Goodyear Reports Record Third Quarter Results

AKRON, Ohio, Oct. 30 /PRNewswire-FirstCall/ -- The Goodyear Tire & Rubber Company today reported record third quarter sales of $5.1 billion, up 3 percent from last year, offsetting lower volumes with higher prices and a richer product mix.

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Improved pricing and product mix in all five business units drove revenue per tire up 7 percent over the 2006 quarter. Lower volumes reflect the strategic decision to exit certain segments of the private label tire business in North America, along with weak markets.

"Our outstanding third quarter is evidence of the success we are seeing in marketing our premium product lines while remaining focused on improving our cost structure," said Robert J. Keegan, chairman and chief executive officer. "Despite market challenges, our results are among the best ever achieved by Goodyear.

"Our product, brand, customer and geographic mix drove margin expansion," he said. The company achieved a gross margin of 20 percent in the quarter, up from 17.4 percent a year ago.

"North American Tire delivered dramatic earnings improvement despite lower volumes. This reflects its new product success, strong marketing initiatives and cost savings efforts."

Each of the five business units achieved double digit or better percentage growth in segment operating income for the quarter. The company's three emerging markets businesses increased sales 15 percent and segment operating income 24 percent over last year.

Keegan said the company made further progress during the third quarter on its plan to achieve $1.8 billion to $2 billion in gross cost savings by the end of 2009. "We have now achieved nearly $900 million in savings and remain on track to reach our four-year goal."

Third quarter 2007 income from continuing operations was $159 million (67 cents per share). This compares to a third quarter 2006 loss from continuing operations of $76 million (43 cents per share).

Segment operating income benefited from improved pricing and product mix of $179 million in the third quarter of 2007, which more than offset increased raw material costs of $23 million.

Favorable foreign currency translation positively impacted sales by $232 million and segment operating income by $33 million in the quarter.

The 2007 third quarter was also impacted by after-tax rationalization and accelerated depreciation costs of $6 million (2 cents per share), tax expense related primarily to a tax law change of $12 million (5 cents per share) and a gain on asset sales of $10 million (4 cents per share).

The third quarter of 2006 included $132 million (75 cents per share) in after-tax rationalization and accelerated depreciation costs.

Goodyear had third quarter 2007 net income of $668 million ($2.75 per share), which includes discontinued operations of $509 million ($2.08 per share). Included in discontinued operations was an after-tax gain of $517 million ($2.12 per share) on the sale of the company's Engineered Products business. In the third quarter of 2006, the company had a net loss of $48 million (27 cents per share). All per share amounts are diluted.

See the table at the end of this release for a list of significant items impacting continuing operations from the 2007 and 2006 third quarters.

Business Segments

Total segment operating income from continuing operations was $382 million in the third quarter of 2007, an all-time high and up 35 percent from the 2006 period.

Asia Pacific Tire, Latin American Tire, European Union Tire, and Eastern Europe, Middle East and Africa Tire achieved record sales.

All five business units had higher segment operating income compared to last year, with Asia Pacific Tire and Eastern Europe, Middle East and Africa Tire setting records for any quarter. Segment operating income for European Union Tire and Latin American Tire set third quarter records.

See the disclosure at the end of this release for further explanation and a segment operating income reconciliation table.

North American Tire Third Quarter Nine Months (in millions) 2007 2006 2007 2006 Tire Units 20.7 23.5 60.7 70.4 Sales $2,285 $2,432 $6,578 $7,011 Segment Operating Income 66 19 99 68 Segment Operating Margin 2.9% 0.8% 1.5% 1.0%

North American Tire third quarter sales were down 6 percent compared to the 2006 period, primarily due to lower volume resulting from the company's exit from certain segments of the private label tire business as well as weak original equipment and replacement markets. This was partially offset by market share gains in Goodyear brand tires and improved pricing and product mix.

Third quarter segment operating income is the highest since the third quarter of 2001. It was up 247 percent compared to the 2006 quarter due to improved pricing and product mix of $60 million, which more than offset increased raw material costs of $8 million.

European Union Tire Third Quarter Nine Months (in millions) 2007 2006 2007 2006 Tire Units 15.5 16.5 45.4 47.8 Sales $1,380 $1,263 $3,977 $3,647 Segment Operating Income 90 81 227 211 Segment Operating Margin 6.5% 6.4% 5.7% 5.8%

European Union Tire third quarter sales increased 9 percent over last year as a result of improved pricing and product mix and a favorable impact from currency translation of $108 million, which more than offset lower volume.

Segment operating income for the third quarter increased 11 percent compared to 2006 as pricing and product mix improvements of $55 million more than offset $13 million in higher raw material costs. Also impacting results were favorable foreign currency translation of $7 million, increased conversion costs and lower unit volume.

Eastern Europe, Middle Third Quarter Nine Months East and Africa Tire (in millions) 2007 2006 2007 2006 Tire Units 5.2 5.6 15.2 15.3 Sales $484 $430 $1,334 $1,153 Segment Operating Income 86 77 213 179 Segment Operating Margin 17.8% 17.9% 16.0% 15.5%

Eastern Europe, Middle East and Africa Tire third quarter sales were up 13 percent compared to 2006. This resulted from improved pricing and product mix and a favorable impact from currency translation of $37 million that more than offset lower unit volume.

