8-K
GOODYEAR TIRE & RUBBER CO /OH/ (GT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): (August 5, 2022)
THE GOODYEAR TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
| Ohio | 1-1927 | 34-0253240 |
|---|---|---|
| (State or other jurisdiction<br> <br>of incorporation) | (Commission<br> <br>File Number) | (I.R.S. Employer<br> <br>Identification No.) |
| 200 Innovation Way, Akron, Ohio | 44316-0001 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (330) 796-2121
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, Without Par Value | GT | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
A copy of the news release issued by The Goodyear Tire & Rubber Company on Friday, August 5, 2022, describing its results of operations for the second quarter of 2022, is attached hereto as Exhibit 99.1.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits |
| --- | --- |
| 99.1 | News Release, dated August 5, 2022 |
| --- | --- |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| THE GOODYEAR TIRE & RUBBER COMPANY | ||
|---|---|---|
| Date: August 5, 2022 | By | /s/ Darren R. Wells |
| Darren R. Wells | ||
| Executive Vice President and<br>Chief Financial Officer |
EX-99.1
Exhibit 99.1
| NEWS RELEASE | |
|---|---|
| GOODYEAR REPORTS SECOND QUARTER, FIRST HALF 2022 RESULTS | |
| Net sales growth of 31% compared with the second quarter of 2021, over 15% growth excluding the Cooper Tire transaction | |
| FOR IMMEDIATE RELEASE | Second quarter Goodyear net income of $166 million; adjusted net income of $131 million |
| • GLOBAL HEADQUARTERS:<br><br><br>200 INNOVATION WAY,<br><br><br>AKRON, OHIO 44316-0001 | Merger-adjusted segment operating income of $372 million, up 7% compared to the second quarter of 2021 |
| Unit volume growth of 21%, including 7% in legacy business | |
| • MEDIA WEBSITE:<br><br><br>WWW.GOODYEARNEWSROOM.COM | Price/mix exceeded raw materials by more than $140 million |
| • MEDIA CONTACT:<br><br><br>ED MARKEY<br><br><br>330.796.8801<br><br><br>EMARKEY@GOODYEAR.COM | Revenue per tire (excluding currency impact) up 14% versus second quarter of 2021 |
| AKRON, Ohio, Aug. 5, 2022 – The Goodyear Tire & Rubber Company today reported results for the second quarter of 2022. | |
| • ANALYST CONTACT:<br><br><br>CHRISTIAN GADZINSKI<br><br><br>330.796.2750<br><br><br>CHRISTIAN_GADZINSKI@GOODYEAR.COM | “Our second quarter and first half sales were the highest in a decade, reflecting the recent addition of Cooper Tire, the benefit of strong pricing actions across many of our key markets, and volume growth,” said Richard<br>J. Kramer, chairman, chief executive officer and president. |
| “With the increase in our top line, we continued to grow earnings despite elevated inflation and COVID-related disruptions in China. I am pleased with the agility and execution our teams demonstrated through the first half of<br>the year.” | |
| Goodyear’s second quarter 2022 sales were $5.2 billion, up 31% from a year ago. The increase was driven by the Cooper Tire merger, improvements in price/mix, higher volume, and increased sales from other tire-related<br>businesses. | |
| Tire unit volumes totaled 45.6 million, up 21% from the prior year’s period. Replacement and original equipment tire unit volume increased 23% and 17%, respectively, reflecting the addition of Cooper Tire unit volume and growth<br>in our legacy business. |
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Goodyear’s second quarter 2022 net income was $166 million (58 cents per share) compared to net income of $67 million (27 cents per share) a year ago. There were several significant items in the period, including, on a pre-tax basis, a one-time gain of $95 million on a sale and leaseback transaction related to retail properties in Americas and a gain of $14 million related to a tariff-rate change, partially offset by rationalization charges of $26 million and pension settlement charges of $18 million.
Second quarter 2022 adjusted net income was $131 million compared to adjusted net income of $79 million in the prior year’s quarter. Adjusted earnings per share were $0.46, compared to $0.32 in the prior year’s quarter. Per share amounts are diluted.
