UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 20212022
Commission File Number: 1-1927
THE GOODYEAR TIRE & RUBBER COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Ohio | 34-0253240 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
200 Innovation Way, Akron, Ohio | 44316-0001 | |
(Address of Principal Executive Offices) | (Zip Code) |
(330) 796-2121
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, Without Par Value | GT | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Number of Shares of Common Stock, Without Par Value, Outstanding at July 31, |
|
TABLE OF CONTENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |
EX-101.INS INSTANCE DOCUMENT | |
EX-101.SCH SCHEMA DOCUMENT | |
EX-101.CAL CALCULATION LINKBASE DOCUMENT | |
EX-101.DEF DEFINITION LINKBASE DOCUMENT | |
EX-101.LAB LABELS LINKBASE DOCUMENT | |
EX-101.PRE PRESENTATION LINKBASE DOCUMENT | |
EX-104 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||||||||
(In millions, except per share amounts) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Net Sales (Note 3) |
| $ | 3,979 |
| $ | 2,144 |
| $ | 7,490 |
| $ | 5,200 |
|
| $ | 5,212 |
|
| $ | 3,979 |
|
| $ | 10,120 |
|
| $ | 7,490 |
| |||
Cost of Goods Sold |
| 3,078 |
| 2,216 |
| 5,829 |
| 4,768 |
|
|
| 4,172 |
|
|
| 3,078 |
|
|
| 8,138 |
|
|
| 5,829 |
| |||||||
Selling, Administrative and General Expense |
| 658 |
| 451 |
| 1,222 |
| 1,032 |
|
|
| 717 |
|
|
| 658 |
|
|
| 1,405 |
|
|
| 1,222 |
| |||||||
Goodwill and Other Asset Impairments |
| 0 |
| 148 |
| 0 |
| 330 |
| |||||||||||||||||||||||
Rationalizations (Note 4) |
| 18 |
| 99 |
| 68 |
| 108 |
|
|
| 26 |
|
|
| 18 |
|
|
| 37 |
|
|
| 68 |
| |||||||
Interest Expense |
| 97 |
| 85 |
| 176 |
| 158 |
|
|
| 110 |
|
|
| 97 |
|
|
| 214 |
|
|
| 176 |
| |||||||
Other (Income) Expense (Note 5) |
|
| 30 |
|
|
| 34 |
|
|
| 64 |
|
|
| 61 |
|
|
| (65 | ) |
|
| 30 |
|
|
| (60 | ) |
|
| 64 |
|
Income (Loss) before Income Taxes |
| 98 |
| (889 | ) |
| 131 |
| (1,257 | ) | ||||||||||||||||||||||
United States and Foreign Tax Expense (Benefit) (Note 6) |
|
| 27 |
|
|
| (186 | ) |
|
| 42 |
|
|
| 63 |
| ||||||||||||||||
Net Income (Loss) |
| 71 |
| (703 | ) |
| 89 |
| (1,320 | ) | ||||||||||||||||||||||
Less: Minority Shareholders’ Net Income (Loss) |
|
| 4 |
|
|
| (7 | ) |
|
| 10 |
|
|
| (5 | ) | ||||||||||||||||
Goodyear Net Income (Loss) |
| $ | 67 |
|
| $ | (696 | ) |
| $ | 79 |
|
| $ | (1,315 | ) | ||||||||||||||||
Goodyear Net Income (Loss) — Per Share of Common Stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Income before Income Taxes |
|
| 252 |
|
|
| 98 |
|
|
| 386 |
|
|
| 131 |
| ||||||||||||||||
United States and Foreign Tax Expense (Note 6) |
|
| 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 |
| $ | 0.27 |
|
| $ | (2.97 | ) |
| $ | 0.33 |
|
| $ | (5.62 | ) |
| $ | 0.58 |
|
| $ | 0.27 |
|
| $ | 0.92 |
|
| $ | 0.33 |
|
Weighted Average Shares Outstanding (Note 7) |
| 244 |
| 234 |
| 239 |
| 234 |
|
|
| 284 |
|
|
| 244 |
|
|
| 284 |
|
|
| 239 |
| |||||||
Diluted |
| $ | 0.27 |
|
| $ | (2.97 | ) |
| $ | 0.32 |
|
| $ | (5.62 | ) |
| $ | 0.58 |
|
| $ | 0.27 |
|
| $ | 0.91 |
|
| $ | 0.32 |
|
Weighted Average Shares Outstanding (Note 7) |
| 247 |
| 234 |
| 242 |
| 234 |
|
|
| 286 |
|
|
| 247 |
|
|
| 286 |
|
|
| 242 |
|
The accompanying notes are an integral part of these consolidated financial statements.
1
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net Income (Loss) |
| $ | 71 |
|
| $ | (703 | ) |
| $ | 89 |
|
| $ | (1,320 | ) |
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation, net of tax of $2 and $1 in 2021 ($4 and ($4) in 2020) |
|
| 33 |
|
|
| (7 | ) |
|
| (6 | ) |
|
| (232 | ) |
Unrealized gain from securities, net of tax of $0 and $0 in 2021 ($0 and $0 in 2020) |
|
| 8 |
|
|
| 0 |
|
|
| 8 |
|
|
| 0 |
|
Defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of prior service cost and unrecognized gains and losses included in total benefit cost, net of tax of $8 and $17 in 2021 ($8 and $17 in 2020) |
|
| 26 |
|
|
| 28 |
|
|
| 53 |
|
|
| 55 |
|
Decrease/(increase) in net actuarial losses, net of tax of $2 and $5 in 2021 (($2) and ($2) in 2020) |
|
| 7 |
|
|
| (8 | ) |
|
| 16 |
|
|
| (9 | ) |
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures, net of tax of $4 and $4 in 2021 ($0 and ($1) in 2020) |
|
| 15 |
|
|
| 1 |
|
|
| 15 |
|
|
| 0 |
|
Deferred derivative gains (losses), net of tax of $0 and $0 in 2021 (($4) and $1 in 2020) |
|
| (1 | ) |
|
| 1 |
|
|
| 0 |
|
|
| 19 |
|
Reclassification adjustment for amounts recognized in income, net of tax of $0 and $0 in 2021 ($0 and $0 in 2020) |
|
| 0 |
|
|
| (4 | ) |
|
| (2 | ) |
|
| (8 | ) |
Other Comprehensive Income (Loss) |
|
| 88 |
|
|
| 11 |
|
|
| 84 |
|
|
| (175 | ) |
Comprehensive Income (Loss) |
|
| 159 |
|
|
| (692 | ) |
|
| 173 |
|
|
| (1,495 | ) |
Less: Comprehensive Income (Loss) Attributable to Minority Shareholders |
|
| 3 |
|
|
| (7 | ) |
|
| 2 |
|
|
| (14 | ) |
Goodyear Comprehensive Income (Loss) |
| $ | 156 |
|
| $ | (685 | ) |
| $ | 171 |
|
| $ | (1,481 | ) |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net Income |
| $ | 170 |
|
| $ | 71 |
|
| $ | 266 |
|
| $ | 89 |
|
Other Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation, net of tax of ($6) and ($6) in 2022 ($2 and $1 in 2021) |
|
| (187 | ) |
|
| 33 |
|
|
| (184 | ) |
|
| (6 | ) |
Unrealized gain from securities, net of tax of $0 and $0 in 2022 ($0 and $0 in 2021) |
|
| 0 |
|
|
| 8 |
|
|
| 0 |
|
|
| 8 |
|
Defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of prior service cost and unrecognized gains and losses included in total benefit cost, net of tax of $7 and $15 in 2022 ($8 and $17 in 2021) |
|
| 24 |
|
|
| 26 |
|
|
| 48 |
|
|
| 53 |
|
Change in net actuarial losses, net of tax of ($2) and $3 in 2022 ($2 and $5 in 2021) |
|
| (2 | ) |
|
| 7 |
|
|
| 14 |
|
|
| 16 |
|
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures, net of tax of $5 and $5 in 2022 ($4 and $4 in 2021) |
|
| 13 |
|
|
| 15 |
|
|
| 13 |
|
|
| 15 |
|
Deferred derivative gains (losses), net of tax of $0 and $0 in 2022 ($0 and $0 in 2021) |
|
| 3 |
|
|
| (1 | ) |
|
| 1 |
|
|
| 0 |
|
Reclassification adjustment for amounts recognized in income, net of tax of $0 and $0 in 2022 ($0 and $0 in 2021) |
|
| 0 |
|
|
| 0 |
|
|
| (1 | ) |
|
| (2 | ) |
Other Comprehensive Income (Loss) |
|
| (149 | ) |
|
| 88 |
|
|
| (109 | ) |
|
| 84 |
|
Comprehensive Income |
|
| 21 |
|
|
| 159 |
|
|
| 157 |
|
|
| 173 |
|
Less: Comprehensive Income (Loss) Attributable to Minority Shareholders |
|
| (3 | ) |
|
| 3 |
|
|
| (11 | ) |
|
| 2 |
|
Goodyear Comprehensive Income |
| $ | 24 |
|
| $ | 156 |
|
| $ | 168 |
|
| $ | 171 |
|
The accompanying notes are an integral part of these consolidated financial statements.
2
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| June 30, |
| December 31, |
|
| June 30, |
| December 31, |
| ||||||
(In millions, except share data) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and Cash Equivalents |
| $ | 1,030 |
| $ | 1,539 |
|
| $ | 1,248 |
|
| $ | 1,088 |
| |
Accounts Receivable, less Allowance — $141 ($150 in 2020) |
| 2,819 |
| 1,691 |
| |||||||||||
Accounts Receivable, less Allowance — $112 ($123 in 2021) |
|
| 3,306 |
|
|
| 2,387 |
| ||||||||
Inventories: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Raw Materials |
| 782 |
| 517 |
|
|
| 1,119 |
|
|
| 958 |
| |||
Work in Process |
| 174 |
| 143 |
|
|
| 208 |
|
|
| 191 |
| |||
Finished Products |
|
| 2,358 |
|
|
| 1,493 |
|
|
| 3,062 |
|
|
| 2,445 |
|
| 3,314 |
| 2,153 |
|
|
| 4,389 |
|
|
| 3,594 |
| ||||
Prepaid Expenses and Other Current Assets |
|
| 356 |
|
|
| 237 |
|
|
| 280 |
|
|
| 262 |
|
Total Current Assets |
| 7,519 |
| 5,620 |
|
|
| 9,223 |
|
|
| 7,331 |
| |||
Goodwill |
| 874 |
| 408 |
|
|
| 995 |
|
|
| 1,004 |
| |||
Intangible Assets |
| 1,216 |
| 135 |
|
|
| 1,023 |
|
|
| 1,039 |
| |||
Deferred Income Taxes (Note 6) |
| 1,170 |
| 1,467 |
|
|
| 1,512 |
|
|
| 1,596 |
| |||
Other Assets |
| 1,079 |
| 952 |
|
|
| 1,099 |
|
|
| 1,106 |
| |||
Operating Lease Right-of-Use Assets |
| 1,025 |
| 851 |
|
|
| 1,008 |
|
|
| 981 |
| |||
Property, Plant and Equipment, less Accumulated Depreciation — $11,192 ($10,991 in 2020) |
|
| 8,297 |
|
|
| 7,073 |
| ||||||||
Property, Plant and Equipment, less Accumulated Depreciation — $11,045 ($11,130 in 2021) |
|
| 8,041 |
|
|
| 8,345 |
| ||||||||
Total Assets |
| $ | 21,180 |
|
| $ | 16,506 |
|
| $ | 22,901 |
|
| $ | 21,402 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts Payable — Trade |
| $ | 3,858 |
| $ | 2,945 |
|
| $ | 4,593 |
|
| $ | 4,148 |
| |
Compensation and Benefits (Notes 11 and 12) |
| 687 |
| 540 |
|
|
| 657 |
|
|
| 689 |
| |||
Other Current Liabilities |
| 849 |
| 865 |
|
|
| 830 |
|
|
| 822 |
| |||
Notes Payable and Overdrafts (Note 9) |
| 459 |
| 406 |
|
|
| 519 |
|
|
| 406 |
| |||
Operating Lease Liabilities due Within One Year |
| 215 |
| 198 |
|
|
| 206 |
|
|
| 204 |
| |||
Long Term Debt and Finance Leases due Within One Year (Note 9) |
|
| 535 |
|
|
| 152 |
|
|
| 316 |
|
|
| 343 |
|
Total Current Liabilities |
| 6,603 |
| 5,106 |
|
|
| 7,121 |
|
|
| 6,612 |
| |||
Operating Lease Liabilities |
| 843 |
| 684 |
|
|
| 844 |
|
|
| 819 |
| |||
Long Term Debt and Finance Leases (Note 9) |
| 6,978 |
| 5,432 |
|
|
| 7,569 |
|
|
| 6,648 |
| |||
Compensation and Benefits (Notes 11 and 12) |
| 1,677 |
| 1,470 |
|
|
| 1,293 |
|
|
| 1,445 |
| |||
Deferred Income Taxes (Note 6) |
| 97 |
| 84 |
|
|
| 134 |
|
|
| 135 |
| |||
Other Long Term Liabilities |
|
| 571 |
|
|
| 471 |
|
|
| 593 |
|
|
| 559 |
|
Total Liabilities |
| 16,769 |
| 13,247 |
|
|
| 17,554 |
|
|
| 16,218 |
| |||
Commitments and Contingent Liabilities (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Shareholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Goodyear Shareholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common Stock, no par value: |
|
|
|
|
|
| ||||||||||
Authorized, 450 million shares, Outstanding shares — 281 million in 2021 |
| 281 |
| 233 |
| |||||||||||
Common Stock, 0 par value: |
|
|
|
|
|
| ||||||||||
Authorized, 450 million shares, Outstanding shares — 282 million in 2022 (282 million in 2021) |
|
| 282 |
|
|
| 282 |
| ||||||||
Capital Surplus |
| 3,086 |
| 2,171 |
|
|
| 3,114 |
|
|
| 3,107 |
| |||
Retained Earnings |
| 4,888 |
| 4,809 |
|
|
| 5,835 |
|
|
| 5,573 |
| |||
Accumulated Other Comprehensive Loss |
|
| (4,043 | ) |
|
| (4,135 | ) |
|
| (4,057 | ) |
|
| (3,963 | ) |
Goodyear Shareholders’ Equity |
| 4,212 |
| 3,078 |
|
|
| 5,174 |
|
|
| 4,999 |
| |||
Minority Shareholders’ Equity — Nonredeemable |
|
| 199 |
|
|
| 181 |
|
|
| 173 |
|
|
| 185 |
|
Total Shareholders’ Equity |
|
| 4,411 |
|
|
| 3,259 |
|
|
| 5,347 |
|
|
| 5,184 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 21,180 |
|
| $ | 16,506 |
|
| $ | 22,901 |
|
| $ | 21,402 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| Minority |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| Minority |
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Goodyear |
|
| Shareholders' |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Goodyear |
|
| Shareholders' |
|
| Total |
| ||||||||||||||||
|
| Common Stock |
|
| Capital |
|
| Retained |
|
| Comprehensive |
|
| Shareholders' |
|
| Equity — Non- |
|
| Shareholders' |
|
| Common Stock |
|
| Capital |
|
| Retained |
|
| Comprehensive |
|
| Shareholders' |
|
| Equity — Non- |
|
| Shareholders' |
| ||||||||||||||||||||||
(Dollars in millions, except per share amounts) |
| Shares |
|
| Amount |
|
| Surplus |
|
| Earnings |
|
| Loss |
|
| Equity |
|
| Redeemable |
|
| Equity |
|
| Shares |
|
| Amount |
|
| Surplus |
|
| Earnings |
|
| Loss |
|
| Equity |
|
| Redeemable |
|
| Equity |
| ||||||||||||||||
Balance at December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
(after deducting 45,243,329 common treasury shares) |
|
| 233,220,098 |
|
| $ | 233 |
|
| $ | 2,171 |
|
| $ | 4,809 |
|
| $ | (4,135 | ) |
| $ | 3,078 |
|
| $ | 181 |
|
| $ | 3,259 |
| ||||||||||||||||||||||||||||||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
| 12 |
|
|
|
|
|
| 12 |
|
|
| 6 |
|
|
| 18 |
| ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
(after deducting 42,494,684 common treasury shares) |
|
| 281,793,223 |
|
| $ | 282 |
|
| $ | 3,107 |
|
| $ | 5,573 |
|
| $ | (3,963 | ) |
| $ | 4,999 |
|
| $ | 185 |
|
| $ | 5,184 |
| ||||||||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
| 96 |
|
|
|
|
|
| 96 |
|
|
|
|
|
| 96 |
| |||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
| 3 |
|
|
| (7 | ) |
|
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 48 |
|
|
| 48 |
|
|
| (8 | ) |
|
| 40 |
| ||||||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15 |
|
|
| (1 | ) |
|
| 14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 144 |
|
|
| (8 | ) |
|
| 136 |
| ||||||||||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 4 |
|
|
|
|
|
|
|
|
| 4 |
|
|
|
|
|
| 4 |
|
|
|
|
|
|
|
|
| 7 |
|
|
|
|
|
|
|
|
| 7 |
|
|
|
|
|
| 7 |
| ||||||||||
Common stock issued from treasury |
|
| 1,759,931 |
|
|
| 2 |
|
|
| 7 |
|
|
|
|
|
|
|
|
| 9 |
|
|
|
|
|
| 9 |
|
|
| 635,149 |
|
|
|
|
|
| (5 | ) |
|
|
|
|
|
|
|
| (5 | ) |
|
|
|
|
| (5 | ) | |||||||
Balance at March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
(after deducting 43,483,398 common treasury shares) |
|
| 234,980,029 |
|
| $ | 235 |
|
| $ | 2,182 |
|
| $ | 4,821 |
|
| $ | (4,132 | ) |
| $ | 3,106 |
|
| $ | 180 |
|
| $ | 3,286 |
| ||||||||||||||||||||||||||||||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
| 67 |
|
|
|
|
|
| 67 |
|
|
| 4 |
|
|
| 71 |
| ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 89 |
|
|
| 89 |
|
|
| (1 | ) |
|
| 88 |
| ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
(after deducting 41,859,535 common treasury shares) |
|
| 282,428,372 |
|
| $ | 282 |
|
| $ | 3,109 |
|
| $ | 5,669 |
|
| $ | (3,915 | ) |
| $ | 5,145 |
|
| $ | 177 |
|
| $ | 5,322 |
| ||||||||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
| 166 |
|
|
|
|
|
| 166 |
|
|
| 4 |
|
|
| 170 |
| ||||||||||||||||||||||||||||||||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (142 | ) |
|
| (142 | ) |
|
| (7 | ) |
|
| (149 | ) | ||||||||||||||||||||||||||||||||||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 156 |
|
|
| 3 |
|
|
| 159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 24 |
|
|
| (3 | ) |
|
| 21 |
| ||||||||||
Common stock issued |
|
| 45,824,480 |
|
|
| 46 |
|
|
| 892 |
|
|
|
|
|
|
|
|
| 938 |
|
|
|
|
|
| 938 |
| |||||||||||||||||||||||||||||||||||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
| 6 |
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
| 5 |
| ||||||||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5 | ) |
|
| (5 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1 | ) |
|
| (1 | ) | ||||||||||||
Common stock issued from treasury |
|
| 387,763 |
|
|
|
|
|
| 6 |
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
| 6 |
|
|
| 42,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Acquisition of Cooper Tire's minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21 |
|
|
| 21 |
| ||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
(after deducting 43,095,635 common treasury shares) |
|
| 281,192,272 |
|
| $ | 281 |
|
| $ | 3,086 |
|
| $ | 4,888 |
|
| $ | (4,043 | ) |
| $ | 4,212 |
|
| $ | 199 |
|
| $ | 4,411 |
| ||||||||||||||||||||||||||||||||
Balance at June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||
(after deducting 41,816,674 common treasury shares) |
|
| 282,471,233 |
|
| $ | 282 |
|
| $ | 3,114 |
|
| $ | 5,835 |
|
| $ | (4,057 | ) |
| $ | 5,174 |
|
| $ | 173 |
|
| $ | 5,347 |
|
There were 0 dividends declared or paid during the three and six months ended June 30, 2022.