Segment operating income improved 12 percent for the third quarter due to improved pricing and product mix of $31 million that more than offset less than $2 million in higher raw material costs. Also impacting results were favorable foreign currency translation of $5 million as well as higher conversion costs, partially the result of a strike in South Africa, and lower volume.

Latin American Tire Third Quarter Nine Months (in millions) 2007 2006 2007 2006 Tire Units 5.5 5.3 16.3 15.7 Sales $491 $408 $1,359 $1,192 Segment Operating Income 99 77 267 262 Segment Operating Margin 20.2% 18.9% 19.6% 22.0%

Latin American Tire sales increased 20 percent from the third quarter of 2006 due to higher unit volume, improved pricing and product mix and a favorable impact from currency translation of $40 million.

Third quarter 2007 segment operating income increased 29 percent from last year due to higher unit volume and improved pricing and product mix of $20 million, which more than offset higher raw material costs of $5 million. Results also benefited from favorable currency translation of $18 million. Higher conversion costs were a partial offset.

Asia Pacific Tire Third Quarter Nine Months (in millions) 2007 2006 2007 2006 Tire Units 4.8 4.9 14.1 14.6 Sales $424 $380 $1,236 $1,110 Segment Operating Income 41 28 111 78 Segment Operating Margin 9.7% 7.4% 9.0% 7.0%

Asia Pacific Tire third quarter sales were 12 percent higher than the 2006 period primarily due to improved pricing and product mix and a favorable impact from currency translation of $40 million, which offset lower volume.

Segment operating income increased 46 percent in the 2007 third quarter, primarily due to improved pricing and product mix of $13 million, reduced raw material costs of $4 million and $3 million of favorable foreign currency translation. Higher SAG costs were a partial offset.

Conference Call

Goodyear will hold an investor conference call at 11 a.m. today. Prior to the commencement of the call, the company will post the financial and other statistical information that will be presented on its investor relations Web site: investor.goodyear.com.

Participating in the call with Keegan will be W. Mark Schmitz, executive vice president and chief financial officer, and Darren R. Wells, senior vice president, finance and strategy.

Shareholders, members of the media and other interested persons may access the call on the Web site or via telephone by calling (706) 634-5954 before 10:55 a.m. A replay of the call will be available at 3 p.m. by calling (706) 634-4556. The replay will also remain available on the Web site.

Goodyear is one of the world's largest tire companies. The company employs about 70,000 people and manufactures its products in more than 60 facilities in 26 countries around the world. For more information about Goodyear, go to http://www.goodyear.com/corporate.

Certain information contained in this press release may constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors, many of which are beyond the company's control, which affect its operations, performance, business strategy and results and could cause its actual results and experience to differ materially from the assumptions, expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to: actions and initiatives taken by both current and potential competitors; increases in the prices paid for raw materials and energy; the company's ability to realize anticipated savings and operational benefits from its cost reduction initiatives, including those expected to be achieved under the company's master labor contract with the United Steelworkers (USW) and those related to the closure of certain of the company's manufacturing facilities; whether or not the various contingencies and requirements are met for the establishment of the Voluntary Employees' Beneficiary Association (VEBA) to provide healthcare benefits for current and future USW retirees; potential adverse consequences of litigation involving the company; pension plan funding obligations; as well as the effects of more general factors such as changes in general market or economic conditions or in legislation, regulation or public policy. Additional factors are discussed in the company's filings with the Securities and Exchange Commission, including the company's annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