The company reported segment operating income of $364 million in the second quarter of 2022, up $65 million from a year ago. The company also reported merger-adjusted segment operating income of $372 million, which excludes certain costs triggered by the Cooper Tire merger, up $23 million from a year ago. The increase in segment operating income primarily reflects improvements in price/mix, the Cooper Tire merger (including the non-recurrence of other transaction-related items in the prior year) and the impact of higher volume. These factors were partly offset by higher raw material costs, inflationary cost pressures in wages, benefits, energy and transportation and the non-recurrence of a $69 million benefit in the prior year related to a Brazilian Supreme Court ruling with respect to indirect taxes.
Year-to-Date Results
Goodyear’s sales for the first six months of 2022 were $10.1 billion, a 35% increase from the 2021 period, primarily due to the Cooper Tire merger, improvements in price/mix, higher volume and increased sales from other tire-related businesses.
Tire unit volumes totaled 90.6 million, up 25% from 2021. Replacement tire shipments increased 29%. This growth included additional tire unit volume related to the Cooper Tire merger, which closed on June 7, 2021, the benefit of stronger industry demand and growth in our legacy business. Original equipment volume increased 13%, driven by higher vehicle production and new fitments.
Goodyear’s net income was $262 million (91 cents per share) compared to net income of $79 million (32 cents per share) in the prior year’s period. The first half of 2022 included several significant items, including, on a pre-tax basis, a one-time gain of $95 million on a sale and leaseback transaction related to retail properties in Americas and a gain of $14 million related to a tariff-rate change, partially offset by rationalization charges of $37 million and pension settlement charges of $18 million.
Goodyear’s adjusted net income for the first six months of 2022 was $236 million (83 cents per share), compared to adjusted net income of $184 million (76 cents per share) in the prior year’s period. Per share amounts are diluted.
The company reported segment operating income of $667 million for the first six months of 2022, up $142 million from a year ago. The company also reported merger-adjusted segment operating income of $683 million, which excludes certain costs triggered by the Cooper Tire merger, up $108 million from the prior year. The increase in segment operating income primarily reflects the impacts of improvements in price/mix, the Cooper Tire merger, including the non-recurrence of other transaction-related items in the prior year, and higher volume. These factors were partly offset by higher raw material costs as well as inflationary cost pressures in wages, benefits, energy and transportation.
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Reconciliation of Non-GAAP Financial Measures
See the note at the end of this release for further explanation and reconciliation tables for Total Segment Operating Income and Margin; Merger-Adjusted Segment Operating Income and Margin; Adjusted Net Income; and Adjusted Diluted Earnings per Share, reflecting the impact of certain significant items on the 2022 and 2021 periods.
Business Segment Results
Americas
| Second Quarter | Six Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||
| Tire Units | 23.3 | 19.0 | 45.5 | 34.5 | ||||||||
| Net Sales | $ | 3,147 | $ | 2,256 | $ | 6,062 | $ | 4,043 | ||||
| Segment Operating Income | 293 | 233 | 509 | 347 | ||||||||
| Segment Operating Margin | 9.3 | % | 10.3 | % | 8.4 | % | 8.6 | % |
Americas’ second quarter 2022 sales of $3.1 billion were nearly 40% higher than in 2021, driven by the Cooper Tire merger, improvements in price/mix, and increased sales from other tire-related businesses. Tire unit volume increased 22%. Replacement tire unit volume increased 24%, driven by the addition of Cooper Tire volume to the company’s reported results. Original equipment unit volume increased almost 13%, reflecting an improvement in vehicle production.
Second quarter 2022 segment operating income of $293 million was up $60 million from the prior year’s quarter. The increase was driven by improvements in price/mix and the Cooper Tire merger. These factors were partially offset by higher raw material costs, inflationary cost pressures and the non-recurrence of a $69 million benefit in the prior year related to a Brazilian Supreme Court ruling with respect to indirect taxes.