The accompanying notes are an integral part of these consolidated financial statements.
no
4
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| Minority |
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Goodyear |
|
| Shareholders' |
|
| Total |
| ||||||||
|
| Common Stock |
|
| Capital |
|
| Retained |
|
| Comprehensive |
|
| Shareholders' |
|
| Equity — Non- |
|
| Shareholders' |
| |||||||||||
(Dollars in millions, except per share amounts) |
| Shares |
|
| Amount |
|
| Surplus |
|
| Earnings |
|
| Loss |
|
| Equity |
|
| Redeemable |
|
| Equity |
| ||||||||
Balance at December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 45,243,329 common treasury shares) |
|
| 233,220,098 |
|
| $ | 233 |
|
| $ | 2,171 |
|
| $ | 4,809 |
|
| $ | (4,135 | ) |
| $ | 3,078 |
|
| $ | 181 |
|
| $ | 3,259 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
| 12 |
|
|
|
|
|
| 12 |
|
|
| 6 |
|
|
| 18 |
| ||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
| 3 |
|
|
| (7 | ) |
|
| (4 | ) | ||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15 |
|
|
| (1 | ) |
|
| 14 |
| |||||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 4 |
|
|
|
|
|
|
|
|
| 4 |
|
|
|
|
|
| 4 |
| |||||
Common stock issued from treasury |
|
| 1,759,931 |
|
|
| 2 |
|
|
| 7 |
|
|
|
|
|
|
|
|
| 9 |
|
|
|
|
|
| 9 |
| |||
Balance at March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 43,483,398 common treasury shares) |
|
| 234,980,029 |
|
| $ | 235 |
|
| $ | 2,182 |
|
| $ | 4,821 |
|
| $ | (4,132 | ) |
| $ | 3,106 |
|
| $ | 180 |
|
| $ | 3,286 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
| 67 |
|
|
|
|
|
| 67 |
|
|
| 4 |
|
|
| 71 |
| ||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 89 |
|
|
| 89 |
|
|
| (1 | ) |
|
| 88 |
| ||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 156 |
|
|
| 3 |
|
|
| 159 |
| |||||
Common stock issued |
|
| 45,824,480 |
|
|
| 46 |
|
|
| 892 |
|
|
|
|
|
|
|
|
| 938 |
|
|
|
|
|
| 938 |
| |||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
| 6 |
| |||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5 | ) |
|
| (5 | ) | ||||||
Common stock issued from treasury |
|
| 387,763 |
|
|
|
|
|
| 6 |
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
| 6 |
| ||||
Acquisition of Cooper Tire's minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21 |
|
|
| 21 |
| ||||||
Balance at June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 43,095,635 common treasury shares) |
|
| 281,192,272 |
|
| $ | 281 |
|
| $ | 3,086 |
|
| $ | 4,888 |
|
| $ | (4,043 | ) |
| $ | 4,212 |
|
| $ | 199 |
|
| $ | 4,411 |
|
There were 0 dividends declared or paid during the three and six months ended June 30, 2021.
The accompanying notes are an integral part of these consolidated financial statements.
4
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| Minority |
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Goodyear |
|
| Shareholders' |
|
| Total |
| ||||||||
|
| Common Stock |
|
| Capital |
|
| Retained |
|
| Comprehensive |
|
| Shareholders' |
|
| Equity — Non- |
|
| Shareholders' |
| |||||||||||
(Dollars in millions, except per share amounts) |
| Shares |
|
| Amount |
|
| Surplus |
|
| Earnings |
|
| Loss |
|
| Equity |
|
| Redeemable |
|
| Equity |
| ||||||||
Balance at December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 45,813,109 common treasury shares) |
|
| 232,650,318 |
|
| $ | 233 |
|
| $ | 2,141 |
|
| $ | 6,113 |
|
| $ | (4,136 | ) |
| $ | 4,351 |
|
| $ | 194 |
|
| $ | 4,545 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
| (619 | ) |
|
|
|
|
| (619 | ) |
|
| 2 |
|
|
| (617 | ) | ||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (177 | ) |
|
| (177 | ) |
|
| (9 | ) |
|
| (186 | ) | ||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (796 | ) |
|
| (7 | ) |
|
| (803 | ) | |||||
Adoption of new accounting standards update |
|
|
|
|
|
|
|
|
|
|
| (12 | ) |
|
|
|
|
| (12 | ) |
|
|
|
|
| (12 | ) | |||||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 7 |
|
|
|
|
|
|
|
|
| 7 |
|
|
|
|
|
| 7 |
| |||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
| (38 | ) |
|
|
|
|
| (38 | ) |
|
|
|
|
| (38 | ) | |||||
Common stock issued from treasury |
|
| 347,232 |
|
|
|
|
|
| (2 | ) |
|
|
|
|
|
|
|
| (2 | ) |
|
|
|
|
| (2 | ) | ||||
Balance at March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 45,465,877 common treasury shares) |
|
| 232,997,550 |
|
| $ | 233 |
|
| $ | 2,146 |
|
| $ | 5,444 |
|
| $ | (4,313 | ) |
| $ | 3,510 |
|
| $ | 187 |
|
| $ | 3,697 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
| (696 | ) |
|
|
|
|
| (696 | ) |
|
| (7 | ) |
|
| (703 | ) | ||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11 |
|
|
| 11 |
|
|
|
|
|
| 11 |
| |||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (685 | ) |
|
| (7 | ) |
|
| (692 | ) | |||||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 8 |
|
|
|
|
|
|
|
|
| 8 |
|
|
|
|
|
| 8 |
| |||||
Common stock issued from treasury |
|
| 13,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance at June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 45,452,865 common treasury shares) |
|
| 233,010,562 |
|
| $ | 233 |
|
| $ | 2,154 |
|
| $ | 4,748 |
|
| $ | (4,302 | ) |
| $ | 2,833 |
|
| $ | 180 |
|
| $ | 3,013 |
|
We declared and paid cash dividends of $0.00 and $0.16 per share for the three and six months ended June 30, 2020.
The accompanying notes are an integral part of these consolidated financial statements.
5
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Income (Loss) |
| $ | 89 |
| $ | (1,320 | ) | |||||||||
Adjustments to Reconcile Net Income (Loss) to Cash Flows from Operating Activities: |
|
|
|
|
|
| ||||||||||
Net Income |
| $ | 266 |
|
| $ | 89 |
| ||||||||
Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: |
|
|
|
|
|
| ||||||||||
Depreciation and Amortization |
| 405 |
| 472 |
|
|
| 481 |
|
|
| 405 |
| |||
Amortization and Write-Off of Debt Issuance Costs |
| 9 |
| 6 |
|
|
| 8 |
|
|
| 9 |
| |||
Amortization of Inventory Fair Value Adjustment Related to the Cooper Tire Acquisition (Note 2) |
| 38 |
| 0 |
|
|
| 0 |
|
|
| 38 |
| |||
Transaction and Other Costs Related to the Cooper Tire Acquisition (Note 2) |
| 55 |
| — |
|
|
| 0 |
|
|
| 55 |
| |||
Cash Payments for Transaction and Other Costs Related to the Cooper Tire Acquisition |
| (33 | ) |
| — |
|
|
| (2 | ) |
|
| (33 | ) | ||
Goodwill and Other Asset Impairments |
| 0 |
| 330 |
| |||||||||||
Provision for Deferred Income Taxes (Note 6) |
| (66 | ) |
| 58 |
|
|
| 42 |
|
|
| (66 | ) | ||
Net Pension Curtailments and Settlements |
| 19 |
| 3 |
|
|
| 18 |
|
|
| 19 |
| |||
Net Rationalization Charges (Note 4) |
| 68 |
| 108 |
|
|
| 37 |
|
|
| 68 |
| |||
Rationalization Payments |
| (123 | ) |
| (101 | ) |
|
| (59 | ) |
|
| (123 | ) | ||
Net (Gains) Losses on Asset Sales (Note 5) |
| 0 |
| 2 |
|
|
| (98 | ) |
|
| 0 |
| |||
Operating Lease Expense |
| 143 |
| 142 |
|
|
| 150 |
|
|
| 143 |
| |||
Operating Lease Payments |
| (133 | ) |
| (130 | ) |
|
| (139 | ) |
|
| (133 | ) | ||
Pension Contributions and Direct Payments |
| (22 | ) |
| (33 | ) |
|
| (33 | ) |
|
| (22 | ) | ||
Changes in Operating Assets and Liabilities, Net of Asset Acquisitions and Dispositions: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts Receivable |
| (545 | ) |
| 36 |
|
|
| (1,024 | ) |
|
| (545 | ) | ||
Inventories |
| (542 | ) |
| 304 |
|
|
| (890 | ) |
|
| (542 | ) | ||
Accounts Payable — Trade |
| 547 |
| (860 | ) |
|
| 672 |
|
|
| 547 |
| |||
Compensation and Benefits |
| 90 |
| (11 | ) |
|
| (44 | ) |
|
| 90 |
| |||
Other Current Liabilities |
| (42 | ) |
| 29 |
|
|
| 21 |
|
|
| (42 | ) | ||
Other Assets and Liabilities |
|
| (28 | ) |
|
| 145 |
|
|
| 61 |
|
|
| (28 | ) |
Total Cash Flows from Operating Activities |
| (71 | ) |
| (820 | ) |
|
| (533 | ) |
|
| (71 | ) | ||
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Acquisition of Cooper Tire, net of cash and restricted cash acquired (Note 2) |
| (1,856 | ) |
| 0 |
| ||||||||||
Acquisition of Cooper Tire, net of cash and restricted cash acquired |
|
| 0 |
|
|
| (1,856 | ) | ||||||||
Capital Expenditures |
| (385 | ) |
| (363 | ) |
|
| (511 | ) |
|
| (385 | ) | ||
Cash Proceeds from Sale and Leaseback Transaction (Note 5) |
|
| 108 |
|
|
| — |
| ||||||||
Asset Dispositions |
|
| 24 |
|
|
| 0 |
| ||||||||
Short Term Securities Acquired |
| (57 | ) |
| (30 | ) |
|
| (41 | ) |
|
| (57 | ) | ||
Short Term Securities Redeemed |
| 58 |
| 46 |
|
|
| 44 |
|
|
| 58 |
| |||
Notes Receivable |
| (7 | ) |
| (35 | ) |
|
| (24 | ) |
|
| (7 | ) | ||
Other Transactions |
|
| 14 |
|
|
| (8 | ) |
|
| (3 | ) |
|
| 14 |
|
Total Cash Flows from Investing Activities |
| (2,233 | ) |
| (390 | ) |
|
| (403 | ) |
|
| (2,233 | ) | ||
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Short Term Debt and Overdrafts Incurred |
| 522 |
| 928 |
|
|
| 723 |
|
|
| 522 |
| |||
Short Term Debt and Overdrafts Paid |
| (446 | ) |
| (521 | ) |
|
| (579 | ) |
|
| (446 | ) | ||
Long Term Debt Incurred |
| 4,855 |
| 4,886 |
|
|
| 5,312 |
|
|
| 4,855 |
| |||
Long Term Debt Paid |
| (3,042 | ) |
| (3,879 | ) |
|
| (4,327 | ) |
|
| (3,042 | ) | ||
Common Stock Issued |
| 9 |
| 0 |
|
|
| (5 | ) |
|
| 9 |
| |||
Common Stock Dividends Paid (Note 14) |
| 0 |
| (37 | ) | |||||||||||
Transactions with Minority Interests in Subsidiaries |
| (5 | ) |
| 0 |
|
|
| (1 | ) |
|
| (5 | ) | ||
Debt Related Costs and Other Transactions |
|
| (73 | ) |
|
| (53 | ) |
|
| 9 |
|
|
| (73 | ) |
Total Cash Flows from Financing Activities |
| 1,820 |
| 1,324 |
|
|
| 1,132 |
|
|
| 1,820 |
| |||
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash |
|
| (6 | ) |
|
| (50 | ) |
|
| (33 | ) |
|
| (6 | ) |
Net Change in Cash, Cash Equivalents and Restricted Cash |
| (490 | ) |
| 64 |
|
|
| 163 |
|
|
| (490 | ) | ||
Cash, Cash Equivalents and Restricted Cash at Beginning of the Period |
|
| 1,624 |
|
|
| 974 |
|
|
| 1,164 |
|
|
| 1,624 |
|
Cash, Cash Equivalents and Restricted Cash at End of the Period |
| $ | 1,134 |
|
| $ | 1,038 |
|
| $ | 1,327 |
|
| $ | 1,134 |
|
The accompanying notes are an integral part of these consolidated financial statements.
6
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared by The Goodyear Tire & Rubber Company (the “Company,” “Goodyear,” “we,” “us” or “our”) in accordance with Securities and Exchange Commission (“SEC”) rules and regulations and generally accepted accounting principles in the United States of America ("U.S. GAAP") and in the opinion of management contain all adjustments (including normal recurring adjustments) necessary to fairly state the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 20202021 (the “2020“2021 Form 10-K”).
Operating results for the three and six months ended June 30, 20212022 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2021.
On June 7, 2021 (the “Closing Date”), we completed the previously announced acquisition of Cooper Tire & Rubber Company (“Cooper Tire”), pursuant to the terms of the Agreement and Plan of Merger, dated as of February 22, 2021 (the “Merger Agreement”), by and among Goodyear, Vulcan Merger Sub Inc., a direct, wholly owned subsidiary of Goodyear (“Merger Sub”), and Cooper Tire. On the Closing Date, Merger Sub merged with and into Cooper Tire, with Cooper Tire surviving the merger and becoming a wholly owned subsidiary of Goodyear (the “Merger”). As a result of the Merger, Cooper Tire, along with its subsidiaries, became subsidiaries of Goodyear. For further information about the Merger, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition.2022.
Recently AdoptedIssued Accounting Standards
EffectiveJanuaryIn November 2021,, we adopted the Financial Accounting Standards Board issued an accounting standards update which eliminates differences in practice among fair value accountingon the disclosure of certain types of government assistance. Specifically, on an annual basis, entities will be required to make certain disclosures for investments in equity securities, equity method investments and certain derivative instruments.transactions with a government that are accounted for by analogizing to a grant model. The standards update is effective either prospectively or retrospectively for annual periods beginning after December 15, 2021, with early adoption permitted. We are currently assessing the impact of this standards update did not have a material impacton our disclosures in the notes to consolidated financial statements.
Acquisitions
We include the results of operations of the businesses in which we acquire a controlling financial interest in our consolidated financial statements beginning as of the acquisition date. On the acquisition date, we recognize, separate from goodwill, the assets acquired, including separately identifiable intangible assets, and the liabilities assumed at their fair values. The excess of the consideration transferred over the fair values assigned to the net identifiable assets and liabilities assumed of the acquired business is recognized as goodwill. Transaction costs are recognized separately from the acquisition and are expensed as incurred.
Principles of Consolidation
The consolidated financial statements include the accounts of all legal entities in which we hold a controlling financial interest. A controlling financial interest generally arises from our ownership of a majority of the voting shares of our subsidiaries. We would also hold a controlling financial interest in variable interest entities if we are considered to be the primary beneficiary. Investments in companies in which we do not own a majority interest and we have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. Investments in other companies are primarily carried at cost. All intercompany balances and transactions have been eliminated in consolidation.
7
Restricted Cash
The following table provides a reconciliation of Cash, Cash Equivalents and Restricted Cash as reported within the Consolidated Statements of Cash Flows:
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash and Cash Equivalents |
| $ | 1,030 |
| $ | 1,006 |
|
| $ | 1,248 |
|
| $ | 1,030 |
| |
Restricted Cash(1) |
|
| 104 |
|
|
| 32 |
|
|
| 79 |
|
|
| 104 |
|
Total Cash, Cash Equivalents and Restricted Cash |
| $ | 1,134 |
|
| $ | 1,038 |
|
| $ | 1,327 |
|
| $ | 1,134 |
|
(1) Includes remaining Cooper Tire & Rubber Company ("Cooper Tire") restricted cash acquired of $21 million and $50 million at June 30, 2021.2022 and June 30, 2021, respectively.
Restricted Cash primarily represents amounts required to be set aside in relation to (i) accounts receivable factoring programs and (ii) change-in-control provisions of certain Cooper Tire compensation plans and (ii) accounts receivable factoring programs.plans. The restrictions lapse as the compensation payments are made or when cash from factored accounts receivable is remitted to the purchaser of those receivables or as the compensation payments are made, respectively. At June 30, 2022, $65 million and $14 million were recorded in Prepaid Expenses and Other Current Assets and Other Assets in the Consolidated Balance Sheets, respectively. At June 30, 2021, $86$86 million and $18 million were recorded in Prepaid Expenses and Other Current Assets and Other Assets in the Consolidated Balance Sheets, respectively. At June 30, 2020, $32 million was included in Prepaid Expenses and Other Current Assets.
