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S&P: Goodyear unaffected
Standard & Poor's said Friday its rating and outlook on Goodyear Tire & Rubber Co. (B+/stable/--) will not be affected by Goodyear's just-announced preliminary third-quarter financial results, or by its plan to amend its 2003 10-K filing.
Goodyear expects to report record sales and strong segment EBIT growth compared with last year's third quarter. The improved performance results from market share gains, price increases, and cost savings, partially offset by higher raw material costs.
Despite the improvements, S&P said it expects profit margins of the company's important North American tire segment (50% of sales) to remain sub par because of its high cost structure, tough competition, and high raw material costs. Goodyear plans to file an amended 2003 10-K that will include additional disclosures required by the SEC related to several nonconsolidated affiliates, the results of which were included on an equity basis.
The restatement of prior-period financial statements, including its first and second quarter of 2004, will result in an after-tax expense adjustment of about $4.6 million. In addition, Goodyear will record balance sheet adjustments related to the recognition of tax assets and liabilities, with no adjustments required to net income, cash flows, or equity, and will reallocate previously disclosed out-of-period adjustments to the periods in which they occurred.
S&P said it considers the adjustments immaterial to Goodyear's credit quality.
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