Europe, Middle East and Africa
| Second Quarter | Six Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||
| Tire Units | 14.5 | 12.0 | 29.0 | 24.7 | ||||||||
| Net Sales | $ | 1,497 | $ | 1,230 | $ | 2,923 | $ | 2,461 | ||||
| Segment Operating Income | 52 | 43 | 111 | 117 | ||||||||
| Segment Operating Margin | 3.5 | % | 3.5 | % | 3.8 | % | 4.8 | % |
Europe, Middle East and Africa’s second quarter 2022 sales increased 22% from last year to $1.5 billion, primarily due to improvements in price/mix, higher volume and the Cooper Tire merger. Tire unit volume increased 21%. Replacement tire unit volume rose 25% due to ongoing industry recovery from the pandemic. Original equipment unit volume increased 7%, reflecting improved vehicle production and share gains.
Second quarter 2022 segment operating income of $52 million was up $9 million from the prior year’s quarter, driven by improvements in price/mix and the impact of higher volume. These factors were partially offset by higher raw material costs and inflationary cost pressures.
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Asia Pacific
| Second Quarter | Six Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||
| Tire Units | 7.8 | 6.5 | 16.1 | 13.3 | ||||||||
| Net Sales | $ | 568 | $ | 493 | $ | 1,135 | $ | 986 | ||||
| Segment Operating Income | 19 | 23 | 47 | 61 | ||||||||
| Segment Operating Margin | 3.3 | % | 4.7 | % | 4.1 | % | 6.2 | % |
Asia Pacific’s second quarter 2022 sales increased 15% to $568 million, driven by higher volume, the Cooper Tire merger and improvements in price/mix. Tire unit volume increased 20% due to the addition of Cooper Tire’s units and growth in the consumer business outside of China. Replacement tire unit volume increased 10%. Original equipment unit volume increased 38% due to new fitments.
Second quarter 2022 segment operating income of $19 million was down $4 million from the prior year’s quarter, driven by higher raw material costs and inflationary cost pressures, partly offset by improvements in price/mix, higher volume and the Cooper Tire merger.
Rationalization Programs
During the quarter, the company approved a plan related to the integration of Cooper Tire aimed at reducing duplicative global administrative headcount and closing redundant Cooper Tire warehouse locations in Americas. The plan will result in approximately 490 job reductions. The program is in line with previously announced planned synergies, costs to achieve, and cash rationalization payment estimates.
Conference Call
Goodyear will hold an investor conference call at 8:30 a.m. EDT today. Prior to the commencement of the call, the company will post the financial and other related information that will be presented on its investor relations website: http://investor.goodyear.com.
Participating in the conference call will be Richard J. Kramer, chairman, chief executive officer and president; Darren R. Wells, executive vice president and chief financial officer; and Christina L. Zamarro, vice president, finance and treasurer.
Investors, members of the media and other interested persons can access the conference call on the website or via telephone by calling either (877) 830-2596 or (785) 424-1744 before 8:25 a.m. EDT and providing the Conference ID “Goodyear.” A taped replay will be available by calling (888) 566-0179 or (402) 530-9316. The replay will also remain available on the website.
About Goodyear
Goodyear is one of the world’s largest tire companies. It employs about 72,000 people and manufactures its products in 57 facilities in 23 countries around the world. Its two Innovation Centers in Akron, Ohio, and Colmar-Berg, Luxembourg, strive to develop state-of-the-art products and services that set the technology and performance standard for the industry. For more information about Goodyear and its products, go to www.goodyear.com/corporate. GT-FN
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Certain information contained in this press release constitutes 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 our control, that affect our operations, performance, business strategy and results and could cause our actual results and experience to differ materially from the assumptions, expectationsand objectives expressed in any forward-looking statements. These factors include, but are not limited to: our ability to achieve the expected benefits of the Cooper Tire & Rubber Company acquisition; the impact on us of the COVID-19 pandemic; increases in the prices paid for raw materials and energy; inflationary cost pressures; delays or disruptions in our supply chain or the provision of services to us; changes in tariffs, tradeagreements or trade restrictions; our ability to implement successfully our strategic initiatives; actions and initiatives taken by both current and potential competitors; deteriorating economic conditions or an inability to access capital markets;a labor strike, work stoppage, labor shortage or other similar event; work stoppages, financial difficulties, labor shortages or supply disruptions at our suppliers or customers; the adequacy of our capital expenditures; foreign currency translationand transaction risks; our failure to comply with a material covenant in our debt obligations; potential adverse consequences of litigation involving the company; as well as the effects of more general factors such as changes in general market,economic or political conditions or in legislation, regulation or public policy. Additional factors are discussed in our filings with the Securities and Exchange Commission, including our annual report on Form10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, any forward-looking statements represent ourestimates 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.