Reclassifications and Adjustments
Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation. In the second quarter of 2021, we recorded an out of period adjustment of $8 million of income related to accrued freight charges in Americas. Additionally, in the first quarter of 2021, we recorded out of period adjustments totaling $20 million of expense, primarily related to the valuation of inventory in Americas. The adjustments relaterelated to the years, and interim periods therein, of 2016 to 2020. The adjustments did not have a material effect on any of the periods impacted.
7
NOTE 2. COOPER TIRE ACQUISITION
On June 7, 2021 (the "Closing Date"), we completed our acquisition of all of the outstanding shares of common stock of Cooper Tire pursuant to the terms of the Merger Agreement. Cooper Tire’s results of operations have been included in our consolidated financial statements since the Closing Date. Cooper Tire stockholders received $41.75 per share infor cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock per share of Cooper Tire common stock (the "Merger Consideration") as consideration pursuant to the terms of the Merger Agreement, which amounted tototaling approximately $3.1 billion. The acquisition will expand Goodyear’s product offering by combining two portfolios of complementary brands.billion (the "Merger Consideration").
We used the net proceeds from the issuance of new senior notes with an aggregate principal amount of $1.45 billion, together with cash on hand and borrowings under our first lien revolving credit facility, to financeUnder the acquisition method of Cooper Tire and related transaction costs. For further information regarding the new senior notes and the first lien revolving credit facility, refer to Note to the Consolidated Financial Statements No. 9, Financing Arrangements and Derivative Financial Instruments.
The calculation ofaccounting, the Merger Consideration is as follows:
(In millions, except share and per share amounts) |
| Shares |
|
| Per Share (4) |
|
| Total |
| |||
Cash paid for Cooper Tire Shares(1) |
|
|
|
|
|
|
| $ | 2,121 |
| ||
Cash paid for other Cooper Tire incentive compensation awards(2) |
|
|
|
|
|
|
|
| 34 |
| ||
Cash component of the Merger Consideration |
|
|
|
|
|
|
| $ | 2,155 |
| ||
Shares of Goodyear Common Stock issued to Cooper Tire Stockholders(3) |
|
| 46,060,349 |
|
| $ | 20.46 |
|
|
| 942 |
|
Merger Consideration |
|
|
|
|
|
|
| $ | 3,097 |
|
8
(In millions, except share and per share amounts) |
| Shares |
|
| Per Share |
|
| Total |
| |||
Shares of Cooper Tire Common Stock outstanding as of the Closing Date |
|
| 50,523,922 |
|
|
|
|
|
|
| ||
Shares issuable pursuant to conversion of share units outstanding |
|
| 269,238 |
|
|
|
|
|
|
| ||
Cooper Tire Shares |
|
| 50,793,160 |
|
| $ | 41.75 |
|
| $ | 2,121 |
|
|
| Shares |
|
| Exchange |
|
| Total |
| |||
Cooper Tire Shares |
|
| 50,793,160 |
|
|
|
|
|
|
| ||
Less: Cooper Tire Shares settled in cash(5) |
|
| 9,975 |
|
|
|
|
|
|
| ||
|
| 50,783,185 |
|
|
| 0.907 |
|
|
| 46,060,349 |
|
The following table presents supplemental cash flow information related to the acquisition of Cooper Tire:
(In millions) |
|
|
| |
Cash component of the Merger Consideration |
| $ | 2,155 |
|
Less: |
|
|
| |
Cash acquired |
|
| 231 |
|
Restricted cash acquired |
|
| 68 |
|
Acquisition of Cooper Tire, net of cash and restricted cash acquired |
| $ | 1,856 |
|
The Consolidated Statements of Cash Flows are presented net of the stock component of the Merger Consideration, which represents a non-cash transaction.
9
The Merger Consideration was allocated, on a preliminary basis as of the Closing Date. AssetsDate, to the identifiable assets acquired and liabilities assumed were recordedof Cooper Tire, which are recognized and measured at estimated fair valuesvalue based on management’s estimates, available information and supportable assumptions that management consideredconsiders reasonable. Under
During the acquisition methodsecond quarter of accounting,2022, we finalized our valuation of the identifiableidentified assets acquired and liabilities assumedassumed. No significant measurement period changes were recorded during the three or six months ended June 30, 2022. Principal changes since our initial measurement in the second quarter of Cooper Tire are recognized and measured at fair value. The determination2021 include (i) decreasing the value attributed to customer relationships primarily to reflect updated assumptions related to customer attrition rates, (ii) updating the value attributed to trade names to reflect our long-term view of how each acquired brand fits into the overall product portfolio of the fair values of certain assetscombined company and the appropriate royalty rate to value each acquired including Inventories,brand based on expected profitability, (iii) decreasing the value attributed to Property, Plant and Equipment Goodwill, Intangible Assets, and Deferred Income Taxes, is dependent upon completion of further fairprimarily to reflect updated assumptions related to the estimated economic value analysis by the Company. The determination of the fair values of certain liabilities assumed is dependent upon completion of certain actuarialunderlying assets, (iv) decreasing the value attributed to pension and other valuationspostretirement benefit liabilities primarily to reflect updated plan population data, (v) increasing the value attributed to a liability for environmental matters primarily to reflect updated estimated lifecycle remediation cost data and studies. Givenrecording other liabilities identified during the complex naturemeasurement period, and (vi) a reclassification between Accounts Receivable and Accounts Payable to conform to Goodyear's classification of customer rebate and discount program liabilities. These adjustments were recorded net of adjustments to Deferred Tax Liabilities with the related valuations and analysescorresponding offset recorded to be completed and the timing of the acquisition, the preliminary purchase price allocation is subject to change. The final valuation of assets acquired and liabilities assumed may be materially different from the estimated values shown below.Goodwill, as applicable.
The following table sets forth cumulative measurement period changes since the preliminaryClosing Date, as well as the final and initial allocation of the Merger Consideration to the estimated fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of Cooper Tire, with the excess recorded to Goodwill:Goodwill as of the Closing Date:
(In millions) |
| As of June 7, 2021 |
|
| Final |
|
| Cumulative |
|
| Initial |
| ||||
Cash and Cash Equivalents |
| $ | 231 |
|
| $ | 231 |
|
| $ | 0 |
|
| $ | 231 |
|
Accounts Receivable |
| 621 |
|
|
| 538 |
|
|
| (83 | ) |
|
| 621 |
| |
Inventories |
| 693 |
|
|
| 708 |
|
|
| 15 |
|
|
| 693 |
| |
Property, Plant and Equipment |
| 1,372 |
|
|
| 1,346 |
|
|
| (26 | ) |
|
| 1,372 |
| |
Goodwill |
| 475 |
|
|
| 633 |
|
|
| 158 |
|
|
| 475 |
| |
Intangible Assets |
| 1,086 |
|
|
| 926 |
|
|
| (160 | ) |
|
| 1,086 |
| |
Other Assets |
|
| 362 |
|
|
| 360 |
|
|
| (2 | ) |
|
| 362 |
|
| 4,840 |
|
|
| 4,742 |
|
|
| (98 | ) |
|
| 4,840 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts Payable — Trade |
| 464 |
|
|
| 384 |
|
|
| (80 | ) |
|
| 464 |
| |
Compensation and Benefits |
| 386 |
|
|
| 356 |
|
|
| (30 | ) |
|
| 386 |
| |
Debt, Finance Leases and Notes Payable and Overdrafts |
| 151 |
|
|
| 151 |
|
|
| 0 |
|
|
| 151 |
| |
Deferred Tax Liabilities, net |
| 347 |
|
|
| 292 |
|
|
| (55 | ) |
|
| 347 |
| |
Other Liabilities |
| 374 |
|
|
| 441 |
|
|
| 67 |
|
|
| 374 |
| |
Minority Equity |
|
| 21 |
|
|
| 21 |
|
|
| 0 |
|
|
| 21 |
|
|
| 1,743 |
|
|
| 1,645 |
|
|
| (98 | ) |
|
| 1,743 |
| |
Merger Consideration |
| $ | 3,097 |
|
| $ | 3,097 |
|
| $ | 0 |
|
| $ | 3,097 |
|
The estimated value of Inventory includes adjustments totaling $230245 million, comprised of $121135 million primarily to adjust inventory valued on a last-in, first-out ("LIFO") basis to a current cost basis and $109110 million to step-up inventory to estimated fair value. The fair value step-up will amortizewas fully amortized to Cost of Goods Sold ("CGS") as the related inventory is sold, which negatively impactedin 2021, including $38 million during the second quarter of 2021, by $38 million.as the related inventory was sold. We have eliminated the LIFO reserve on Cooper Tire’s U.S. inventories as we predominately determine the value of our inventory using the first-in, first-out ("FIFO") method. To estimate the fair value of inventory, we considered the components of Cooper Tire’s inventory, as well as estimates of selling prices and selling and distribution costs that were based on Cooper Tire’s historical experience.
The estimated value of Property, Plant and Equipment includes adjustments totaling $175138 million to increase the net book value of $1,1971,208 million to the preliminaryfinal fair value estimate of $1,3721,346 million. This estimate is based on other comparable acquisitionsa combination of cost and historical experience,market approaches, including appraisals, and preliminary expectations as to the duration of time we expect to realize benefits from those assets, as we do not yet have sufficient information as to the underlying condition of Cooper Tire’s fixed assets.
The estimated fair values of identifiable intangible assets acquired were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period
8
excess earnings method. The estimated useful lives are based on our historical experience and expectations as to the duration of time we expect to realize benefits from those assets.
The estimated fair values of the identifiable intangible assets acquired, their weighted average estimated useful lives and the related valuation methodology are as follows:
(In millions) |
| Preliminary |
|
| Range of |
| Valuation Methodology | |
Trade names (indefinite-lived) |
| $ | 310 |
|
| N/A |
| Relief-from-royalty |
Trade names (definite-lived) |
|
| 40 |
|
| 13-15 years |
| Relief-from-royalty |
Customer relationships |
|
| 730 |
|
| 7-16 years |
| Multi-period excess earnings |
Non-compete and other |
|
| 6 |
|
|
|
|
|
| $ | 1,086 |
|
|
|
|
|
10
(In millions, except years) |
| Final |
|
| Cumulative |
|
| Initial |
|
| Weighted Average |
| Valuation Methodology | |||
Trade names (indefinite-lived) |
| $ | 560 |
|
| $ | 250 |
|
| $ | 310 |
|
| N/A |
| Relief-from-royalty |
Trade names (definite-lived) |
|
| 10 |
|
|
| (30 | ) |
|
| 40 |
|
| 14 years |
| Relief-from-royalty |
Customer relationships |
|
| 350 |
|
|
| (380 | ) |
|
| 730 |
|
| 12 years |
| Multi-period excess earnings |
Non-compete and other |
|
| 6 |
|
|
| 0 |
|
|
| 6 |
|
| 2 years |
| Discounted cash flow |
|
| $ | 926 |
|
| $ | (160 | ) |
| $ | 1,086 |
|
|
|
|
|
At the Closing Date, allAll of the calculated Goodwill of $475 million was allocated to our Americas segment. The goodwill consists of expected future economic benefits that will arise from expected future product sales, operating efficiencies and other synergies that may result from the Merger,acquisition, including income tax synergies, and is not deductible for tax purposes.
Net sales and earningsCGS related to Cooper Tire’s operations that have been included in our Consolidated Statements of Operations for the period fromthree months ended June 30, 2022 are $919 million and $710 million, respectively, and for the Closing Date throughsix months ended June 30, 2022 are $1,788 million and $1,429 million, respectively. Net Sales and CGS related to Cooper Tire's operations that have been included in our Consolidated Statements of Operations for both the three and six months ended June 30, 2021 are $256 million and $236 million, respectively. As a result of our ongoing integration efforts, particularly as follows:it relates to administrative functions and financing activities, we did not present stand-alone Income before Income Taxes or Net Income for Cooper Tire for these periods.
(In millions) |
|
|
| |
Net Sales |
| $ | 256 |
|
Income (Loss) before Income Taxes |
|
| (20 | ) |
Goodyear Net Income (Loss) |
|
| (6 | ) |
During the three and six months ended June 30, 2021, we incurred transaction and other costs in connection with the Mergeracquisition of Cooper Tire totaling $48 million and $55 million, respectively, including $10 million for a commitment fee related to a bridge term loan facility that was not utilized to finance the transaction and $6 million related to the post-combination settlement of certain Cooper Tire incentive compensation awards during the second quarter of 2021. In the three and six months ended June 30, 2021, $42 million and $49 million of these costs, respectively, are included in Other (Income) Expense, with the remainder included in CGS and Selling, Administrative and General Expense ("SAG") in our Consolidated Statements of Operations. There were no related transaction costs incurred during the three and six months ended June 30, 2022.
Pro forma financial information
The following table summarizes, on a pro forma basis, the combined results of operations of Goodyear and Cooper Tire for the three and six months ended June 30, 2021, as though the acquisition and the related financing had occurred as of January 1, 2020. The pro forma results are not necessarily indicative of either the actual consolidated results had the acquisition of Cooper Tire occurred on January 1, 2020, nor are they indicative of future consolidated operating results.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net Sales |
| $ | 4,563 |
|
| $ | 2,655 |
|
| $ | 8,744 |
|
| $ | 6,253 |
|
Income (Loss) before Income Taxes |
|
| 232 |
|
|
| (957 | ) |
|
| 320 |
|
|
| (1,638 | ) |
Goodyear Net Income (Loss) |
|
| 167 |
|
|
| (748 | ) |
|
| 220 |
|
|
| (1,612 | ) |
(In millions) |
| Three Months Ended |
|
| Six Months Ended |
| ||
Net Sales |
| $ | 4,563 |
|
| $ | 8,744 |
|
Income before Income Taxes |
|
| 244 |
|
|
| 344 |
|
Goodyear Net Income |
|
| 178 |
|
|
| 241 |
|
These pro forma amounts have been calculated after applying Goodyear’s accounting policies and making certain adjustments, which primarily include: (i) depreciation adjustments relating to fair value step-ups to property, plant and equipment; (ii) amortization adjustments relating to fair value estimates of acquired intangible assets; (iii) incremental interest expense associated with the $1.45 billion senior note issuance and additional borrowings under our first lien revolving credit facility used, in part, to fund the acquisition, related debt issuance costs, and fair value adjustments related to Cooper Tire's debt; (iv) CGS adjustments relating to fair value step-ups to inventory and the change from LIFO to FIFO; (v) executive severance andfair value adjustments for certain Cooper Tire stock-based compensation that was accelerated and settled on the Closing Date;compensation; and (vi) transaction related costs of both Goodyear and Cooper Tire.
