 million from the first quarter of 2000. Sales slid 17.9 percent from a record performance a year ago to $758 million. Net income declined 88.4 percent to $3.6 million.
Tire and related products sales were off 13 percent to $388 million, as unit sales fell 18 percent primarily due to the soft North American replacement tire market.
Besides lower sales volume, Cooper also blamed the fall in profits on higher raw material and energy costs, as well as charges of about $19 million for litigation and product liability provisions.
``In spite of the anomaly that was the first quarter, there are many reasons to be optimistic as we look to the months ahead,'' Mr. Dattilo said. ``Tire price increases implemented in North America appear to be holding. During the quarter Cooper-Standard Automotive won over $80 million in net new business awards that will come on stream in the next few years. Light vehicle inventory has come down dramatically and should lead to more stable production patterns during the rest of the year.''
Carlisle Companies Inc.
Syracuse, N.Y.-based Carlisle reported a net loss of $10.2 million for the first quarter after taking a $24 million restructuring charge.
The charge relates to exiting and realigning facilities that have underperformed in a move to improve future operating performance, the company said. Net earnings before the restructuring charge were $13.9 million.
Sales for the quarter rose 6.7 percent to $463.2 million vs. the same quarter a year ago. Subsidiaries Carlisle Tire & Wheel, Carlisle Process Systems, Tensolite and Carlisle SynTec all showed sales growth, the firm said.
``Carlisle has been impacted by the manufacturing slowdown evidenced throughout the industry, especially in the automotive and transportation markets. We have taken appropriate actions to reduce costs and eliminate marginal assets,'' the company said.
Myers Industries
Myers' first-quarter net income dipped 4.1 percent to slightly less than $8 million as declines in the automotive and truck markets impacted the company's performance.
The Akron-based parent of Myers Tire Supply and Patch Rubber Co. said net sales for the quarter rose 2 percent to $165.3 million. Without contributions from acquisitions, Myers said, total net sales would have been flat.
``Our first quarter was challenged with difficult economic conditions carried over from the fourth quarter,'' said Stephen Myers, president and CEO. ``The weakened conditions in many sectors of the economy, including further decline in the automotive and truck markets, impacted performance in both of our business segments.''
Myers also announced that it has moved its shares from trading on the American Stock Exchange to the New York Stock Exchange. Trading began May 1, and Myers Industries' stock symbol, ``MYE,'' was retained.
Continental A.G.
Despite what it called a ``tight market'' and production cutbacks, especially in North America, Continental reported higher sales in the first quarter of 2001.
Conti said sales reached nearly $2.4 billion in the quarter, up 6.3 percent from the year ago period. Operating earnings dropped 26.6 percent to $97.85 million.
``Both our passenger tire business in Europe and the business in electronic brake systems at Continental Automotive Systems are doing well despite the perceptible pressure on prices this year,'' said Chairman Stephan Kessel.
At its Continental Tire North America unit, Conti said sales fell 11.1 percent to $357.2 million, contributing to a $21.3 million operating loss. This compares with an operating profit of $14.8 million in last year's first period.
Conti said North American sales were impacted by ``fierce price gouging and a slump in vehicle sales, accompanied by drastic increases in energy and raw materials prices and increased costs for production modifications.''
TBC Corp.
The acquisition of the Tire Kingdom Inc. retail chain in Florida and the sale and leaseback of a distribution center pushed Memphis, Tenn.-based TBC's first quarter net income to $4.3 million, a 7.9-percent increase from the same period in 2000.
Net sales jumped 28.1 percent to $227.2 million, which the Memphis-based company credited to its Tire Kingdom subsidiary.
``We believe the strong relative performance of TBC in the first quarter further validates the rationale for the Tire Kingdom acquisition,'' said President and CEO Larry Day. ``Our retail operations are contributing positively to our income and are serving as a growth vehicle for TBC.''
Mr. Day said TBC is optimistic of surpassing the $1 billion sales mark in 2001. The distributor and private brand tire marketer, he said, recently opened a distribution center for its Carroll's Tire unit in Baltimore and opened eight stores for TBC's Big O Tires Inc. subsidiary.
Bandag Inc.
Bandag Inc. suffered a 77-percent drop in both net and operating earnings in the first quarter while sales fell nearly 6.7 percent to $209.2 million.
Net profits dropped to $2.3 million from $10 million reported in last year's first quarter, while operating earnings fell to $4 million.
Chairman and CEO Martin G. Carver attributed the slide to sluggish business conditions and more intense competition throughout the truck tire industry globally. Both new and retread tire sectors have been affected by the slowing economy, the company said.
The sales decline reflected a 10-percent drop in unit volume, partially offset by price increases, Bandag said.
The company's Tire Distribution Systems Inc. commercial tire and retreading subsidiary saw sales drop 7.1 percent, to $83.4 million, reflecting the overall business malaise. The unit posted an operating loss of $5.3 million in the quarter, compared with an operating loss of $2.9 million in the year-ago quarter.
``The decrease in traditional tread volume reflects the sluggish business conditions and more intense competition throughout the truck tire industry worldwide,'' Mr. Carver said in a prepared statement.
``The slowing economies in our major markets reduced demand for trucking services and, in turn, fleets looked to their suppliers for price reductions in order to reduce costs. Both new and retread tires have been affected,'' he added.
High energy costs also have affected sales and earnings, Mr. Carver said, noting that higher diesel fuel prices are pressuring trucking fleets to look for ways to reduce operating costs, while at the same time higher prices for oil-derived raw materials are pushing production costs for tread rubber higher.
Despite the downturns, Bandag feels it is in a position to take advantage of any rebound in demand, once it comes, Mr. Carver said. He noted that the company's ``continuing operating expense management has been prudent and focused on investing in critical capabilities, products and programs which positions us well for the eventual global economic recovery.''
Titan International
Titan's net income slid to $200,000 in the first quarter from $1.1 million a year ago.
Sales for the Quincy, Ill.-based tire and wheel maker fell 17.2 percent to $136 million.
Titan President and CEO Maurice Taylor Jr. attributed the results to depressed market conditions adding that sales of Titan's LSW assemblies continue to increase with potential for future growth.