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The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statements of Operations (unaudited)
| (In millions, except per share amounts) | Three Months Ended | Six Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, | June 30, | |||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||
| NET SALES | $ | 5,212 | **** | $ | 3,979 | $ | 10,120 | **** | $ | 7,490 |
| Cost of Goods Sold | 4,172 | 3,078 | 8,138 | 5,829 | ||||||
| Selling, Administrative and General Expense | 717 | 658 | 1,405 | 1,222 | ||||||
| Rationalizations | 26 | 18 | 37 | 68 | ||||||
| Interest Expense | 110 | 97 | 214 | 176 | ||||||
| Other (Income) Expense | (65 | ) | 30 | (60 | ) | 64 | ||||
| Income before Income Taxes | 252 | 98 | 386 | 131 | ||||||
| United States and Foreign Tax Expense | 82 | 27 | 120 | 42 | ||||||
| Net Income | 170 | 71 | 266 | 89 | ||||||
| Less: Minority Shareholders’ Net Income | 4 | 4 | 4 | 10 | ||||||
| Goodyear Net Income | $ | 166 | **** | $ | 67 | $ | 262 | **** | $ | 79 |
| Goodyear Net Income - Per Share of Common Stock | ||||||||||
| Basic | $ | 0.58 | **** | $ | 0.27 | $ | 0.92 | **** | $ | 0.33 |
| Weighted Average Shares Outstanding | 284 | 244 | 284 | 239 | ||||||
| Diluted | $ | 0.58 | **** | $ | 0.27 | $ | 0.91 | **** | $ | 0.32 |
| Weighted Average Shares Outstanding | 286 | 247 | 286 | 242 |
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The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheets (unaudited)
| (In millions, except share data) | December 31, | ||||
|---|---|---|---|---|---|
| 2021 | |||||
| Assets: | |||||
| Current Assets: | |||||
| Cash and Cash Equivalents | 1,248 | $ | 1,088 | ||
| Accounts Receivable, less Allowance—112 (123 in 2021) | 3,306 | 2,387 | |||
| Inventories: | |||||
| Raw Materials | 1,119 | 958 | |||
| Work in Process | 208 | 191 | |||
| Finished Products | 3,062 | 2,445 | |||
| 4,389 | 3,594 | ||||
| Prepaid Expenses and Other Current Assets | 280 | 262 | |||
| Total Current Assets | 9,223 | **** | **** | 7,331 | **** |
| Goodwill | 995 | 1,004 | |||
| Intangible Assets | 1,023 | 1,039 | |||
| Deferred Income Taxes | 1,512 | 1,596 | |||
| Other Assets | 1,099 | 1,106 | |||
| Operating Lease<br>Right-of-Use Assets | 1,008 | 981 | |||
| Property, Plant and Equipment, less Accumulated Depreciation – 11,045 (11,130 in<br>2021) | 8,041 | 8,345 | |||
| Total Assets | 22,901 | **** | $ | 21,402 | **** |
| Liabilities: | |||||
| Current Liabilities: | |||||
| Accounts Payable – Trade | 4,593 | $ | 4,148 | ||
| Compensation and Benefits | 657 | 689 | |||
| Other Current Liabilities | 830 | 822 | |||
| Notes Payable and Overdrafts | 519 | 406 | |||
| Operating Lease Liabilities due Within One Year | 206 | 204 | |||
| Long Term Debt and Finance Leases due Within One Year | 316 | 343 | |||
| Total Current Liabilities | 7,121 | **** | **** | 6,612 | **** |
| Operating Lease Liabilities | 844 | 819 | |||
| Long Term Debt and Finance Leases | 7,569 | 6,648 | |||
| Compensation and Benefits | 1,293 | 1,445 | |||
| Deferred Income Taxes | 134 | 135 | |||
| Other Long Term Liabilities | 593 | 559 | |||
| Total Liabilities | 17,554 | **** | **** | 16,218 | **** |
| Commitments and Contingent Liabilities | |||||
| Shareholders’ Equity: | |||||
| Goodyear Shareholders’ Equity: | |||||
| Common Stock, no par value: | |||||
| Authorized, 450 million shares, Outstanding shares – 282 million in 2022 and<br>2021 | 282 | 282 | |||
| Capital Surplus | 3,114 | 3,107 | |||
| Retained Earnings | 5,835 | 5,573 | |||