9
NOTE 3. NET SALES
The following tables show disaggregated net sales from contracts with customers by major source:
|
| Three Months Ended June 30, 2022 |
| |||||||||||||
|
|
|
|
| Europe, Middle East |
|
|
|
|
|
|
| ||||
(In millions) |
| Americas |
|
| and Africa |
|
| Asia Pacific |
|
| Total |
| ||||
Tire unit sales |
| $ | 2,626 |
|
| $ | 1,301 |
|
| $ | 536 |
|
| $ | 4,463 |
|
Other tire and related sales |
|
| 194 |
|
|
| 164 |
|
|
| 19 |
|
|
| 377 |
|
Retail services and service related sales |
|
| 166 |
|
|
| 32 |
|
|
| 12 |
|
|
| 210 |
|
Chemical sales |
|
| 154 |
|
|
| 0 |
|
|
| 0 |
|
|
| 154 |
|
Other |
|
| 7 |
|
|
| 0 |
|
|
| 1 |
|
|
| 8 |
|
Net Sales by reportable segment |
| $ | 3,147 |
|
| $ | 1,497 |
|
| $ | 568 |
|
| $ | 5,212 |
|
|
| Three Months Ended June 30, 2021 |
|
| Three Months Ended June 30, 2021 |
| ||||||||||||||||||||||||||
|
|
|
|
| Europe, Middle East |
|
|
|
|
|
|
|
|
|
| Europe, Middle East |
|
|
|
|
|
| ||||||||||
(In millions) |
| Americas |
|
| and Africa |
|
| Asia Pacific |
|
| Total |
|
| Americas |
|
| and Africa |
|
| Asia Pacific |
|
| Total |
| ||||||||
Tire unit sales |
| $ | 1,777 |
| $ | 1,085 |
| $ | 455 |
| $ | 3,317 |
|
| $ | 1,777 |
|
| $ | 1,085 |
|
| $ | 455 |
|
| $ | 3,317 |
| |||
Other tire and related sales |
| 170 |
| 114 |
| 22 |
| 306 |
|
|
| 170 |
|
|
| 114 |
|
|
| 22 |
|
|
| 306 |
| |||||||
Retail services and service related sales |
| 155 |
| 29 |
| 15 |
| 199 |
|
|
| 155 |
|
|
| 29 |
|
|
| 15 |
|
|
| 199 |
| |||||||
Chemical sales |
| 149 |
| 0 |
| 0 |
| 149 |
|
|
| 149 |
|
|
| 0 |
|
|
| 0 |
|
|
| 149 |
| |||||||
Other |
|
| 5 |
|
|
| 2 |
|
|
| 1 |
|
|
| 8 |
|
|
| 5 |
|
|
| 2 |
|
|
| 1 |
|
|
| 8 |
|
Net Sales by reportable segment |
| $ | 2,256 |
|
| $ | 1,230 |
|
| $ | 493 |
|
| $ | 3,979 |
|
| $ | 2,256 |
|
| $ | 1,230 |
|
| $ | 493 |
|
| $ | 3,979 |
|
|
| Six Months Ended June 30, 2022 |
| |||||||||||||
|
|
|
|
| Europe, Middle East |
|
|
|
|
|
|
| ||||
(In millions) |
| Americas |
|
| and Africa |
|
| Asia Pacific |
|
| Total |
| ||||
Tire unit sales |
| $ | 5,059 |
|
| $ | 2,576 |
|
| $ | 1,069 |
|
| $ | 8,704 |
|
Other tire and related sales |
|
| 365 |
|
|
| 281 |
|
|
| 41 |
|
|
| 687 |
|
Retail services and service related sales |
|
| 306 |
|
|
| 66 |
|
|
| 23 |
|
|
| 395 |
|
Chemical sales |
|
| 319 |
|
|
| 0 |
|
|
| 0 |
|
|
| 319 |
|
Other |
|
| 13 |
|
|
| 0 |
|
|
| 2 |
|
|
| 15 |
|
Net Sales by reportable segment |
| $ | 6,062 |
|
| $ | 2,923 |
|
| $ | 1,135 |
|
| $ | 10,120 |
|
11
|
| Three Months Ended June 30, 2020 |
| |||||||||||||
|
|
|
|
| Europe, Middle East |
|
|
|
|
|
|
| ||||
(In millions) |
| Americas |
|
| and Africa |
|
| Asia Pacific |
|
| Total |
| ||||
Tire unit sales |
| $ | 835 |
|
| $ | 595 |
|
| $ | 304 |
|
| $ | 1,734 |
|
Other tire and related sales |
|
| 118 |
|
|
| 63 |
|
|
| 14 |
|
|
| 195 |
|
Retail services and service related sales |
|
| 128 |
|
|
| 17 |
|
|
| 16 |
|
|
| 161 |
|
Chemical sales |
|
| 49 |
|
|
| 0 |
|
|
| 0 |
|
|
| 49 |
|
Other |
|
| 4 |
|
|
| 1 |
|
|
| 0 |
|
|
| 5 |
|
Net Sales by reportable segment |
| $ | 1,134 |
|
| $ | 676 |
|
| $ | 334 |
|
| $ | 2,144 |
|
|
| Six Months Ended June 30, 2021 |
| |||||||||||||
|
|
|
|
| Europe, Middle East |
|
|
|
|
|
|
| ||||
(In millions) |
| Americas |
|
| and Africa |
|
| Asia Pacific |
|
| Total |
| ||||
Tire unit sales |
| $ | 3,171 |
|
| $ | 2,207 |
|
| $ | 909 |
|
| $ | 6,287 |
|
Other tire and related sales |
|
| 310 |
|
|
| 193 |
|
|
| 44 |
|
|
| 547 |
|
Retail services and service related sales |
|
| 291 |
|
|
| 57 |
|
|
| 31 |
|
|
| 379 |
|
Chemical sales |
|
| 262 |
|
|
| 0 |
|
|
| 0 |
|
|
| 262 |
|
Other |
|
| 9 |
|
|
| 4 |
|
|
| 2 |
|
|
| 15 |
|
Net Sales by reportable segment |
| $ | 4,043 |
|
| $ | 2,461 |
|
| $ | 986 |
|
| $ | 7,490 |
|
|
| Six Months Ended June 30, 2020 |
| |||||||||||||
|
|
|
|
| Europe, Middle East |
|
|
|
|
|
|
| ||||
(In millions) |
| Americas |
|
| and Africa |
|
| Asia Pacific |
|
| Total |
| ||||
Tire unit sales |
| $ | 2,141 |
|
| $ | 1,499 |
|
| $ | 647 |
|
| $ | 4,287 |
|
Other tire and related sales |
|
| 260 |
|
|
| 135 |
|
|
| 46 |
|
|
| 441 |
|
Retail services and service related sales |
|
| 261 |
|
|
| 35 |
|
|
| 28 |
|
|
| 324 |
|
Chemical sales |
|
| 140 |
|
|
| 0 |
|
|
| 0 |
|
|
| 140 |
|
Other |
|
| 5 |
|
|
| 2 |
|
|
| 1 |
|
|
| 8 |
|
Net Sales by reportable segment |
| $ | 2,807 |
|
| $ | 1,671 |
|
| $ | 722 |
|
| $ | 5,200 |
|
Tire unit sales consist of consumer, commercial, farm and off-the-road tire sales, including the sale of new Company-branded tires through Company-owned retail channels. Other tire and related sales consist of aviation, race and motorcycle tire sales, retread sales and other tire related sales. Sales of tires in this category are not included in reported tire unit information. Retail services and service related sales consist of automotive services performed for customers through our Company-owned retail channels, and includes service related products. Chemical sales relate to the sale of synthetic rubber and other chemicals to third parties, and exclude intercompany sales. Other sales include items such as franchise fees and ancillary tire parts.
When we receive consideration from a customer prior to transferring goods or services under the terms of a sales contract, we record deferred revenue, which represents a contract liability. Deferred revenue included in Other Current Liabilities in the Consolidated Balance Sheets totaled $2421 million and $23 million at June 30, 20212022 and December 31, 2020,2021, respectively. Deferred revenue included in Other Long Term Liabilities in the Consolidated Balance Sheets totaled $2118 million and $2721 million at June 30, 20212022 and December 31, 2020,2021, respectively. We recognize deferred revenue after we have transferred control of the goods or services to the customer and all revenue recognition criteria are met.
10
The following table presents the balance of deferred revenue related to contracts with customers, and changes during the six months ended June 30, 2021:2022:
|
|
|
|
|
|
| ||
(In millions) |
|
|
|
|
|
| ||
Balance at December 31, 2020 |
| $ | 50 |
| ||||
Balance at December 31, 2021 |
| $ | 44 |
| ||||
Revenue deferred during period |
| 71 |
|
|
| 44 |
| |
Revenue recognized during period |
| (76 | ) |
|
| (48 | ) | |
Impact of foreign currency translation |
|
| 0 |
|
|
| (1 | ) |
Balance at June 30, 2021 |
| $ | 45 |
| ||||
Balance at June 30, 2022 |
| $ | 39 |
|
12
NOTE 4. COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS
In order to maintain our global competitiveness, we have implemented rationalization actions over the past several years to reduce high-cost and excess manufacturing capacity and operating and administrative costs.
The following table presents a roll-forward of the liability balance between periods:
|
| Associate- |
|
|
|
|
|
|
| |||
(In millions) |
| Related Costs |
|
| Other Costs |
|
| Total |
| |||
Balance at December 31, 2020 |
| $ | 200 |
|
| $ | 0 |
|
| $ | 200 |
|
2021 Charges |
|
| 48 |
|
|
| 20 |
|
|
| 68 |
|
Incurred, net of foreign currency translation of $(5) million and $0 million, respectively |
|
| (108 | ) |
|
| (20 | ) |
|
| (128 | ) |
Reversed to the Statement of Operations |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Balance at June 30, 2021 |
| $ | 140 |
|
| $ | 0 |
|
| $ | 140 |
|
|
| Associate- |
|
|
|
|
|
|
| |||
(In millions) |
| Related Costs |
|
| Other Costs |
|
| Total |
| |||
Balance at December 31, 2021 |
| $ | 88 |
|
| $ | 0 |
|
| $ | 88 |
|
2022 Charges |
|
| 27 |
|
|
| 12 |
|
|
| 39 |
|
Incurred, net of foreign currency translation of $(2) million and $0 million, respectively |
|
| (49 | ) |
|
| (12 | ) |
|
| (61 | ) |
Reversed to the Statement of Operations |
|
| (2 | ) |
|
| 0 |
|
|
| (2 | ) |
Balance at June 30, 2022 |
| $ | 64 |
|
| $ | 0 |
|
| $ | 64 |
|
During the firstsecond quarter of 2021,2022, we approved a plan related to the integration of Cooper Tire aimed at reducing duplicative global SAG headcount and closing redundant Cooper Tire warehouse locations in Americas in line with previously announced planned synergies. Total expected charges related to the plan are $54 million, of which $44 million represents cash charges primarily designed to reduce SAGfor associate severance and other exit benefits. The remainder of the charges represent primarily accelerated depreciation. The plan will result in Europe, Middle East and Africa (“EMEA”).approximately 490 job reductions. We have $19 million accrued related to this plan at June 30, 2021,2022, which is expected to be substantially paid through 2021.
During the first quarter of 2021, we increased by $32 million the estimated total cost of our previously announced plan to permanently close our Gadsden, Alabama tire manufacturing facility (“Gadsden”), primarily to reflect our decision to transfer additional machinery and equipment from Gadsden to other tire manufacturing facilities. We have $22 million accrued at June 30, 2021 related to this plan, which is expected to be substantially paid through 2021. In addition, we increased by $8 million and $29 million in the second quarter and first half of 2021, respectively, the estimated total cost of our previously announced plan to modernize 2 of our tire manufacturing facilities in Germany, primarily to increase expected associate severance costs based on actual payout history to date and the mix of associates electing lump sum vs. annuity settlements. We have $53 million accrued at June 30, 2021 related to this plan, which is expected to be substantially paid through 2022.2023.
The remainder of the accrual balance at June 30, 20212022 is expected to be substantially utilized in the next 12 months and includes $12 million related to global plans to reduce SAG headcount, $821 million related to plans to reduce manufacturingSAG headcount, and improve operating efficiency in EMEA, $65 million related to the permanent closure of our Gadsden, Alabama tire manufacturing facility ("Gadsden"), $5 million related to the closed Amiens, France tire manufacturing facility, and $5 million relatedvarious other plans to a plan primarily to offer voluntary buy-outs to certain associates at Gadsden. reduce headcount and improve operating efficiency.
The following table shows net rationalization charges included in Income (Loss) before Income Taxes:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Current Year Plans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Associate Severance and Other Related Costs |
| $ | 0 |
|
| $ | 64 |
|
| $ | 20 |
|
| $ | 66 |
|
Benefit Plan Curtailments/Settlements/Termination Benefits |
|
| 0 |
|
|
| 5 |
|
|
| 0 |
|
|
| 5 |
|
Other Exit Costs |
|
| 0 |
|
|
| 2 |
|
|
| 0 |
|
|
| 2 |
|
Current Year Plans - Net Charges |
| $ | 0 |
|
| $ | 71 |
|
| $ | 20 |
|
| $ | 73 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Prior Year Plans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Associate Severance and Other Related Costs |
| $ | 8 |
|
| $ | 27 |
|
| $ | 28 |
|
| $ | 33 |
|
Benefit Plan Curtailments/Settlements/Termination Benefits |
|
| 0 |
|
|
| — |
|
|
| 0 |
|
|
| (4 | ) |
Other Exit Costs |
|
| 10 |
|
|
| 1 |
|
|
| 20 |
|
|
| 6 |
|
Prior Year Plans - Net Charges |
|
| 18 |
|
|
| 28 |
|
|
| 48 |
|
|
| 35 |
|
Total Net Charges |
| $ | 18 |
|
| $ | 99 |
|
| $ | 68 |
|
| $ | 108 |
|
Asset Write-off and Accelerated Depreciation Charges(1) |
| $ | 0 |
|
| $ | 86 |
|
| $ | 0 |
|
| $ | 90 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Current Year Plans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Associate Severance and Other Related Costs |
| $ | 22 |
|
| $ | 0 |
|
| $ | 22 |
|
| $ | 20 |
|
Current Year Plans - Net Charges |
| $ | 22 |
|
| $ | 0 |
|
| $ | 22 |
|
| $ | 20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Prior Year Plans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Associate Severance and Other Related Costs |
| $ | 0 |
|
| $ | 8 |
|
| $ | 4 |
|
| $ | 28 |
|
Other Exit Costs |
|
| 4 |
|
|
| 10 |
|
|
| 11 |
|
|
| 20 |
|
Prior Year Plans - Net Charges |
| $ | 4 |
|
| $ | 18 |
|
| $ | 15 |
|
| $ | 48 |
|
Total Net Charges |
| $ | 26 |
|
| $ | 18 |
|
| $ | 37 |
|
| $ | 68 |
|
Substantially all of the new charges for the three and six months ended June 30, 2022 and 2021 and 2020 relatedrelate to future cash outflows. Net current year plan charges for the three and six months ended June 30, 2022 are primarily due to the Cooper Tire integration related plan discussed above. Net current year plan charges for the six months ended June 30, 2021 primarily relatedrelate to a plan to reduce SAG headcount in EMEA. Europe, Middle East and Africa (“EMEA”).
Net currentprior year plan charges for the three and six months ended June 30, 2020 primarily2022 included $4 million and $11 million, respectively, related to the permanent closure of Gadsden, including a $51 million termination benefits charge for oneand $6 million, respectively, related to the modernization of two of our defined benefit pension plans.
13
Tabletire manufacturing facilities in Germany, and reversals of Contents$
1 million and $2 million, respectively, for actions no longer needed for their originally intended purpose. Net prior year plan charges for the three and six months ended June 30, 2021 included $7 million and $21 million, respectively, related to the modernization of two2 of our tire manufacturing facilities in Germany, $9
11
million and $17 million, respectively, related to the permanent closure of Gadsden, and $2 million and $810 million, respectively, related to various other plans to reduce manufacturing headcount and improve operating efficiency in EMEA. Net prior year plan charges for the three and six months ended June 30, 2020 included $25 million related to additional termination benefits for associates at the closed Amiens, France manufacturing facility. Refer to Note to the Consolidated Financial Statements No. 13, Commitments and Contingent Liabilities. In addition, net prior year plan charges for the six months ended June 30, 2020 included $6 million related to the plan to modernize two of our tire manufacturing facilities in Germany and $4 million related to the plan primarily to offer voluntary buy-outs to certain associates at Gadsden. Net prior year plan charges for the six months ended June 30, 2020 also included a curtailment credit of $4 million for a postretirement benefit plan related to the exit of employees under an approved rationalization plan.efficiency.
Ongoing rationalization plans had approximately $740830 million in charges incurred prior to 20212022 and approximately $7060 million is expected to be incurred in future periods.
Approximately 60490 associates will be released under the new plansplan initiated in 2021.the second quarter of 2022, of which approximately 60 were released through June 30, 2022. In the first six months of 2021,2022, approximately 200100 associates were released under plans initiated in prior years. Approximately 300550 associates remain to be released under all ongoing rationalization plans.
NOTE 5. OTHER (INCOME) EXPENSE
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Non-service related pension and other postretirement benefits cost |
| $ | 32 |
| $ | 25 |
| $ | 49 |
| $ | 51 |
|
| $ | 29 |
|
| $ | 32 |
|
| $ | 42 |
|
| $ | 49 |
| |||
Interest income on a favorable indirect tax ruling in Brazil |
| (48 | ) |
| 0 |
| (48 | ) |
| 0 |
|
|
| 0 |
|
|
| (48 | ) |
|
| 0 |
|
|
| (48 | ) | |||||
Financing fees and financial instruments expense |
| 17 |
| 5 |
| 25 |
| 12 |
|
|
| 10 |
|
|
| 17 |
|
|
| 17 |
|
|
| 25 |
| |||||||
Net foreign currency exchange (gains) losses |
| 0 |
| 4 |
| 10 |
| 3 |
|
|
| (1 | ) |
|
| 0 |
|
|
| 1 |
|
|
| 10 |
| |||||||
General and product liability expense - discontinued products |
| 2 |
| 2 |
| 3 |
| 4 |
|
|
| 2 |
|
|
| 2 |
|
|
| 3 |
|
|
| 3 |
| |||||||
Royalty income |
| (5 | ) |
| (4 | ) |
| (10 | ) |
| (9 | ) |
|
| (6 | ) |
|
| (5 | ) |
|
| (17 | ) |
|
| (10 | ) | ||||
Net (gains) losses on asset sales |
| 0 |
| 3 |
| 0 |
| 2 |
|
|
| (95 | ) |
|
| 0 |
|
|
| (98 | ) |
|
| 0 |
| |||||||
Interest income |
| (5 | ) |
| (3 | ) |
| (11 | ) |
| (6 | ) |
|
| (6 | ) |
|
| (5 | ) |
|
| (11 | ) |
|
| (11 | ) | ||||
Transaction costs |
| 32 |
| 0 |
| 39 |
| 0 |
|
|
| 0 |
|
|
| 32 |
|
|
| 0 |
|
|
| 39 |
| |||||||
Miscellaneous (income) expense |
|
| 5 |
|
|
| 2 |
|
|
| 7 |
|
|
| 4 |
|
|
| 2 |
|
|
| 5 |
|
|
| 3 |
|
|
| 7 |
|
| $ | 30 |
|
| $ | 34 |
|
| $ | 64 |
|
| $ | 61 |
|
| $ | (65 | ) |
| $ | 30 |
|
| $ | (60 | ) |
| $ | 64 |
|
Non-service related pension and other postretirement benefits cost consists primarily of the interest cost, expected return on plan assets and amortization components of net periodic cost, as well as curtailments and settlements which are not related to rationalization plans. For further information, refer to Note to the Consolidated Financial Statements No. 11, Pension, Savings and Other Postretirement Benefit Plans.
We, along with other companies, havehad previously filed various claims with the Brazilian tax authorities challenging the legality of the government's calculation of certain indirect taxes dating back to 2001. During the second quarter of 2021, the Brazilian Supreme Court rendered a final ruling that was favorable to companies on the remaining open aspects of these claims. As a result of thisthe ruling, we recorded a gain in CGS of $69 million and related interest income of $48 million in Other (Income) Expense.
Financing fees and financial instruments expense consists of commitment fees and charges incurred in connection with financing transactions. Financing fees and financial instruments expense for the three and six months ended June 30, 2021 includeincludes a $10 million charge for a commitment fee on a bridge term loan facility related to the Cooper Tire acquisition that was not utilized and was terminated upon the closing of the transaction.
Net foreign currency exchange (gains) losses include $7 million of expense in the first quarter of 2021 related to the out of period adjustments discussed in Note to the Consolidated Financial Statements No. 1, Accounting Policies.
Royalty income of $6 million and $17 million, respectively, for the three and six months ended June 30, 2022 increased compared to 2021 primarily due to an increase in chemical royalties in Americas.
Net gains on asset sales for the three and six months ended June 30, 2022 include a $95 million one-time gain related to a sale and leaseback transaction for certain consumer and commercial retail locations in Americas. Cash proceeds, which were received during the second quarter of 2022, related to this transaction totaled $108 million. Leaseback terms for all locations include a 15-year initial term with up to six 5-year renewal options. We have determined it is not probable that we will exercise any of the renewal options. The transaction resulted in the recognition of Operating Lease Right-of-Use Assets totaling $57 million.
Transaction costs include legal, consulting and other expenses incurred by us in connection with the Cooper Tire acquisition.acquisition in 2021.
Other (Income) Expense also includes general and product liability expense - discontinued products, which consists of charges for claims against us related primarily to asbestos personal injury claims, net of probable insurance recoveries; royalty income which is derived primarily from licensing arrangements; net (gains) and losses on asset sales;recoveries, and interest income.
1412
NOTE 6. INCOME TAXES
For the second quarter of 2022, we recorded income tax expense of $82 million on income before income taxes of $252 million. For the first six months of 2022, we recorded income tax expense of $120 million on income before income taxes of $386 million. Income tax expense for the three and six months ended June 30, 2022 includes net discrete tax expense of $14 million and $18 million, respectively. Discrete tax expense for the second quarter of 2022 includes a charge of $14 million to write off deferred tax assets related to tax loss carryforwards in the UK. Discrete tax expense for the first six months of 2022 also includes a charge of $11 million to establish a full valuation allowance on our net deferred tax assets in Russia, partially offset by a net benefit of $7 million for various other items.