The Goodyear Tire & Rubber Company and Subsidiaries Consolidated Statements of Operations (unaudited) Quarter Ended Nine Months Ended September 30, September 30, (In millions, except 2007 2006 2007 2006 per share amounts) NET SALES $5,064 $4,913 $14,484 $14,113 Cost of Goods Sold 4,051 4,060 11,759 11,620 Selling, Administrative and General Expense 670 611 2,025 1,856 Rationalizations 2 137 24 210 Interest Expense 106 105 351 310 Other Income, Net (33) (2) (14) (36) Minority Interest in Net Income of Subsidiaries 14 19 52 42 Income (Loss) from Continuing Operations before Income Taxes 254 (17) 287 111 United States and Foreign Taxes 95 59 209 174 Income (Loss) from Continuing Operations 159 (76) 78 (63) Discontinued Operations 509 28 472 91 NET INCOME (LOSS) $668 $(48) $550 $28 Income (Loss) Per Share - Basic Income (Loss) from Continuing Operations $0.76 $(0.43) $0.40 $ (0.36) Discontinued Operations 2.41 0.16 2.41 0.52 Net Income (Loss) Per Share - Basic $3.17 $(0.27) $2.81 $0.16 Weighted Average Shares Outstanding 211 177 196 177 Income (Loss) Per Share - Diluted Income (Loss) from Continuing Operations $0.67 $(0.43) $0.39 $ (0.36) Discontinued Operations 2.08 0.16 2.05 0.52 Net Income (Loss) Per Share - Diluted $2.75 $(0.27) $2.44 $0.16 Weighted Average Shares Outstanding 244 177 229 177 The Goodyear Tire & Rubber Company and Subsidiaries Consolidated Balance Sheets (unaudited) September 30, December 31, (In millions) 2007 2006 Assets: Current Assets: Cash and Cash Equivalents $2,933 $3,862 Restricted Cash 183 214 Accounts and Notes Receivable, less Allowance - $91 ($98 in 2006) 3,804 2,800 Inventories: Raw Materials 597 663 Work in Process 149 135 Finished Products 2,350 1,803 3,096 2,601 Prepaid Expenses and Other Current Assets 297 289 Current Assets of Discontinued Operations - 413 Total Current Assets 10,313 10,179 Goodwill 697 662 Intangible Assets 166 166 Deferred Income Tax 112 150 Other Assets and Deferred Pension Costs 468 453 Long Term Assets of Discontinued Operations - 352 Properties and Plants, less Accumulated Depreciation - $8,264 ($7,673 in 2006) 5,286 5,067 Total Assets $17,042 $17,029 Liabilities: Current Liabilities: Accounts Payable-Trade $2,252 $1,945 Compensation and Benefits 968 883 Other Current Liabilities 738 811 Current Liabilities of Discontinued Operations - 157 United States and Foreign Taxes 248 222 Notes Payable and Overdrafts 219 243 Long Term Debt and Capital Leases due within one year 163 405 Total Current Liabilities 4,588 4,666 Long Term Debt and Capital Leases 4,675 6,562 Compensation and Benefits 4,105 4,935 Long Term Liabilities of Discontinued Operations - 47 Deferred and Other Noncurrent Income Taxes 285 320 Other Long Term Liabilities 675 380 Minority Equity in Subsidiaries 915 877 Total Liabilities 15,243 17,787 Commitments and Contingent Liabilities Shareholders' Equity (Deficit): Preferred Stock, no par value: Authorized, 50 shares, unissued - - Common Stock, no par value: Authorized, 450 shares, Outstanding shares - 211 (178 in 2006) after deducting 11 treasury shares (18 in 2006) 211 178 Capital Surplus 2,349 1,427 Retained Earnings 1,550 968 Accumulated Other Comprehensive Loss (2,311) (3,331) Total Shareholders' Equity (Deficit) 1,799 (758) Total Liabilities and Shareholders' Equity (Deficit) $17,042 $17,029 Non-GAAP Financial Measures

This earnings release presents total segment operating income and net debt, each of which are important financial measures for the company but are not financial measures defined by GAAP.

Total segment operating income is the sum of the individual strategic business units segment operating income as determined in accordance with Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." Management believes that total segment operating income is useful because it represents the aggregate value of income created by the company's SBUs and excludes items not directly related to the SBUs for performance evaluation purposes. See the table below for the reconciliation of total segment operating income.

Net debt is total debt (the sum of long term debt and capital leases, notes payable, and long-term debt and capital leases due within one year) minus cash and cash equivalents. Management believes net debt is an important measure of liquidity, which it uses as a tool to assess the company's capital structure and measure its ability to meet its future debt obligations. Cash and cash equivalents are subtracted from the GAAP measure because they could be used to reduce our debt obligations. See the table below for the reconciliation of net debt.

Total Segment Operating Income Reconciliation Table (In millions) Quarter Ended Sept. 30, (unaudited) 2007 2006 Total Segment Operating Income 382 282 Rationalizations (2) (137) Accelerated depreciation (6) (7) Interest expense (106) (105) Minority interest in net income of subsidiaries (14) (19) Corporate incentive compensation plans (22) (12) Intercompany profit elimination -- (1) Retained expenses of discontinued operations (1) (13) Other income, net less equity in earnings of affiliates 32 3 Other (9) (8) Income from continuing operations before income taxes 254 (17) US and foreign taxes 95 59 Income (Loss) from continuing operations 159 (76) Discontinued operations 509 28 Net Income $668 $(48) Net Debt Reconciliation Table (In millions) Sept. 30, Dec. 31, 2007 2006 Long Term Debt and Capital Leases 4,675 6,562 Notes Payable and Overdrafts 219 243 Long Term Debt and Capital Leases Due Within One Year 163 405 Total Debt 5,057 7,210 Less: Cash and Cash Equivalents $2,933 $3,862 Net Debt $2,124 $3,348 Change in Net Debt $1,224

Third Quarter Significant Items (after-tax) Impacting Continuing Operations

2007 -- Rationalization and accelerated depreciation costs, $6 million (2 cents per share) -- Reduced value of deferred tax assets primarily due to tax rate reduction in Germany, $12 million (5 cents per share) -- Gain on asset sales, $10 million (4 cents per share) 2006 -- Rationalization and accelerated depreciation costs, $132 million (75 cents per share) MEDIA CONTACT: Keith Price 330-796-1863 ANALYST CONTACT: Greg Dooley 330-796-6704