| Accumulated Other Comprehensive Loss | (4,057 | ) | (3,963 | ) | |
| Goodyear Shareholders’ Equity | 5,174 | **** | **** | 4,999 | **** |
| Minority Shareholders’ Equity – Nonredeemable | 173 | 185 | |||
| Total Shareholders’ Equity | 5,347 | **** | **** | 5,184 | **** |
| Total Liabilities and Shareholders’ Equity | 22,901 | **** | $ | 21,402 | **** |
All values are in US Dollars.
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The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
| (In millions) | Six Months Ended | |||||
|---|---|---|---|---|---|---|
| June 30, | ||||||
| 2022 | 2021 | |||||
| Cash Flows from Operating Activities: | ||||||
| Net Income | $ | 266 | **** | $ | 89 | **** |
| Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: | ||||||
| Depreciation and Amortization | 481 | 405 | ||||
| Amortization and Write-Off of Debt Issuance Costs | 8 | 9 | ||||
| Amortization of Inventory Fair Value Adjustment Related to the Cooper Tire Acquisition | — | 38 | ||||
| Transaction and Other Costs Related to the Cooper Tire Acquisition | — | 55 | ||||
| Cash Payments for Transaction and Other Costs Related to the Cooper Tire Acquisition | (2 | ) | (33 | ) | ||
| Provision for Deferred Income Taxes | 42 | (66 | ) | |||
| Net Pension Curtailments and Settlements | 18 | 19 | ||||
| Net Rationalization Charges | 37 | 68 | ||||
| Rationalization Payments | (59 | ) | (123 | ) | ||
| Net (Gains) Losses on Asset Sales | (98 | ) | — | |||
| Operating Lease Expense | 150 | 143 | ||||
| Operating Lease Payments | (139 | ) | (133 | ) | ||
| Pension Contributions and Direct Payments | (33 | ) | (22 | ) | ||
| Changes in Operating Assets and Liabilities, Net of Asset Acquisitions and Dispositions: | ||||||
| Accounts Receivable | (1,024 | ) | (545 | ) | ||
| Inventories | (890 | ) | (542 | ) | ||
| Accounts Payable – Trade | 672 | 547 | ||||
| Compensation and Benefits | (44 | ) | 90 | |||
| Other Current Liabilities | 21 | (42 | ) | |||
| Other Assets and Liabilities | 61 | (28 | ) | |||
| Total Cash Flows from Operating Activities | **** | (533 | ) | **** | (71 | ) |
| Cash Flows from Investing Activities: | ||||||
| Acquisition of Cooper Tire, net of cash and restricted cash acquired | — | (1,856 | ) | |||
| Capital Expenditures | (511 | ) | (385 | ) | ||
| Cash Proceeds from Sale and Leaseback Transaction | 108 | — | ||||
| Asset Dispositions | 24 | — | ||||
| Short Term Securities Acquired | (41 | ) | (57 | ) | ||
| Short Term Securities Redeemed | 44 | 58 | ||||
| Notes Receivable | (24 | ) | (7 | ) | ||
| Other Transactions | (3 | ) | 14 | |||
| Total Cash Flows from Investing Activities | **** | (403 | ) | **** | (2,233 | ) |
| Cash Flows from Financing Activities: | ||||||
| Short Term Debt and Overdrafts Incurred | 723 | 522 | ||||
| Short Term Debt and Overdrafts Paid | (579 | ) | (446 | ) | ||
| Long Term Debt Incurred | 5,312 | 4,855 | ||||
| Long Term Debt Paid | (4,327 | ) | (3,042 | ) | ||
| Common Stock Issued | (5 | ) | 9 | |||
| Transactions with Minority Interests in Subsidiaries | (1 | ) | (5 | ) | ||
| Debt Related Costs and Other Transactions | 9 | (73 | ) | |||
| Total Cash Flows from Financing Activities | **** | 1,132 | **** | **** | 1,820 | **** |
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | (33 | ) | (6 | ) | ||
| Net Change in Cash, Cash Equivalents and Restricted Cash | **** | 163 | **** | **** | (490 | ) |
| Cash, Cash Equivalents and Restricted Cash at Beginning of the Period | 1,164 | 1,624 | ||||