For the second quarter of 2021, we recorded income tax expense of $27 million on income before income taxes of $98 million. For the first six months of 2021, we recorded income tax expense of $42 million on income before income taxes of $131 million. Income tax expense for the three and six months ended June 30, 2021 includes net discrete tax benefits of $3$232 million and $29 million, respectively, primarily related to adjusting our deferred tax assets in England for an enacted increase in the tax rate, partially offset by net discrete charges for various other items, including the settlement of a tax audit in Poland.
For the second quarter of 2020, we recorded an income tax benefit of $186 million on a loss before income taxes of $889 million. For the first six months of 2020, we recorded income tax expense of $63 million on a loss before income taxes of $1,257 million. Income tax expense (benefit) for the three and six months ended June 30, 2020 includes net discrete charges of $2 million and $293 million, respectively, primarily related to the establishment of a $295 million valuation allowance on certain deferred tax assets for foreign tax credits during the first quarter of 2020.
We record taxes based on overall estimated annual effective tax rates. The difference between our effective tax rate and the U.S. statutory rate of 21% for both the three and six months ended June 30, 2022 primarily relates to losses in foreign jurisdictions in which no tax benefits are recorded and the discrete items noted above. The difference between our effective tax rate and the U.S. statutory tax rate of 21% for both the three and six months ended June 30, 2021 primarily relates to the tax on a favorable indirect tax ruling in Brazil, losses in foreign jurisdictions in which no tax benefits are recorded, and the discrete items noted above. The difference between our effective tax rate and the U.S. statutory rate of 21% for the three and six months ended June 30, 2020 primarily relates to the discrete items noted above, a non-cash goodwill impairment charge of $182 million, and forecasted losses for the full year in foreign jurisdictions in which 0 tax benefits are recorded, which were accentuated during 2020 by business interruptions resulting from the COVID-19 pandemic.
We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. We give operating results during the most recent three-year period a significant weight in our analysis. We typically only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. We also consider prudent tax planning strategies available(including an assessment of their feasibility) to accelerate taxable amountsincome if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized.
At both June 30, 20212022 and December 31, 2020,2021, we had approximately $800 million and $1.2 billion of U.S. federal, state and local net deferred tax assets, respectively, net of valuation allowances totaling $36826 million primarily for foreignstate tax creditsloss carryforwards with limited lives. At June 30, 2021, approximately $500 million of these U.S. net deferred tax assets have unlimited lives and approximately $300 million have limited lives and expire between 2025 and 2041. The decrease in our U.S. net deferred tax assets from December 31, 2020 primarily reflects the establishment of deferred tax liabilities for the tax impacts of certain fair value and other purchase accounting adjustments related to the Cooper Tire acquisition. In the U.S., we have a cumulative loss for the three-year period ending June 30, 2021.2022. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only include the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including recentcontinued favorable recoveryoverall volume trends in the tire industry and our tire volume as well as expected continued improvement.compared to 2020 levels. In addition, the Cooper Tire acquisition is expected to generatehas generated significant incremental domestic earnings since the Closing Date and provideprovides opportunities for cost and other operating synergies to further improve our U.S. profitability. These favorable trends, together with tax planning strategies, may provide sufficient objectively verifiable information to reverse a portion or all of our U.S. valuation allowances for foreign tax credits within the next twelve months.
At both June 30, 20212022 and December 31, 2020,2021, our U.S. net deferred tax assets includedinclude $150339 million and $133 million, respectively, of foreign tax credits with limited lives, net of valuation allowances of $3283 million, generated primarily from the receipt of foreign dividends.million. Our earnings and forecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income, provide us sufficient positive evidence that we will be able to utilize our remainingthese net foreign tax credits thatwhich expire betweenthrough 2025 and 20312030. Our sources of foreign income are (1) 100% of our domestic profitability can be re-characterized as foreign source income under current U.S. tax law to the extent domestic losses have offset foreign source income in prior years, (2) annual net foreign source income, exclusive of dividends, primarily from royalties, and (3) tax planning strategies, including capitalizing research and development costs, accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, and reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, all of which would increase our domestic profitability.
We consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets, including our foreign tax credits. As noted above, theseThese forecasts include the impact of recent trends, including various macroeconomic factors such as the impact of the COVID-19 pandemic,higher raw material, transportation, labor and energy costs, on our profitability, as well as the impact of tax planning strategies.
15
Macroeconomic These macroeconomic factors including the impact of the COVID-19 pandemic, possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future earnings will not be sufficient to fully utilize our U.S. net deferred tax assets, including our remaining foreign tax credits. However, we believe our forecasts of future profitability along with the three significant sources of foreign income
13
described above provide us sufficient positive, objectively verifiable evidence to conclude that it is more likely than not that, at June 30, 2021,2022, our U.S. net deferred tax assets, including our foreign tax credits, net of valuation allowances, will be fully utilized.
At June 30, 20212022 and December 31, 2020,2021, we also had approximately $1.41.2 billion and $1.3 billion of foreign net deferred tax assets, respectively, and related valuation allowances of $1.11.0 billion. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $933800 million on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances having a significant impact on our financial position or results of operations will exist within the next twelve months.
For the six months ended June 30, 2021,2022, changes to our unrecognized tax benefits did not, and for the full year of 20212022 are not expected to, have a significant impact on our financial position or results of operations.
We are open to examination in the United States for 20202021 and in Germany from 2018 onward. Cooper Tire, our newly acquired wholly owned subsidiary, is open to examination in the United States from 2017 onward. Generally, for our remaining tax jurisdictions, years from 20162017 onward are still open to examination.
NOTE 7. EARNINGS PER SHARE
Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share are calculated to reflect the potential dilution that could occur if securities or other contracts were exercised or converted into common stock.
Basic and diluted earnings per common share are calculated as follows:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions, except per share amounts) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Earnings (loss) per share — basic: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Goodyear net income (loss) |
| $ | 67 |
|
| $ | (696 | ) |
| $ | 79 |
|
| $ | (1,315 | ) |
Weighted average shares outstanding |
|
| 244 |
|
|
| 234 |
|
|
| 239 |
|
|
| 234 |
|
Earnings (loss) per common share — basic |
| $ | 0.27 |
|
| $ | (2.97 | ) |
| $ | 0.33 |
|
| $ | (5.62 | ) |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings (loss) per share — diluted: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Goodyear net income (loss) |
| $ | 67 |
|
| $ | (696 | ) |
| $ | 79 |
|
| $ | (1,315 | ) |
Weighted average shares outstanding |
|
| 244 |
|
|
| 234 |
|
|
| 239 |
|
|
| 234 |
|
Dilutive effect of stock options and other dilutive securities |
|
| 3 |
|
|
| 0 |
|
|
| 3 |
|
|
| 0 |
|
Weighted average shares outstanding — diluted |
|
| 247 |
|
|
| 234 |
|
|
| 242 |
|
|
| 234 |
|
Earnings (loss) per common share — diluted |
| $ | 0.27 |
|
| $ | (2.97 | ) |
| $ | 0.32 |
|
| $ | (5.62 | ) |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions, except per share amounts) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Earnings per share — basic: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Goodyear net income |
| $ | 166 |
|
| $ | 67 |
|
| $ | 262 |
|
| $ | 79 |
|
Weighted average shares outstanding |
|
| 284 |
|
|
| 244 |
|
|
| 284 |
|
|
| 239 |
|
Earnings per common share — basic |
| $ | 0.58 |
|
| $ | 0.27 |
|
| $ | 0.92 |
|
| $ | 0.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Earnings per share — diluted: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Goodyear net income |
| $ | 166 |
|
| $ | 67 |
|
| $ | 262 |
|
| $ | 79 |
|
Weighted average shares outstanding |
|
| 284 |
|
|
| 244 |
|
|
| 284 |
|
|
| 239 |
|
Dilutive effect of stock options and other dilutive securities |
|
| 2 |
|
|
| 3 |
|
|
| 2 |
|
|
| 3 |
|
Weighted average shares outstanding — diluted |
|
| 286 |
|
|
| 247 |
|
|
| 286 |
|
|
| 242 |
|
Earnings per common share — diluted |
| $ | 0.58 |
|
| $ | 0.27 |
|
| $ | 0.91 |
|
| $ | 0.32 |
|
Weighted average shares outstanding — diluted for both the three and six months ended June 30, 2022 and the three and six months ended June 30, 2021 excludes approximately 2 million equivalent shares related to options with exercise prices greater than the average market price of our common shares (i.e., "underwater" options). Weighted average shares outstanding — diluted for the three and six months ended June 30, 2020 excludes approximately 9 million equivalent shares related to underwater options. At June 30, 2020, there were 0 options with exercise prices less than the average market price of our common shares (i.e., “in-the-money” options).
1614
NOTE 8. BUSINESS SEGMENTS
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | 3,147 |
|
| $ | 2,256 |
|
| $ | 6,062 |
|
| $ | 4,043 |
|
Europe, Middle East and Africa |
|
| 1,497 |
|
|
| 1,230 |
|
|
| 2,923 |
|
|
| 2,461 |
|
Asia Pacific |
|
| 568 |
|
|
| 493 |
|
|
| 1,135 |
|
|
| 986 |
|
Net Sales |
| $ | 5,212 |
|
| $ | 3,979 |
|
| $ | 10,120 |
|
| $ | 7,490 |
|
Segment Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | 293 |
|
| $ | 233 |
|
| $ | 509 |
|
| $ | 347 |
|
Europe, Middle East and Africa |
|
| 52 |
|
|
| 43 |
|
|
| 111 |
|
|
| 117 |
|
Asia Pacific |
|
| 19 |
|
|
| 23 |
|
|
| 47 |
|
|
| 61 |
|
Total Segment Operating Income |
| $ | 364 |
|
| $ | 299 |
|
| $ | 667 |
|
| $ | 525 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Rationalizations (Note 4) |
| $ | 26 |
|
| $ | 18 |
|
| $ | 37 |
|
| $ | 68 |
|
Interest expense |
|
| 110 |
|
|
| 97 |
|
|
| 214 |
|
|
| 176 |
|
Other (income) expense (Note 5) |
|
| (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 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | 2,256 |
|
| $ | 1,134 |
|
| $ | 4,043 |
|
| $ | 2,807 |
|
Europe, Middle East and Africa |
|
| 1,230 |
|
|
| 676 |
|
|
| 2,461 |
|
|
| 1,671 |
|
Asia Pacific |
|
| 493 |
|
|
| 334 |
|
|
| 986 |
|
|
| 722 |
|
Net Sales |
| $ | 3,979 |
|
| $ | 2,144 |
|
| $ | 7,490 |
|
| $ | 5,200 |
|
Segment Operating Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | 233 |
|
| $ | (287 | ) |
| $ | 347 |
|
| $ | (287 | ) |
Europe, Middle East and Africa |
|
| 43 |
|
|
| (110 | ) |
|
| 117 |
|
|
| (163 | ) |
Asia Pacific |
|
| 23 |
|
|
| (34 | ) |
|
| 61 |
|
|
| (28 | ) |
Total Segment Operating Income (Loss) |
| $ | 299 |
|
| $ | (431 | ) |
| $ | 525 |
|
| $ | (478 | ) |
Less: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Goodwill and other asset impairments |
| $ | 0 |
|
| $ | 148 |
|
| $ | 0 |
|
| $ | 330 |
|
Rationalizations (Note 4) |
|
| 18 |
|
|
| 99 |
|
|
| 68 |
|
|
| 108 |
|
Interest expense |
|
| 97 |
|
|
| 85 |
|
|
| 176 |
|
|
| 158 |
|
Other (income) expense (Note 5) |
|
| 30 |
|
|
| 34 |
|
|
| 64 |
|
|
| 61 |
|
Asset write-offs and accelerated depreciation (Note 4) |
|
| 0 |
|
|
| 86 |
|
|
| 0 |
|
|
| 90 |
|
Corporate incentive compensation plans |
|
| 24 |
|
|
| 7 |
|
|
| 33 |
|
|
| 10 |
|
Retained expenses of divested operations |
|
| 4 |
|
|
| 1 |
|
|
| 7 |
|
|
| 3 |
|
Other |
|
| 28 |
|
|
| (2 | ) |
|
| 46 |
|
|
| 19 |
|
Income (Loss) before Income Taxes |
| $ | 98 |
|
| $ | (889 | ) |
| $ | 131 |
|
| $ | (1,257 | ) |
Goodwill and other asset impairments; rationalizations,Rationalizations, as described in Note to the Consolidated Financial Statements No. 4, Costs Associated with Rationalization Programs;Programs, and net (gains) losses on asset sales, as described in Note to the Consolidated Financial Statements No. 5, Other (Income) Expense; and asset write-offs and accelerated depreciationExpense, were not charged to the strategic business units ("SBUs") for performance evaluation purposes but were attributable to the SBUs as follows:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Goodwill and Other Asset Impairments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | 0 |
|
| $ | 148 |
|
| $ | 0 |
|
| $ | 148 |
|
Europe, Middle East and Africa |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 182 |
|
Total Segment Goodwill and Other Asset Impairments |
| $ | 0 |
|
| $ | 148 |
|
| $ | 0 |
|
| $ | 330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Rationalizations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | 8 |
|
| $ | 69 |
|
| $ | 18 |
|
| $ | 72 |
|
Europe, Middle East and Africa |
|
| 7 |
|
|
| 30 |
|
|
| 44 |
|
|
| 36 |
|
Total Segment Rationalizations |
| $ | 15 |
|
| $ | 99 |
|
| $ | 62 |
|
| $ | 108 |
|
Corporate |
|
| 3 |
|
|
| 0 |
|
|
| 6 |
|
|
| 0 |
|
| $ | 18 |
|
| $ | 99 |
|
| $ | 68 |
|
| $ | 108 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net (Gains) Losses on Asset Sales: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Europe, Middle East and Africa |
| $ | 0 |
|
| $ | 3 |
|
| $ | 0 |
|
| $ | 2 |
|
Total Segment Net (Gains) Losses on Asset Sales |
| $ | 0 |
|
| $ | 3 |
|
| $ | 0 |
|
| $ | 2 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Asset Write-offs and Accelerated Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | 0 |
|
| $ | 86 |
|
| $ | 0 |
|
| $ | 89 |
|
Europe, Middle East and Africa |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
Total Segment Asset Write-offs and Accelerated Depreciation |
| $ | 0 |
|
| $ | 86 |
|
| $ | 0 |
|
| $ | 90 |
|
17
The following table presents segment assets:
|
| June 30, |
|
| December 31, |
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Assets |
|
|
|
|
|
| ||
Americas |
| $ | 9,902 |
|
| $ | 6,666 |
|
Europe, Middle East and Africa |
|
| 5,366 |
|
|
| 4,825 |
|
Asia Pacific |
|
| 3,143 |
|
|
| 2,725 |
|
Total Segment Assets |
|
| 18,411 |
|
|
| 14,216 |
|
Corporate(1) |
|
| 2,769 |
|
|
| 2,290 |
|
| $ | 21,180 |
|
| $ | 16,506 |
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Rationalizations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | 11 |
|
| $ | 8 |
|
| $ | 18 |
|
| $ | 18 |
|
Europe, Middle East and Africa |
|
| 9 |
|
|
| 7 |
|
|
| 14 |
|
|
| 44 |
|
Asia Pacific |
|
| 1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Total Segment Rationalizations |
| $ | 21 |
|
| $ | 15 |
|
| $ | 32 |
|
| $ | 62 |
|
Corporate |
|
| 5 |
|
|
| 3 |
|
|
| 5 |
|
|
| 6 |
|
|
| $ | 26 |
|
| $ | 18 |
|
| $ | 37 |
|
| $ | 68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net (Gains) Losses on Asset Sales: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Americas |
| $ | (95 | ) |
| $ | 0 |
|
| $ | (98 | ) |
| $ | 0 |
|
Total Segment Net (Gains) Losses on Asset Sales |
| $ | (95 | ) |
| $ | 0 |
|
| $ | (98 | ) |
| $ | 0 |
|
The increases from December 31, 2020 were driven by the acquisition of Cooper Tire.
NOTE 9. FINANCING ARRANGEMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
At June 30, 2021,2022, we had total credit arrangements of $11,95111,475 million, of which $4,1123,210 million were unused. At that date, approximately 2327% of our debt was at variable interest rates averaging 2.984.07%.
Notes Payable and Overdrafts, Long Term Debt and Finance Leases due Within One Year and Short Term Financing Arrangements
At June 30, 2021,2022, we had short term committed and uncommitted credit arrangements totaling $968826 million, of which $479294 million were unused. These arrangements are available primarily to certain of our foreign subsidiaries through various banks at quoted market interest rates.
15
The following table presents amounts due within one year:
|
| June 30, |
|
| December 31, |
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Chinese credit facilities |
| $ | 96 |
|
| $ | 163 |
|
Other foreign and domestic debt |
|
| 363 |
|
|
| 243 |
|
Notes Payable and Overdrafts |
| $ | 459 |
|
| $ | 406 |
|
Weighted average interest rate |
|
| 4.05 | % |
|
| 4.52 | % |
|
|
|
|
|
| |||
Chinese credit facilities |
| $ | 90 |
|
| $ | 13 |
|
Other foreign and domestic debt (including finance leases) |
|
| 445 |
|
|
| 139 |
|
Long Term Debt and Finance Leases due Within One Year |
| $ | 535 |
|
| $ | 152 |
|
Weighted average interest rate |
|
| 3.29 | % |
|
| 4.43 | % |
Total obligations due within one year |
| $ | 994 |
|
| $ | 558 |
|
18
|
| June 30, |
|
| December 31, |
|
| ||
(In millions) |
| 2022 |
|
| 2021 |
|
| ||
Chinese credit facilities |
| $ | 71 |
|
| $ | 37 |
|
|
Other foreign and domestic debt |
|
| 448 |
|
|
| 369 |
|
|
Notes Payable and Overdrafts |
| $ | 519 |
|
| $ | 406 |
|
|
Weighted average interest rate |
|
| 4.46 | % |
|
| 2.78 | % |
|
|
|
|
|
|
|
|
| ||
Chinese credit facilities |
| $ | 154 |
|
| $ | 124 |
|
|
Other foreign and domestic debt (including finance leases) |
|
| 162 |
|
|
| 219 |
|
|
Long Term Debt and Finance Leases due Within One Year |
| $ | 316 |
|
| $ | 343 |
|
|
Weighted average interest rate |
|
| 5.45 | % |
|
| 5.25 | % |
|
Total obligations due within one year |
| $ | 835 |
|
| $ | 749 |
|
|
Long Term Debt and Finance Leases and Financing Arrangements
At June 30, 2021,2022, we had long term credit arrangements totaling $10,98310,649 million, of which $3,6332,916 million were unused.
