AKRON (March 18, 2003) — Because it likely won't have the profits necessary to qualify for certain tax credits, Goodyear on March 17 announced a non-cash charge of $1.1 billion, or $6.17 a share, for the fourth quarter 2002.
In addition to the charge, the Akron-based tire maker will reduce its shareholders' equity for 2002 by $1.3 billion to reflect an increase in its unfunded pension benefit obligations. In a statement, the tire maker said the reduction brought its net worth below the level required in its bank loan agreements. However, Goodyear's lenders have waived those covenants until April 4 as the tire maker tries to restructure, refinance and extend its loan agreements.
A Goodyear spokesman said the tire maker has not offered any guidance for its fourth-quarter and year-end 2002 earnings, which will be released once the talks with its lenders are complete. But before the March 17 announcement, analysts were expecting a 3-cent per-share loss for the fourth quarter and year. For the fourth quarter in 2001, Goodyear lost $44.5 million in its North American tire operations.
Goodyear said no cash is involved in the $1.1 billion charge, so the company is not expecting any operational impact.
“We do not believe this charge is a reflection of the long-term prospects of our business as we expect to accomplish a successful turnaround of our U.S. operations,” said Robert W. Tieken, Goodyear's executive vice president and chief financial officer.
Goodyear's stock was trading at $4.17 per share by 3 p.m. March 18, up from the $4.07 it closed at on March 17.