| Cash, Cash Equivalents and Restricted Cash at End of the Period | $ | 1,327 | **** | $ | 1,134 | **** |
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Non-GAAP Financial Measures (unaudited)
This earnings release presents Total Segment Operating Income and Margin, Merger-Adjusted Segment Operating Income and Margin, Adjusted Net Income and Adjusted Diluted Earnings Per Share (EPS), which are important financial measures for the company but are not financial measures defined by U.S. GAAP, and should not be construed as alternatives to corresponding financial measures presented in accordance with U.S. GAAP.
Total Segment Operating Income is the sum of the individual strategic business units’ (SBUs’) Segment Operating Income as determined in accordance with U.S. GAAP. Total Segment Operating Margin is Total Segment Operating Income divided by Net Sales as determined in accordance with U.S. GAAP. Management believes that Total Segment Operating Income and Margin are useful because they represent the aggregate value of income created by the company’s SBUs and exclude items not directly related to the SBUs for performance evaluation purposes. The most directly comparable U.S. GAAP financial measure to Total Segment Operating Income is Goodyear Net Income and to Total Segment Operating Margin is Return on Sales (which is calculated by dividing Goodyear Net Income by Net Sales).
Merger-Adjusted Segment Operating Income is Total Segment Operating Income less the impact of the amortization of inventory step-up adjustments, the incremental amortization of intangible assets and other transaction-related items related to the Cooper Tire merger. Merger-Adjusted Segment Operating Margin is Merger-Adjusted Segment Operating Income divided by Net Sales as determined in accordance with U.S. GAAP. Management believes that Merger-Adjusted Segment Operating Income and Margin are useful because they allow investors to understand and evaluate the aggregate value of income created by the company’s SBUs in a manner that is more comparable to the performance of The Goodyear Tire & Rubber Company and Cooper Tire & Rubber Company in the periods before the merger by adjusting for certain expenses related to the Cooper Tire merger, including amortization of the Cooper Tire inventory step-up adjustments, incremental amortization of Cooper Tire intangible assets and other transaction-related items.
Adjusted Net Income is Goodyear Net Income as determined in accordance with U.S. GAAP adjusted for certain significant items. Adjusted Diluted Earnings Per Share is the company’s Adjusted Net Income divided by Weighted Average Shares Outstanding-Diluted as determined in accordance with U.S. GAAP. Management believes that Adjusted Net Income and Adjusted Diluted Earnings Per Share are useful because they represent how management reviews the operating results of the company excluding the impacts of non-cash impairment charges, rationalizations, asset write-offs, accelerated depreciation, asset sales and certain other significant items.
It should be noted that other companies may calculate similarly titled non-GAAP financial measures differently and, as a result, the measures presented herein may not be comparable to such similarly titled measures reported by other companies.
See the tables below for reconciliations of historical Total Segment Operating Income and Margin, Merger-Adjusted Segment Operating Income and Margin, Adjusted Net Income and Adjusted Diluted Earnings Per Share to the most directly comparable U.S. GAAP financial measures.
