Goodyear to slice $100 million from earnings to 1998, blaming accounting system
Thursday, October 23rd 2003, 12:00 am
By: News On 6
CLEVELAND (AP) _ Goodyear Tire & Rubber Co. is working to repair accounting errors that will force the nation's largest tire maker to lower net income since 1998 by as much as $100 million and delay its quarterly earnings report.
In a statement after the market closed Wednesday, Goodyear said an accounting system implemented in 1999 caused errors with its internal billing system, resulting in the mistakes.
Goodyear shares plunged nearly 28 percent in the extended trading session after the company disclosed the accounting issue. They had finished the regular session 2 cents higher at $6.83 on the New York Stock Exchange.
The accounting system was used to track the purchase of equipment for factories, Goodyear spokesman Keith Price said.
Accounting entry errors also were involved, but Price said he could not confirm whether someone had simply ``punched in the wrong numbers.'' He declined to reveal when the errors were discovered.
The accounting errors do not affect the company's cash flow or access to credit, Goodyear said. Price said the company moved to disclose and correct the problems quickly.
Third-quarter results are expected to be released next month.
Goodyear said it is still reviewing the mistakes, but as of now, income reported from 1998 through 2002 is expected to be lowered by as much as $100 million. The erroneous system also affected results for the first half of 2003.
The loss of $236.9 million, or $1.35 a share, previously reported for the first half of this year is expected to improve, Goodyear said. The company said the improvement was because charges previously recognized during the first half of 2003 will be reflected in the restatement for prior years.
Goodyear said it expected a loss in the quarter that ended Sept. 30 of between $90 million to $115 million, or 51 cents to 66 cents per share. The loss includes charges related to a plant closing and 1,360 layoffs in North America and Europe.
Analysts surveyed by Thomson First Call had expected a loss of 14 cents a share, excluding the charges.
The company expects to report sales of about $3.9 billion for the quarter.
Goodyear has battled rising expenses and sagging sales, prompting a plan that includes possibly selling some of its non-tire businesses and cutting $1.15 billion in wage and benefits costs over the next three years.
A three-year contract approved last month by Goodyear employees gave the company the option to cut jobs if production and cost-cutting goals aren't met.
Earlier this year, Goodyear eliminated approximately 700 salaried positions. Last week, it said it will close its Dunlop tire plant in Huntsville, Ala., leaving 1,100 workers unemployed.