The following table presents long term debt and finance leases, net of unamortized discounts, and interest rates:
|
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||
|
|
|
|
| Interest |
|
|
|
|
| Interest |
|
|
|
|
| Interest |
|
|
|
|
| Interest |
| ||||||||
(In millions) |
| Amount |
|
| Rate |
|
| Amount |
|
| Rate |
|
| Amount |
|
| Rate |
|
| Amount |
|
| Rate |
| ||||||||
Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
5.125% due 2023 |
| $ | 0 |
|
|
|
| $ | 1,000 |
|
|
| ||||||||||||||||||||
3.75% Euro Notes due 2023 |
| 297 |
|
|
|
| 307 |
|
|
| ||||||||||||||||||||||
9.5% due 2025 |
| 803 |
|
|
|
| 803 |
|
|
|
| $ | 802 |
|
|
|
|
| $ | 802 |
|
|
|
| ||||||||
5% due 2026 |
| 900 |
|
|
|
| 900 |
|
|
|
|
| 900 |
|
|
|
|
|
| 900 |
|
|
|
| ||||||||
4.875% due 2027 |
| 700 |
|
|
|
| 700 |
|
|
|
|
| 700 |
|
|
|
|
|
| 700 |
|
|
|
| ||||||||
7.625% due 2027 |
| 136 |
|
|
|
| 0 |
|
|
|
|
| 133 |
|
|
|
|
|
| 135 |
|
|
|
| ||||||||
7% due 2028 |
| 150 |
|
|
|
| 150 |
|
|
|
|
| 150 |
|
|
|
|
|
| 150 |
|
|
|
| ||||||||
2.75% Euro Notes due 2028 |
|
| 416 |
|
|
|
|
|
| 454 |
|
|
|
| ||||||||||||||||||
5% due 2029 |
| 850 |
|
|
|
| 0 |
|
|
|
|
| 850 |
|
|
|
|
|
| 850 |
|
|
|
| ||||||||
5.25% due April 2031 |
| 550 |
|
|
|
| 0 |
|
|
|
|
| 550 |
|
|
|
|
|
| 550 |
|
|
|
| ||||||||
5.25% due July 2031 |
| 600 |
|
|
|
| 0 |
|
|
|
|
| 600 |
|
|
|
|
|
| 600 |
|
|
|
| ||||||||
5.625% due 2033 |
| 450 |
|
|
|
| 0 |
|
|
|
|
| 450 |
|
|
|
|
|
| 450 |
|
|
|
| ||||||||
Credit Facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
First lien revolving credit facility due 2026 |
| 0 |
| 0 |
| 0 |
| 0 |
|
|
| 570 |
|
|
| 2.48 | % |
|
| 0 |
|
|
| 0 |
| |||||||
Second lien term loan facility due 2025 |
| 400 |
| 2.09 | % |
| 400 |
| 2.15 | % | ||||||||||||||||||||||
European revolving credit facility due 2024 |
| 0 |
| 0 |
| 0 |
| 0 |
|
|
| 310 |
|
|
| 3.10 | % |
|
| 0 |
|
|
| 0 |
| |||||||
Pan-European accounts receivable facility |
| 246 |
| 1.15 | % |
| 291 |
| 1.18 | % |
|
| 246 |
|
|
| 1.31 | % |
|
| 279 |
|
|
| 1.08 | % | ||||||
Mexican credit facility |
| 200 |
| 1.82 | % |
| 152 |
| 1.87 | % |
|
| 200 |
|
|
| 3.26 | % |
|
| 158 |
|
|
| 1.85 | % | ||||||
Chinese credit facilities |
| 314 |
| 4.34 | % |
| 212 |
| 4.49 | % |
|
| 294 |
|
|
| 4.25 | % |
|
| 333 |
|
|
| 4.34 | % | ||||||
Other foreign and domestic debt(1) |
|
| 712 |
|
|
| 3.03 | % |
|
| 451 |
|
|
| 3.22 | % |
|
| 507 |
|
|
| 6.91 | % |
|
| 430 |
|
|
| 6.05 | % |
| 7,308 |
|
|
|
| 5,366 |
|
|
|
|
| 7,678 |
|
|
|
|
|
| 6,791 |
|
|
|
| |||||||||
Unamortized deferred financing fees |
|
| (54 | ) |
|
|
|
|
| (32 | ) |
|
|
|
|
| (50 | ) |
|
|
|
|
| (55 | ) |
|
|
| ||||
| 7,254 |
|
|
|
| 5,334 |
|
|
|
|
| 7,628 |
|
|
|
|
|
| 6,736 |
|
|
|
| |||||||||
Finance lease obligations(2) |
|
| 259 |
|
|
|
|
|
| 250 |
|
|
|
|
|
| 257 |
|
|
|
|
|
| 255 |
|
|
|
| ||||
| 7,513 |
|
|
|
| 5,584 |
|
|
|
|
| 7,885 |
|
|
|
|
|
| 6,991 |
|
|
|
| |||||||||
Less portion due within one year |
|
| (535 | ) |
|
|
|
|
| (152 | ) |
|
|
|
|
| (316 | ) |
|
|
|
|
| (343 | ) |
|
|
| ||||
| $ | 6,978 |
|
|
|
|
| $ | 5,432 |
|
|
|
|
| $ | 7,569 |
|
|
|
|
| $ | 6,648 |
|
|
|
|
16
NOTES
At June 30, 2021,2022, we had $5,4365,551 million of outstanding notes, compared to $3,8605,591 million at December 31, 2020. The increase from December 31, 2020 was primarily due to the issuance of $1.45 billion of senior notes to fund a portion of the acquisition of Cooper Tire.
$550 million 5.25% Senior Notes due April 2031 and $450 million 5.625% Senior Notes due 2033
On April 6, 2021, we issued $550 million in aggregate principal amount of 5.25% senior notes due 2031 and $450 million in aggregate principal amount of 5.625% senior notes due 2033. The proceeds from these notes, together with cash and cash equivalents, were used to redeem our existing $1.0 billion 5.125% senior notes due 2023 in May 2021. These notes were sold at 100% of the principal amount and will mature on April 30, 2031 and 2033, respectively. These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior secured credit facilities described below.
We have the option to redeem these notes, in whole or in part, at any time prior to their maturity. If we elect to redeem these notes prior to three months before their maturity date, we will pay a redemption price equal to the greater of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments on the notes redeemed, discounted using a defined treasury rate plus 50 basis points, plus in each case accrued and unpaid interest to the redemption date. If we elect to redeem these notes on or after three months before their maturity date, we will pay a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to the redemption date.
19
The terms of the indenture for these notes, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur certain liens, (ii) engage in sale and leaseback transactions, and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications.
$1.0 billion 5.125% Senior Notes due 2023
On May 6, 2021, we repaid in full our $1.0 billion 5.125% senior notes due 2023 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest to the redemption date.
$850 million 5% Senior Notes due 2029 and $600 million 5.25% Senior Notes due July 2031
On May 18, 2021, we issued $850 million in aggregate principal amount of 5% senior notes due 2029 and $600 million in aggregate principal amount of 5.25% senior notes due 2031. The net proceeds from these notes, together with cash and cash equivalents and borrowings under our first lien revolving credit facility, were used to fund the cash portion of the consideration for the acquisition of Cooper Tire and related transaction costs. These notes were sold at 100% of the principal amount and will mature on July 15, 2029 and 2031, respectively. These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior secured credit facilities described below.
We have the option to redeem these notes, in whole or in part, at any time prior to their maturity. If we elect to redeem these notes prior to three months before their maturity date, we will pay a redemption price equal to the greater of 100% of the principal amount of the notes redeemed and the sum of the present values of the remaining scheduled payments on the notes redeemed, discounted using a defined treasury rate plus 50 basis points, plus in each case accrued and unpaid interest to the redemption date. If we elect to redeem these notes on or after three months before their maturity date, we will pay a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to the redemption date.
The terms of the indenture for these notes, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur certain liens, (ii) engage in sale and leaseback transactions, and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications.
$136 million 7.625% Senior Notes due 2027 of Cooper Tire
Following the Cooper Tire acquisition, $117 million in aggregate principal amount of Cooper Tire's 7.625% senior notes due 2027 remain outstanding. These notes also include a $19 million fair value step-up, which will be amortized to interest expense over the remaining life of the notes. These notes will mature on March 15, 2027 and are unsecured senior obligations of Cooper Tire. These notes are not redeemable prior to maturity.
The terms of the indenture for these notes, among other things, limit the ability of Cooper Tire and certain of its subsidiaries to (i) incur certain liens, (ii) enter into certain sale/leaseback transactions and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets. These covenants are subject to significant exceptions and qualifications.
CREDIT FACILITIES
$2.75 billion Amended and Restated First Lien Revolving Credit Facility due 2026
On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026, increasing the amount of the facility to $2.75 billion, and including Cooper Tire's accounts receivable and inventory in the borrowing base for the facility. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points, based on our current liquidity as described below.
Our amended and restated first lien revolving credit facility is available in the form of loans or letters of credit. Up to $800 million in letters of credit and $50 million of swingline loans are available for issuance under the facility. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to $250 million.
Our obligations under the facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries, including, as of July 2, 2021, Cooper Tire and certain of its subsidiaries. Our obligations under the facility and our subsidiaries' obligations under the related guarantees are secured by first priority security interests in a variety of collateral. Based on our current liquidity, amounts drawn under this facility bear interest at LIBOR plus 125 basis points.
Availability under the facility is subject to a borrowing base, which is based on (i) eligible accounts receivable and inventory of The Goodyear Tire & Rubber Company and certain of its U.S. and Canadian subsidiaries, (ii) the value of our principal trademarks in an amount not to exceed $400 million, (iii) the value of eligible machinery and equipment, and (iv) certain cash in an amount not to exceed $275 million. To the extent that our eligible accounts receivable, inventory and other components of the borrowing base decline in value, our borrowing base will decrease and the availability under the facility may decrease below $2.75 billion. As of June 30, 2021,2022, our borrowing base, and therefore our availability, under this facility was $423108 million below the facility's stated amount of $2.75 billion.
20
The facility has customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2020. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
If Available Cash (as defined in the facility) plus the availability under the facility is greater than $750 million, amounts drawn under the facility will bear interest, at our option, at (i) 125 basis points over LIBOR or (ii) 25 basis points over an alternative base rate (the higher of (a) the prime rate, (b) the federal funds effective rate or the overnight bank funding rate plus 50 basis points or (c) LIBOR plus 100 basis points). If Available Cash plus the availability under the facility is equal to or less than $750 million, then amounts drawn under the facility will bear interest, at our option, at (i) 150 basis points over LIBOR or (ii) 50 basis points over an alternative base rate. Undrawn amounts under the facility will be subject to an annual commitment fee of 25 basis points.
At June 30, 2022, we had $570 million of borrowings and $3 million of letters of credit issued under the revolving credit facility. At December 31, 2021, we had 0 borrowings and $19 million of letters of credit issued under the revolving credit facility. At December 31, 2020, we had 0 borrowings and $11 million of letters of credit issued under the revolving credit facility.
Amended and Restated Second Lien Term Loan Facility due2025
Our amended and restated second lien term loan facility matures on March 7, 2025. The term loan bears interest, at our option, at (i) 200 basis points over LIBOR or (ii) 100 basis points over an alternative base rate (the higher of (a) the prime rate, (b) the federal funds effective rate or the overnight bank funding rate plus 50 basis points or (c) LIBOR plus 100 basis points). In addition, if the Total Leverage Ratio is equal to or less than 1.25 to 1.00, we have the option to further reduce the spreads described above by 25 basis points. "Total Leverage Ratio" has the meaning given it in the facility.
Our obligations under our second lien term loan facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries, including, as of July 2, 2021, Cooper Tire and certain of its subsidiaries, and are secured by second priority security interests in the same collateral securing the $2.75 billion first lien revolving credit facility.
At both June 30, 2021 and December 31, 2020, the amount outstanding under this facility was $400 million.
€800 million Amended and Restated Senior Secured European Revolving Credit Facility due 2024
Our amended and restated European revolving credit facility consists of (i) a €180 million German tranche that is available only to Goodyear Dunlop Tires Germany GmbH (“GDTG”) and (ii) a €620 million all-borrower tranche that is available to Goodyear Europe B.V. (“GEBV”("GEBV"), GDTGGoodyear Germany and Goodyear Dunlop Tires Operations S.A. Up to €175 million of swingline loans and €75 million in letters of credit are available for issuance under the all-borrower tranche. Amounts drawn under this facility will bear interest at LIBOR plus 150 basis points for loans denominated in U.S. dollars, or pounds sterling and EURIBOR plus 150 basis points for loans denominated in euros, and undrawnSONIA plus 150 basis points for loans denominated in pounds sterling. Undrawn amounts under the facility are subject to an annual commitment fee of 25 basis points.
GEBV and certain of its subsidiaries in the United Kingdom, Luxembourg, France and Germany provide guarantees to support the facility. The German guarantors secure the German tranche on a first-lien basis and the all-borrower tranche on a second-lien basis. GEBV and its other subsidiaries that provide guarantees secure the all-borrower tranche on a first-lien basis and generally do not provide collateral support for the German tranche. The Company and its U.S. and Canadian subsidiaries that guarantee our U.S. senior securedfirst lien revolving credit facilitiesfacility described above also provide unsecured guarantees in support of the facility.
The facility has customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2018. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
At both June 30, 20212022, there were 0 borrowings outstanding under the German tranche, $310 million (€298 million) of borrowings outstanding under the all-borrower tranche and0 letters of credit outstanding under the European revolving credit facility. At December 31, 2020, there were2021, we had 0 borrowings and 0 letters of credit outstanding under the European revolving credit facility.
17
Accounts Receivable Securitization Facilities (On-Balance Sheet)
GEBV and certain other of our European subsidiaries are parties to a pan-European accounts receivable securitization facility that expires in 2023.2027. The terms of the facility provide the flexibility to designate annually the maximum amount of funding available under the facility in an amount of not less than €30 million and not more than €450 million. For the period from October 16, 202019, 2021 through October 18, 2021,19, 2022, the designated maximum amount of the facility is €280300 million.
The facility involves thean ongoing daily sale of substantially all of the trade accounts receivable of certain GEBV subsidiaries. These subsidiaries retain servicing responsibilities. Utilization under this facility is based on eligible receivable balances.
The funding commitments under the facility will expire upon the earliest to occur of: (a) September 26, 2023,October 19, 2027, (b) the non-renewal and expiration (without substitution) of all of the back-up liquidity commitments, (c) the early termination of the facility
21
according to its terms (generally upon an Early Amortisation Event (as defined in the facility), which includes, among other things, events similar to the events of default under our senior securedfirst lien revolving credit facilities;facility; certain tax law changes; or certain changes to law, regulation or accounting standards), or (d) our request for early termination of the facility. The facility’s current back-up liquidity commitments will expire on October 18, 2021.19, 2022.
At June 30, 2021,2022, the amounts available and utilized under this program totaled $246 million (€207237 million). At December 31, 2020,2021, the amounts available and utilized under this program totaled $291279 million (€237246 million). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Finance Leases.
For a description of the collateral securing the credit facilities described above as well as the covenants applicable to them, refer to Note to the Consolidated Financial Statements No. 15,16, Financing Arrangements and Derivative Financial Instruments, in our 20202021 Form 10-K.
Accounts Receivable Factoring Facilities (Off-Balance Sheet)
We have sold certain of our trade receivables under off-balance sheet programs. For these programs, we have concluded that there is generally no risk of loss to us from non-payment of the sold receivables. At June 30, 2021,2022, the gross amount of receivables sold was $518597 million, compared to $451605 million at December 31, 2020. The increase from December 31, 2020 is primarily due to the addition of Cooper Tire's off-balance sheet factoring programs.2021.
Other Foreign Credit Facilities
A Mexican subsidiary and a U.S. subsidiary have a revolving credit facility in Mexico. At June 30, 2021,2022, the amounts available and utilized under this facility were $200 million. At December 31, 2020,2021, the amounts available and utilized under this facility were $200 million and $152158 million, respectively. The facility ultimately matures in 2022,on November 22, 2024, has covenants relating to the Mexican and U.S. subsidiary, and has customary representations and warranties and defaults relating to the Mexican and U.S. subsidiary’s ability to perform its respective obligations under the facility.
A Chinese subsidiary has several financing arrangements in China. At June 30, 20212022 and December 31, 2020,2021, the amounts available under these facilities were $931812 million and $981958 million, respectively. At June 30, 2021,2022, the amount utilized under these facilities was $410358 million, of which $9664 million represented notes payable and $314294 million represented long term debt. At June 30, 2021,2022, $90154 million of the long term debt was due within aone year. At December 31, 2020,2021, the amount utilized under these facilities was $375365 million, of which $16332 million represented notes payable and $212333 million represented long term debt. At December 31, 2020,2021, $13124 million of the long term debt was due within aone year. The facilities contain covenants relating to the Chinese subsidiary and have customary representations and warranties and defaults relating to the Chinese subsidiary’s ability to perform its obligations under the facilities. Certain of the facilities can only be used to finance the expansion of one of our manufacturing facilityfacilities in China and, at June 30, 20212022 and December 31, 2020,2021, the unused amounts available under these facilities were $8986 million and $9981 million, respectively. Following the Cooper Tire acquisition, twothree of Cooper Tire's Chinese credit facilities remain outstanding. The amountAt June 30, 2022, the amounts available and utilized under these facilities waswere $2945 million and they$7 million, respectively. At December 31, 2021, the amounts available and utilized under these facilities were not utilized as of June 30, 2021.$75 million and $5 million, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS
We utilize derivative financial instrument contracts and nonderivative instruments to manage interest rate, foreign exchange and commodity price risks. We have established a control environment that includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. We do not hold or issue derivative financial instruments for trading purposes.