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Merger-Adjusted Segment Operating Income and Margin, Segment Operating Income and Margin
Reconciliation Table
| (In millions) | Three Months EndedJune 30, | Six Months Ended<br><br><br>June 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Merger-Adjusted Segment Operating Income | $ | 372 | **** | $ | 349 | **** | $ | 683 | **** | $ | 575 | **** |
| Amortization of Cooper Tire Inventory Step-up | — | (40 | ) | — | (40 | ) | ||||||
| Other Transaction-related Items | — | (6 | ) | — | (6 | ) | ||||||
| Incremental Amortization of Cooper Tire Intangible Assets | (8 | ) | (4 | ) | (16 | ) | (4 | ) | ||||
| Total Segment Operating Income | $ | 364 | **** | $ | 299 | **** | $ | 667 | **** | $ | 525 | **** |
| Rationalizations | (26 | ) | (18 | ) | (37 | ) | (68 | ) | ||||
| Interest Expense | (110 | ) | (97 | ) | (214 | ) | (176 | ) | ||||
| Other Income (Expense) | 65 | (30 | ) | 60 | (64 | ) | ||||||
| Corporate Incentive Compensation Plans | (21 | ) | (24 | ) | (40 | ) | (33 | ) | ||||
| Retained Expenses of Divested Operations | (4 | ) | (4 | ) | (7 | ) | (7 | ) | ||||
| Other | (16 | ) | (28 | ) | (43 | ) | (46 | ) | ||||
| Income before Income Taxes | $ | 252 | **** | $ | 98 | **** | $ | 386 | **** | $ | 131 | **** |
| United States and Foreign Tax Expense | 82 | 27 | 120 | 42 | ||||||||
| Less: Minority Shareholders’ Net Income | 4 | 4 | 4 | 10 | ||||||||
| Goodyear Net Income | $ | 166 | **** | $ | 67 | **** | $ | 262 | **** | $ | 79 | **** |
| Net Sales | $ | 5,212 | $ | 3,979 | $ | 10,120 | $ | 7,490 | ||||
| Return on Net Sales | 3.2 | % | 1.7 | % | 2.6 | % | 1.1 | % | ||||
| Total Segment Operating Margin | 7.0 | % | 7.5 | % | 6.6 | % | 7.0 | % | ||||
| Merger-Adjusted Segment Operating Margin | 7.1 | % | 8.8 | % | 6.7 | % | 7.7 | % |
(more)
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Adjusted Net Income and Adjusted Diluted Earnings per Share
Reconciliation Tables
| Second Quarter 2022<br> <br>(Inmillions, except EPS) | IncomeBeforeIncomeTaxes | Taxes | MinorityInterest | GoodyearNetIncome | WeightedAverageSharesOutstanding-Diluted | Diluted<br>EPS | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| As Reported | $ | 252 | **** | $ | 82 | **** | $ | 4 | $ | 166 | **** | **** | 286 | $ | 0.58 | **** |
| Significant Items: | ||||||||||||||||
| Rationalizations, Asset Write-offs and Accelerated Depreciation Charges | 26 | 6 | 20 | 0.07 | ||||||||||||
| Pension Settlement Charges | 18 | 5 | 13 | 0.05 | ||||||||||||
| Indirect Tax Settlements and Discrete Tax Items | (14 | ) | (17 | ) | 3 | 0.01 | ||||||||||
| Asset Sales | (95 | ) | (24 | ) | (71 | ) | (0.25 | ) | ||||||||
| (65 | ) | (30 | ) | — | (35 | ) | (0.12 | ) | ||||||||
| As Adjusted | $ | 187 | **** | $ | 52 | **** | $ | 4 | $ | 131 | **** | **** | 286 | $ | 0.46 | **** |
| Second Quarter 2021<br> <br>(In millions,except EPS) | IncomeBeforeIncomeTaxes | Taxes | MinorityInterest | GoodyearNetIncome | WeightedAverageSharesOutstanding-Diluted | Diluted<br>EPS | ||||||||||
| As Reported | $ | 98 | **** | $ | 27 | **** | $ | 4 | $ | 67 | **** | **** | 247 | $ | 0.27 | **** |
| Significant Items: | ||||||||||||||||
| Acquisition Related Transaction and Other Costs | 48 | 9 | 39 | 0.16 | ||||||||||||
| Amortization of Acquisition Related Inventory Fair Value Adjustment | 38 | 9 | 29 | 0.12 | ||||||||||||
| Americas Winter Storm Impact | 27 | 5 | 22 | 0.09 | ||||||||||||
| Pension Settlement Charges | 19 | 5 | 14 | 0.06 | ||||||||||||
| Rationalizations, Asset Write-offs and Accelerated Depreciation Charges | 18 | 2 | 16 | 0.06 | ||||||||||||
| Colombia National Strike | 4 | 4 | 0.02 | |||||||||||||
| Debt Redemption Charges | 5 | 1 | 4 | 0.01 | ||||||||||||
| Americas Accrued Freight Adjustment | (8 | ) | (2 | ) | (6 | ) | (0.02 | ) | ||||||||
| Indirect Tax Settlements and Discrete Tax Items | (117 | ) | (7 | ) | (110 | ) | (0.45 | ) | ||||||||
| 34 | 22 | — | 12 | 0.05 | ||||||||||||
| As Adjusted | $ | 132 | **** | $ | 49 | **** | $ | 4 | $ | 79 | **** | **** | 247 | $ | 0.32 | **** |
(more)
| 11 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| First Six Months 2022<br> <br>(In millions,except EPS) | IncomeBeforeIncomeTaxes | Taxes | MinorityInterest | GoodyearNetIncome | WeightedAverageSharesOutstanding-Diluted | Diluted<br>EPS | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| As Reported | $ | 386 | $ | 120 | $ | 4 | $ | 262 | 286 | $ | **** 0.91 | |||||
| Significant Items: | ||||||||||||||||
| Rationalizations, Asset Write-offs and Accelerated Depreciation Charges | 37 | 8 | 29 | 0.10 | ||||||||||||
| Pension Settlement Charges | 18 | 5 | 13 | 0.05 | ||||||||||||
| Indirect Tax Settlements and Discrete Tax Items | (14 | ) | (21 | ) | 7 | 0.03 | ||||||||||
| Asset Sales | (98 | ) | (23 | ) | (75 | ) | (0.26 | ) | ||||||||
| (57 | ) | (31 | ) | — | (26 | ) | (0.08 | ) | ||||||||
| As Adjusted | $ | 329 | $ | 89 | $ | 4 | $ | 236 | 286 | $ | **** 0.83 | |||||
| First Six Months 2021<br> <br>(Inmillions, except EPS) | IncomeBeforeIncomeTaxes | Taxes | MinorityInterest | GoodyearNetIncome | WeightedAverageSharesOutstanding-Diluted | Diluted<br>EPS | ||||||||||
| As Reported | $ | 131 | **** | $ | 42 | **** | $ | 10 | $ | 79 | **** | **** | 242 | $ | 0.32 | **** |
| Significant Items: | ||||||||||||||||
| Rationalizations, Asset Write-offs and Accelerated Depreciation Charges | 68 | 7 | 61 | 0.25 | ||||||||||||
| Acquisition Related Transaction and Other Costs | 55 | 10 | 45 | 0.19 | ||||||||||||
| Americas Winter Storm Impact | 50 | 10 | 40 | 0.16 | ||||||||||||
| Amortization of Acquisition Related Inventory Fair Value Adjustment | 38 | 9 | 29 | 0.12 | ||||||||||||
| Inventory, Accrued Freight & Other Adjustments | 13 | 13 | 0.06 | |||||||||||||
| Pension Settlement Charges | 19 | 5 | 14 | 0.06 | ||||||||||||
| Colombia National Strike | 4 | 4 | 0.02 | |||||||||||||
| Debt Redemption Charges | 5 | 1 | 4 | 0.01 | ||||||||||||
| Indirect Tax Settlements and Discrete Tax Items | (114 | ) | (9 | ) | (105 | ) | (0.43 | ) | ||||||||
| 138 | 33 | — | 105 | 0.44 | ||||||||||||
| As Adjusted | $ | 269 | **** | $ | 75 | **** | $ | 10 | $ | 184 | **** | **** | 242 | $ | 0.76 | **** |
-0-
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