Foreign Currency Contracts
We enter into foreign currency contracts in order to manage the impact of changes in foreign exchange rates on our consolidated results of operations and future foreign currency-denominated cash flows. These contracts may be used to reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted
18
transactions resulting primarily from trade purchases and sales, equipment acquisitions, intercompany loans and royalty agreements. Contracts hedging short term trade receivables and payables normally have no hedging designation.
The following table presents the fair values for foreign currency hedge contracts that do not meet the criteria to be accounted for as cash flow hedging instruments:
|
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Fair Values — Current asset (liability): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable |
| $ | 21 |
| $ | 1 |
|
| $ | 27 |
|
| $ | 9 |
| |
Other current liabilities |
| (4 | ) |
| (27 | ) |
|
| (2 | ) |
|
| (4 | ) |
22
At June 30, 20212022 and December 31, 2020,2021, these outstanding foreign currency derivatives had notional amounts of $1,3351,228 million and $1,664993 million, respectively, and were primarily related to intercompany loans. Other (Income) Expense included net transaction gains on derivatives of $24 million and $34 million for the three and six months ended June 30, 2022, respectively. Other (Income) Expense included net transaction losses on derivatives of $14 million and net transaction gains on derivatives of $41 million for the three and six months ended June 30, 2021, respectively. Other (Income) Expense included net transaction losses on derivatives of $41 million and $3 million for the three and six months ended June 30, 2020, respectively. These amounts were substantially offset in Other (Income) Expense by the effect of changing exchange rates on the underlying currency exposures.
The following table presents fair values for foreign currency hedge contracts that meet the criteria to be accounted for as cash flow hedging instruments:
|
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Fair Values — Current asset (liability): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable |
| $ | 2 |
|
| $ | 1 |
| ||||||||
Other current liabilities |
| $ | (2 | ) |
| $ | (7 | ) |
|
| (1 | ) |
|
| (1 | ) |
At June 30, 20212022 and December 31, 2020,2021, these outstanding foreign currency derivatives had notional amounts of $4870 million and $5063 million, respectively, and primarily related to U.S. dollar denominated intercompany transactions. Based on our current forecasts, including the expected ongoing impacts of the COVID-19 pandemic, we believe that it is probable that the underlying hedge transactions will occur within an appropriate time frame in order to continue to qualify for cash flow hedge accounting treatment.
We enter into master netting agreements with counterparties. The amounts eligible for offset under the master netting agreements are not material and we have elected a gross presentation of foreign currency contracts in the Consolidated Balance Sheets.
The following table presents the classification of changes in fair values of foreign currency contracts that meet the criteria to be accounted for as cash flow hedging instruments (before tax and minority):
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Amount of gains (losses) deferred to Accumulated Other Comprehensive Loss ("AOCL") |
| $ | (1 | ) |
| $ | (3 | ) |
| $ | 0 |
| $ | 20 |
|
| $ | 3 |
|
| $ | (1 | ) |
| $ | 1 |
|
| $ | 0 |
| |
Reclassification adjustment for amounts recognized in CGS |
| 0 |
| (4 | ) |
| (2 | ) |
|
| (8 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (1 | ) |
|
| (2 | ) |
The estimated net amount of deferred gains at June 30, 20212022 that are expected to be reclassified to earnings within the next twelve months is $12 million.
The counterparties to our foreign currency contracts were considered by us to be substantial and creditworthy financial institutions that were recognized market makers at the time we entered into those contracts. We seek to control our credit exposure to these counterparties by diversifying across multiple counterparties, by setting counterparty credit limits based on long term credit ratings and other indicators of counterparty credit risk such as credit default swap spreads, and by monitoring the financial strength of these counterparties on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to counterparties in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a counterparty. However, the inability of a counterparty to fulfill its contractual obligations to us could have a material adverse effect on our liquidity, financial position or results of operations in the period in which it occurs.
2319
NOTE 10. FAIR VALUE MEASUREMENTS
The following table presents information about assets and liabilities recorded at fair value on the Consolidated Balance Sheets at June 30, 20212022 and December 31, 2020:2021:
|
| Total Carrying Value |
|
| Quoted Prices in Active |
|
| Significant Other |
|
| Significant |
|
| Total Carrying Value |
|
| Quoted Prices in Active |
|
| Significant Other |
|
| Significant |
| ||||||||||||||||||||||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Investments |
| $ | 20 |
| $ | 11 |
| $ | 20 |
| $ | 11 |
| $ | 0 |
| $ | 0 |
| $ | 0 |
| $ | 0 |
|
| $ | 8 |
|
| $ | 10 |
|
| $ | 8 |
|
| $ | 10 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
| |||||||
Foreign Exchange Contracts |
|
| 21 |
|
|
| 1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 21 |
|
|
| 1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 29 |
|
|
| 10 |
|
|
| 0 |
|
|
| 0 |
|
|
| 29 |
|
|
| 10 |
|
|
| 0 |
|
|
| 0 |
|
Total Assets at Fair Value |
| $ | 41 |
|
| $ | 12 |
|
| $ | 20 |
|
| $ | 11 |
|
| $ | 21 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 37 |
|
| $ | 20 |
|
| $ | 8 |
|
| $ | 10 |
|
| $ | 29 |
|
| $ | 10 |
|
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Foreign Exchange Contracts |
| $ | 6 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 6 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3 |
|
| $ | 5 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3 |
|
| $ | 5 |
|
| $ | 0 |
|
| $ | 0 |
|
Total Liabilities at Fair Value |
| $ | 6 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 6 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3 |
|
| $ | 5 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3 |
|
| $ | 5 |
|
| $ | 0 |
|
| $ | 0 |
|
The following table presents supplemental fair value information about long term fixed rate and variable rate debt, excluding finance leases, at June 30, 20212022 and December 31, 2020:2021:
|
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Fixed Rate Debt:(1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Carrying amount — liability |
| $ | 5,632 |
| $ | 4,094 |
|
| $ | 5,682 |
|
| $ | 5,781 |
| |
Fair value — liability |
| 5,924 |
| 4,283 |
|
|
| 5,081 |
|
|
| 6,149 |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Variable Rate Debt:(1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Carrying amount — liability |
| $ | 1,622 |
| $ | 1,240 |
|
| $ | 1,946 |
|
| $ | 955 |
| |
Fair value — liability |
| 1,617 |
| 1,197 |
|
|
| 1,887 |
|
|
| 955 |
|
Long term debt with fair values of $6,0704,899 million and $4,3915,905 million at June 30, 20212022 and December 31, 2020,2021, respectively, were estimated using quoted Level 1 market prices. The carrying value of the remaining long term debt approximateswas based upon internal estimates of fair value since the terms of financing agreements arederived from market prices for similar to terms that could be obtained under current lending conditions.debt.
NOTE 11. PENSION, SAVINGS AND OTHER POSTRETIREMENT BENEFIT PLANS
We provide employees with defined benefit pension or defined contribution savings plans.
Defined benefit pension cost follows:
|
| U.S. |
|
| U.S. |
|
| U.S. |
|
| U.S. |
| ||||||||||||||||||||
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||||||
|
| June 30, |
| June 30, |
|
| June 30, |
| June 30, |
| ||||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Service cost |
| $ | 2 |
| $ | 1 |
| $ | 3 |
| $ | 2 |
|
| $ | 4 |
|
| $ | 2 |
|
| $ | 7 |
|
| $ | 3 |
| |||
Interest cost |
| 22 |
| 32 |
| 42 |
| 65 |
|
|
| 29 |
|
|
| 22 |
|
|
| 60 |
|
|
| 42 |
| |||||||
Expected return on plan assets |
| (46 | ) |
| (48 | ) |
| (88 | ) |
| (97 | ) |
|
| (53 | ) |
|
| (46 | ) |
|
| (105 | ) |
|
| (88 | ) | ||||
Amortization of net losses |
|
| 26 |
|
|
| 28 |
|
|
| 54 |
|
|
| 55 |
|
|
| 25 |
|
|
| 26 |
|
|
| 51 |
|
|
| 54 |
|
Net periodic pension cost |
| $ | 4 |
| $ | 13 |
| $ | 11 |
| $ | 25 |
|
| $ | 5 |
|
| $ | 4 |
|
| $ | 13 |
|
| $ | 11 |
| |||
Net curtailments/settlements/termination benefits |
|
| 19 |
|
|
| 6 |
|
|
| 19 |
|
|
| 7 |
|
|
| 18 |
|
|
| 19 |
|
|
| 18 |
|
|
| 19 |
|
Total defined benefit pension cost |
| $ | 23 |
|
| $ | 19 |
|
| $ | 30 |
|
| $ | 32 |
|
| $ | 23 |
|
| $ | 23 |
|
| $ | 31 |
|
| $ | 30 |
|
2420
|
| Non-U.S. |
|
| Non-U.S. |
|
| Non-U.S. |
|
| Non-U.S. |
| ||||||||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Service cost |
| $ | 8 |
| $ | 7 |
| $ | 15 |
| $ | 14 |
|
| $ | 6 |
|
| $ | 8 |
|
| $ | 12 |
|
| $ | 15 |
| |||
Interest cost |
| 11 |
| 14 |
| 22 |
| 28 |
|
|
| 16 |
|
|
| 11 |
|
|
| 32 |
|
|
| 22 |
| |||||||
Expected return on plan assets |
| (12 | ) |
| (13 | ) |
| (22 | ) |
| (27 | ) |
|
| (17 | ) |
|
| (12 | ) |
|
| (35 | ) |
|
| (22 | ) | ||||
Amortization of prior service cost |
| 1 |
| 0 |
| 1 |
| 1 |
|
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
|
| 1 |
| |||||||
Amortization of net losses |
|
| 9 |
|
|
| 9 |
|
|
| 17 |
|
|
| 19 |
|
|
| 5 |
|
|
| 9 |
|
|
| 11 |
|
|
| 17 |
|
Net periodic pension cost |
| $ | 17 |
| $ | 17 |
| $ | 33 |
| $ | 35 |
| |||||||||||||||||||
Net curtailments/settlements/termination benefits |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
| ||||||||||||||||
Total defined benefit pension cost |
| $ | 17 |
|
| $ | 17 |
|
| $ | 33 |
|
| $ | 36 |
|
| $ | 11 |
|
| $ | 17 |
|
| $ | 21 |
|
| $ | 33 |
|
The net funded (unfunded) status of Cooper Tire's defined benefit pension plans at the Closing Date was $12 million and $(62) million for their U.S. plans and non-U.S. plans, respectively. The net unfunded status of Cooper Tire's U.S. other postretirement benefits plan at the Closing Date was $(215) million.
Service cost is recorded in CGS or SAG. Other components of net periodic pension cost are recorded in Other (Income) Expense. Net curtailments, settlements and termination benefits, if any, are recorded in Other (Income) Expense or Rationalizations if related to a rationalization plan.
In the second quarter and first six months of 2022 and 2021, pension settlement charges of $19 million were recorded in Other (Income) Expense.
In the second quarter and first six months of 2020, pension settlement charges of $118 million and $319 million, respectively, were recorded in Other (Income) ExpenseExpense. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans.
In the first quarter of 2022, we communicated the termination of a Cooper Tire U.S. salaried defined benefit pension plan, which was frozen in 2009, to applicable participants. The termination benefits charge of the plan, which had $5416 million was recorded in Rationalizations, relatedassets and $403 million in estimated obligations on a termination accounting basis as of June 30, 2022, is expected to be completed in the exitfirst half of employees under an approved rationalization plan.2023.
We also provide certain U.S. employees and employees at certain non-U.S. subsidiaries with health care benefits or life insurance benefits upon retirement. Other postretirement benefits expense for the three months ended June 30, 2022 and 2021 was $4 million and 2020 was $1 million, respectively, and $2 million, respectively.Other postretirement benefits expense (credit) for the six months ended June 30, 2022 and 2021 was $8 million and 2020 was $3 million, and $(respectively.1) million, respectively. The six months ended June 30, 2020 included a curtailment credit of $4 million in Rationalizations, related to the exit of employees under an approved rationalization plan.
We expect to contribute $5025 million to $7550 million to our funded non-U.S. pension plans in 2021.2022. For the three and six months ended June 30, 2021,2022, we contributed $58 million and $717 million, respectively, to our non-U.S. plans.
The expense recognized for our contributions to defined contribution savings plans for the three months ended June 30, 20212022 and 20202021 was $2731 million and $2027 million, respectively, and for the six months ended June 30, 2022 and 2021 was $66 million and 2020 was $55 million, and $respectively.50 million, respectively.
NOTE 12. STOCK COMPENSATION PLANS
Stock based awards are made pursuant to stock compensation plans that are approved by our shareholders. The 2022 Performance Plan was adopted by our shareholders on April 11, 2022 and will expire on February 28, 2032 unless earlier terminated. The 2022 Performance Plan replaced the 2017 Performance Plan, which was terminated on April 11, 2022, except with respect to outstanding awards.
Our Board of Directors granted 0.6 million restricted stock units and 0.10.4 million performance share units during the six months ended June 30, 20212022 under our stock compensation plans. We measure the fair value of grants of restricted stock units and performance share units based primarily on the closing market price of a share of our common stock on the date of the grant, modified as appropriate to take into account the features of such grants. The weighted average fair value per share was $16.3415.66 for restricted stock units and $19.2115.60 for performance share units granted during the six months ended June 30, 2021.2022.
We recognized stock-based compensation expense of $8 million and $13 million during the three and six months ended June 30, 2022, respectively. At June 30, 2022, unearned compensation cost related to the unvested portion of all stock-based awards was approximately $39 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of 2025. We recognized stock-based compensation of $7 million and $11 million during the three and six months ended June 30, 2021, respectively. At June 30, 2021, unearned compensation cost related to the unvested portion of all stock-based awards was approximately $26 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of 2024. We recognized stock-based compensation expense of $8 million and $14 million during the three and six months ended June 30, 2020, respectively.
25
21
NOTE 13. COMMITMENTS AND CONTINGENT LIABILITIES
Environmental Matters
We have recorded liabilities totaling $71 million and $6480 million at both June 30, 20212022 and December 31, 2020, respectively,2021 for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by us. Of these amounts, $2119 million and $1621 million were included in Other Current Liabilities at June 30, 20212022 and December 31, 2020,2021, respectively. The costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities, and will be paid over several years. The amount of our ultimate liability in respect of these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute. We have limited potential insurance coverage for future environmental claims.
Since many of the remediation activities related to environmental matters vary substantially in duration and cost from site to site and the associated costs for each vary depending on the mix of unique site characteristics, in some cases we cannot reasonably estimate a range of possible losses. Although it is not possible to estimate with certainty the outcome of all of our environmental matters, management believes that potential losses in excess of current reserves for environmental matters, individually and in the aggregate, will not have a material adverse effect on our financial position, cash flows or results of operations.
Workers’ Compensation
We have recorded liabilities, on a discounted basis, totaling $202195 million and $196194 million for anticipated costs related to workers’ compensation at June 30, 20212022 and December 31, 2020,2021, respectively. Of these amounts, $34 million and $2938 million were included in Current Liabilities as part of Compensation and Benefits at June 30, 20212022 and December 31, 2020,2021, respectively. The costs include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on our assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and current cost trends. The amount of our ultimate liability in respect of these matters may differ from these estimates. We periodically, and at least annually, update our loss development factors based on actuarial analyses. At June 30, 20212022 and December 31, 2020,2021, the liability was discounted using a risk-free rate of return. At June 30, 2021,2022, we estimate that it is reasonably possible that the liability could exceed our recorded amounts by approximately $25 million.
General and Product Liability and Other Litigation
We have recorded liabilities totaling $395407 million and $285390 million, including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at June 30, 20212022 and December 31, 2020,2021, respectively. The increase from December 31, 2020 was primarily due to the acquisition of Cooper Tire. Of these amounts, $5638 million and $3841 million were included in Other Current Liabilities at June 30, 20212022 and December 31, 2020,2021, respectively. The amounts recorded were estimated based on an assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and, where available, recent and current trends. Based upon that assessment, at June 30, 2021,2022, we do not believe that estimated reasonably possible losses associated with general and product liability claims in excess of the amounts recorded will have a material adverse effect on our financial position, cash flows or results of operations. However, the amount of our ultimate liability in respect of these matters may differ from these estimates.
We have recorded an indemnification asset within Accounts Receivable of $1 million and within Other Assets of $2319 million for Sumitomo Rubber Industries, Ltd.'s ("SRI") obligation to indemnify us for certain product liability claims related to products manufactured by a formerly consolidated joint venture entity, subject to certain caps and restrictions.
Asbestos. We are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to asbestos in certain products manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in state and federal courts. To date, we have disposed of approximately 154,900156,200 claims by defending, obtaining the dismissal thereof, or entering into a settlement. The sum of our accrued asbestos-related liability and gross payments to date, including legal costs, by us and our insurers totaled approximately $568569 million through June 30, 20212022 and $563560 million through December 31, 2020.2021.
2622
A summary of recent approximate asbestos claims activity follows. Because claims are often filed and disposed of by dismissalsettlement or settlementdismissal in large numbers, the amount and timing of filings, settlements and dismissals and the number of open claims during a particular period can fluctuate significantly.
|
| Six Months Ended |
|
| Year Ended |
|
| Six Months Ended |
|
| Year Ended |
| ||||
(Dollars in millions) |
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||
Pending claims, beginning of period |
| 38,700 |
| 39,600 |
|
|
| 38,200 |
|
|
| 38,700 |
| |||
New claims filed |
| 500 |
| 1,100 |
|
|
| 500 |
|
|
| 1,000 |
| |||
Claims settled/dismissed |
|
| (700 | ) |
|
| (2,000 | ) |
|
| (500 | ) |
|
| (1,500 | ) |
Pending claims, end of period |
|
| 38,500 |
|
|
| 38,700 |
|
|
| 38,200 |
|
|
| 38,200 |
|
Payments(1) |
| $ | 7 |
|
| $ | 13 |
|
| $ | 8 |
|
| $ | 15 |
|
We periodically, and at least annually, review our existing reserves for pending claims, including a reasonable estimate of the liability associated with unasserted asbestos claims, and estimate our receivables from probable insurance recoveries. We recorded gross liabilities for both asserted and unasserted claims, inclusive of defense costs, totaling $147132 million and $149131 million at June 30, 20212022 and December 31, 2020,2021, respectively. In determining the estimate of our asbestos liability, we evaluated claims over the next ten-year period. Due to the difficulties in making these estimates, analysis based on new data and/or a change in circumstances arising in the future may result in an increase in the recorded obligation, and that increase could be significant.
We maintain certain primary and excess insurance coverage under coverage-in-place agreements, and also have additional excess liability insurance with respect to asbestos liabilities. After consultation with our outside legal counsel and giving consideration to agreements with certain of our insurance carriers, the financial viability and legal obligations of our insurance carriers and other relevant factors, we determine an amount we expect is probable of recovery from such carriers. We record a receivable with respect to such policies when we determine that recovery is probable and we can reasonably estimate the amount of a particular recovery.
We recorded an insurance receivable related to asbestos claims of $88 million and $9077 million at both June 30, 20212022 and December 31, 2020, respectively.2021. We expect that approximately 60% of asbestos claim related losses would be recoverable through insurance during the ten-year period covered by the estimated liability. Of these amounts, $1312 million was included in Current Assets as part of Accounts Receivable at both June 30, 20212022 and December 31, 2020.2021. The recorded receivable consists of an amount we expect to collect under coverage-in-place agreements with certain primary and excess insurance carriers as well as an amount we believe is probable of recovery from certain of our other excess insurance carriers.
We believe that, at December 31, 2020,2021, we had approximately $550540 million in excess level policy limits applicable to indemnity and defense costs for asbestos products claims under coverage-in-place agreements. We also had additional unsettled excess level policy limits potentially applicable to such costs. In addition, we had coverage under certain primary policies for indemnity and defense costs for asbestos products claims under remaining aggregate limits pursuant to a coverage-in-place agreement, as well as coverage for indemnity and defense costs for asbestos premises claims pursuant to coverage-in-place agreements.
With respect to both asserted and unasserted claims, it is reasonably possible that we may incur a material amount of cost in excess of the current reserve; however, such amounts cannot be reasonably estimated. Coverage under insurance policies is subject to varying characteristics of asbestos claims including, but not limited to, the type of claim (premise vs. product exposure), alleged date of first exposure to our products or premises and disease alleged. Recoveries may also be limited by insurer insolvencies or financial difficulties. Depending upon the nature of these characteristics or events, as well as the resolution of certain legal issues, some portion of the insurance may not be accessible by us.
Amiens Labor Claims
Approximately 850 former employees of the closed Amiens, France manufacturing facility have asserted wrongful termination or other claims totaling approximately €140 million ($166 million) against Goodyear France SAS. On May 28, 2020, Goodyear France SAS received a judgment from the labor court with respect to approximately 790 of these former employees. As a result of this ruling and settlement discussions to resolve these claims and other similar claims, we recognized €27 million ($30 million), primarily in 2020, for estimated additional termination benefits. During the first quarter of 2021, we reached settlement agreements with substantially all of the former employees and are filing appropriate proceedings with the labor court to conclude the related legal proceedings.We will continue to defend ourselves against any remaining claims and any additional claims that may be asserted against us.
27
Other Actions
We are currently a party to various claims, indirect tax assessments and legal proceedings in addition to those noted above. If management believes that a loss arising from these matters is probable and can reasonably be estimated, we record the amount of the loss, or the minimum estimated liability when the loss is estimated using a range and no point within the range is more probable than another. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Based on currently available information, management believes that the ultimate outcome of these matters, individually and in the aggregate, will not have a material adverse effect on our financial position or overall trends in results of operations.
Our recorded liabilities and estimates of reasonably possible losses for the contingent liabilities described above are based on our assessment of potential liability using the information available to us at the time and, where applicable, any past experience and recent and current trends with respect to similar matters. Our contingent liabilities are subject to inherent uncertainties, and unfavorable judicial or administrative decisions could occur which we did not anticipate. Such an unfavorable decision could
23
include monetary damages, fines or other penalties or an injunction prohibiting us from taking certain actions or selling certain products. If such an unfavorable decision were to occur, it could result in a material adverse impact on our financial position and results of operations in the period in which the decision occurs or in future periods.
Tax Matters
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We also recognize income tax benefits to the extent that it is more likely than not that our positions will be sustained when challenged by the taxing authorities. We derecognize income tax benefits when based on new information we determine that it is no longer more likely than not that our position will be sustained. To the extent we prevail in matters for which liabilities have been established, or determine we need to derecognize tax benefits recorded in prior periods, our results of operations and effective tax rate in a given period could be materially affected. An unfavorable tax settlement would require use of our cash, and lead to recognition of expense to the extent the settlement amount exceeds recorded liabilities and, in the case of an income tax settlement, result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement would be recognized as a reduction of expense to the extent the settlement amount is lower than recorded liabilities and, in the case of an income tax settlement, would result in a reduction in our effective tax rate in the period of resolution.
While the Company applies consistent transfer pricing policies and practices globally, supports transfer prices through economic studies, seeks advance pricing agreements and joint audits to the extent possible and believes its transfer prices to be appropriate, such transfer prices, and related interpretations of tax laws, are occasionally challenged by various taxing authorities globally. We have received various tax assessments challenging our interpretations of applicable tax laws in various jurisdictions. Although we believe we have complied with applicable tax laws, have strong positions and defenses and have historically been successful in defending such claims, our results of operations could be materially adversely affected in the case we are unsuccessful in the defense of existing or future claims.
Binding Commitments and Guarantees
We have off-balance sheet financial guarantees and other commitments totaling $85 million and $7334 million at both June 30, 20212022 and December 31, 2020, respectively.2021. We issue guarantees to financial institutions or other entities on behalf of certain of our affiliates, lessors or customers. We generally do not require collateral in connection with the issuance of these guarantees.
In 2017, we issued a guarantee of approximately PLN165 million ($43 million) in connection with an indirect tax assessment in EMEA. This guarantee amount was subsequently increased to PLN181 million ($48 million). We have concluded our performance under this guarantee is not probable and, therefore, have not recorded a liability for this guarantee. In 2015, as a result of the dissolution of the global alliance with SRI, we issued a guarantee of $46 million to an insurance company related to SRI's obligation to pay certain outstanding workers' compensation claims of a formerly consolidated joint venture entity. As of June 30, 2021,2022, this guarantee amount has been reduced to $2320 million. We have concluded the probability of our performance to be remote and, therefore, have not recorded a liability for this guarantee. While there is no fixed duration of this guarantee, we expect the amount of this guarantee to continue to decrease over time as the formerly consolidated joint venture entity pays its outstanding claims.
If our performance under these guarantees is triggered by non-payment or another specified event, we would be obligated to make payment to the financial institution or the other entity, and would typically have recourse to the affiliate, lessor, customer or SRI. Except for the workers' compensation guarantee described above, the guarantees expire at various times
28
through 2021. We are unable to estimate the extent to which our affiliates’, lessors’, customers’, or SRI's assets would be adequate to recover any payments made by us under the related guarantees.
We have an agreement to provide a revolving loan commitment to TireHub, LLC of up to $100 million. At June 30, 2022, $25 million was drawn on this commitment. At December 31, 2021, 0 funds were drawn on this commitment.
NOTE 14. CAPITAL STOCK
Dividends
In the first six months of 2020, we paid cash dividends of $37 million on our common stock, all of which was paid in the first quarter of 2020. This amount excludes dividends earned on stock-based compensation plans of approximately $1 million. On April 16, 2020, we announced that we have suspended the quarterly dividend on our common stock.
Common Stock Repurchases
We may repurchase shares delivered to us by employees as payment for the exercise price of stock options and the withholding taxes due upon the exercise of stock options or the vesting or payment of stock awards. During the first six monthsmonth of 2021,2022, we did 0t repurchase any shares from employees.
Cooper Tire Acquisition
In connection with the acquisition of Cooper Tire, we issued 46,060,349 shares of common stock. Refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition.
2924
NOTE 15. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables present changes in AOCL, by component, for the six months ended June 30, 20212022 and 2020,2021, after tax and minority interest.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(In millions) Income (Loss) |
| Foreign |
|
| Unrealized Gains (Losses) from Securities |
|
| Unrecognized |
|
| Deferred |
|
| Total |
| |||||
Balance at December 31, 2020 |
| $ | (1,284 | ) |
| $ | 0 |
|
| $ | (2,856 | ) |
| $ | 5 |
|
| $ | (4,135 | ) |
Other comprehensive income (loss) before |
|
| 2 |
|
|
| 8 |
|
|
| 16 |
|
|
| 0 |
|
|
| 26 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
| 0 |
|
|
| — |
|
|
| 68 |
|
|
| (2 | ) |
|
| 66 |
|
Balance at June 30, 2021 |
| $ | (1,282 | ) |
| $ | 8 |
|
| $ | (2,772 | ) |
| $ | 3 |
|
| $ | (4,043 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(In millions) Income (Loss) |
| Foreign |
|
| Unrecognized |
|
| Deferred |
|
| Total |
| ||||
Balance at December 31, 2021 |
| $ | (1,402 | ) |
| $ | (2,565 | ) |
| $ | 4 |
|
| $ | (3,963 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (169 | ) |
|
| 14 |
|
|
| 1 |
|
|
| (154 | ) |
Amounts reclassified from accumulated other comprehensive loss |
|
| 0 |
|
|
| 61 |
|
|
| (1 | ) |
|
| 60 |
|
Balance at June 30, 2022 |
| $ | (1,571 | ) |
| $ | (2,490 | ) |
| $ | 4 |
|
| $ | (4,057 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(In millions) Income (Loss) |
| Foreign |
|
| Unrecognized |
|
| Deferred |
|
| Total |
| ||||
Balance at December 31, 2019 |
| $ | (1,156 | ) |
| $ | (2,983 | ) |
| $ | 3 |
|
| $ | (4,136 | ) |
Other comprehensive income (loss) before |
|
| (223 | ) |
|
| (9 | ) |
|
| 19 |
|
|
| (213 | ) |
Amounts reclassified from accumulated other |
|
| 0 |
|
|
| 55 |
|
|
| (8 | ) |
|
| 47 |
|
Balance at June 30, 2020 |
| $ | (1,379 | ) |
| $ | (2,937 | ) |
| $ | 14 |
|
| $ | (4,302 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(In millions) Income (Loss) |
| Foreign |
|
| Unrealized Gains (Losses) from Securities |
|
| Unrecognized |
|
| Deferred |
|
| Total |
| |||||
Balance at December 31, 2020 |
| $ | (1,284 | ) |
| $ | 0 |
|
| $ | (2,856 | ) |
| $ | 5 |
|
| $ | (4,135 | ) |
Other comprehensive income (loss) before |
|
| 2 |
|
|
| 8 |
|
|
| 16 |
|
|
| 0 |
|
|
| 26 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
| 0 |
|
|
| 0 |
|
|
| 68 |
|
|
| (2 | ) |
|
| 66 |
|
Balance at June 30, 2021 |
| $ | (1,282 | ) |
| $ | 8 |
|
| $ | (2,772 | ) |
| $ | 3 |
|
| $ | (4,043 | ) |
The following table presents reclassifications out of AOCL:
|
| Three Months Ended |
| Six Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
|
| ||||||||
(In millions) (Income) Expense |
| Amount Reclassified |
| Amount Reclassified |
| Affected Line Item in the Consolidated |
| Amount Reclassified |
| Amount Reclassified |
| Affected Line Item in the Consolidated | ||||||||||||||||||||||||
Component of AOCL |
| from AOCL |
|
| from AOCL |
|
| Statements of Operations |
| from AOCL |
|
| from AOCL |
|
| Statements of Operations | ||||||||||||||||||||
Amortization of prior service cost and |
| $ | 34 |
| $ | 36 |
| $ | 70 |
| $ | 72 |
| Other (Income) Expense |
| $ | 31 |
|
| $ | 34 |
|
| $ | 63 |
|
| $ | 70 |
|
| Other (Income) Expense | ||||
Immediate recognition of prior service cost |
|
| 19 |
|
|
| 1 |
|
|
| 19 |
|
|
| (1 | ) |
| Other (Income) Expense / Rationalizations |
|
| 18 |
|
|
| 19 |
|
|
| 18 |
|
|
| 19 |
|
| Other (Income) Expense / Rationalizations |
Unrecognized net actuarial losses and |
| 53 |
| 37 |
| 89 |
| 71 |
|
|
| 49 |
|
|
| 53 |
|
|
| 81 |
|
|
| 89 |
|
| ||||||||||
Tax effect |
|
| (12 | ) |
|
| (8 | ) |
|
| (21 | ) |
|
| (16 | ) |
| United States and Foreign Taxes |
|
| (12 | ) |
|
| (12 | ) |
|
| (20 | ) |
|
| (21 | ) |
| United States and Foreign Taxes |
Net of tax |
| $ | 41 |
| $ | 29 |
| $ | 68 |
| $ | 55 |
| Goodyear Net Income (Loss) |
| $ | 37 |
|
| $ | 41 |
|
| $ | 61 |
|
| $ | 68 |
|
| Goodyear Net Income | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred derivative (gains) losses, before tax |
| $ | 0 |
| $ | (4 | ) |
| $ | (2 | ) |
| $ | (8 | ) |
| Cost of Goods Sold |
| $ | 0 |
|
| $ | 0 |
|
| $ | (1 | ) |
| $ | (2 | ) |
| Cost of Goods Sold | |
Tax effect |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| United States and Foreign Taxes |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| United States and Foreign Taxes |
Net of tax |
| $ | 0 |
|
| $ | (4 | ) |
| $ | (2 | ) |
| $ | (8 | ) |
| Goodyear Net Income (Loss) |
| $ | 0 |
|
| $ | 0 |
|
| $ | (1 | ) |
| $ | (2 | ) |
| Goodyear Net Income |
Total reclassifications |
| $ | 41 |
|
| $ | 25 |
|
| $ | 66 |
|
| $ | 47 |
|
| Goodyear Net Income (Loss) |
| $ | 37 |
|
| $ | 41 |
|
| $ | 60 |
|
| $ | 66 |
|
| Goodyear Net Income |
The following table presents the details of comprehensive income (loss) attributable to minority shareholders:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net Income (Loss) Attributable to Minority Shareholders |
| $ | 4 |
|
| $ | (7 | ) |
| $ | 10 |
|
| $ | (5 | ) |
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation |
|
| (1 | ) |
|
| 0 |
|
|
| (8 | ) |
|
| (9 | ) |
Comprehensive Income (Loss) Attributable to Minority Shareholders |
| $ | 3 |
|
| $ | (7 | ) |
| $ | 2 |
|
| $ | (14 | ) |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net Income Attributable to Minority Shareholders |
| $ | 4 |
|
| $ | 4 |
|
| $ | 4 |
|
| $ | 10 |
|
Other Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation |
|
| (7 | ) |
|
| (1 | ) |
|
| (15 | ) |
|
| (8 | ) |
Comprehensive Income (loss) Attributable to Minority Shareholders |
| $ | (3 | ) |
| $ | 3 |
|
| $ | (11 | ) |
| $ | 2 |
|
3025
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
All per share amounts are diluted and refer to Goodyear net income (loss).income.
OVERVIEW
The Goodyear Tire & Rubber Company is one of the world’s leading manufacturers of tires, with one of the most recognizable brand names in the world and operations in most regions of the world. We have a broad global footprint with 5557 manufacturing facilities in 23 countries, including the United States. We operate our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific.
Cooper Tire Acquisition
On June 7, 2021 (the "Closing Date"), we completed our previously announced acquisition of Cooper Tire & Rubber Company (“Cooper Tire”) pursuant to the terms of the Agreement and Plan of Merger, dated February 22, 2021 (the “Merger Agreement”), by and among Goodyear, Vulcan Merger Sub Inc., a direct, wholly owned subsidiary of Goodyear (“Merger Sub”) and Cooper Tire. Goodyear acquired Cooper Tire by way of the merger of Merger Sub with and into Cooper Tire (the “Merger”), with Cooper Tire surviving the Merger as a wholly owned subsidiary of Goodyear. In accordance with the terms of the Merger Agreement, upon closing of the transaction, Cooper Tire stockholders received $41.75 per share in cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock per share of Cooper Tire common stock (the "Merger Consideration"). The cash portion of the Merger Consideration totaled $2,155 million and the stockholders of Cooper Tire received 46.1 million shares of Goodyear common stock valued at $942 million, based on the closing market price of Goodyear common stock on the last trading day prior to the Closing Date. For further information, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition.
The descriptions of, and references to, the Merger Agreement included in this Quarterly Report on Form 10-Q are qualified in their entirety by the full text of the Merger Agreement, which is attached as Exhibit 2.1 to our Current Report on Form 8-K filed on February 25, 2021.
On May 18, 2021, we issued $850 million in aggregate principal amount of 5% senior notes due 2029 and $600 million in aggregate principal amount of 5.25% senior notes due July 2031. The net proceeds from these notes, together with cash and cash equivalents and borrowings under our first lien revolving credit facility, were used to fund the cash portion of the Merger Consideration and related transaction costs.
On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026 and increasing the amount of the facility to $2.75 billion. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points.
The results of Cooper Tire’s operations have been included in our consolidated financial statements since the Closing Date.
Transaction and other costs related to the acquisition of Cooper Tire totaled $48 million and $55 million during the three and six months ended June 30, 2021, respectively. For the three months ended June 30, 2021, $42 million ($35 million after-tax and minority) of these costs were included in Other (Income) Expense and $6 million ($4 million after-tax and minority) were included in Cost of Goods Sold ("CGS") and Selling, Administrative and General Expense ("SAG"). For the six months ended June 30, 2021, $49 million ($41 million after-tax and minority) of these costs were included in Other (Income) Expense and $6 million ($4 million after-tax and minority) were included in CGS and SAG.
The Merger Consideration was allocated on a provisional basis to the estimated fair value of the assets acquired and liabilities assumed from Cooper Tire as of the Closing Date. Certain of these fair value estimates, including those related to Inventories, Property, Plant and Equipment, Goodwill, Intangible Assets and Deferred Income Taxes, are preliminary and subject to change as management completes further analyses and studies. For further information, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition, and "Critical Accounting Policies".
Results of Operations
During the second quarter and first halfsix months of 2021,2022, our operating results significantly improved compared to 2020,2021 despite a continued difficult macroeconomic environment, including the strengthening of the U.S. dollar against most foreign currencies, as we continue to realize the overall negativebenefits of our acquisition of Cooper Tire & Rubber Company ("Cooper Tire") on June 7, 2021 (the "Closing Date"). While we experienced continued recovery from the impacts of the COVID-19 pandemic, on tire industry demand, auto production, miles driven and our tire volume moderated and continued to improve, compared to the severe global economic disruption experienced throughout much of 2020, particularly in the first half of the year.
Nonetheless, our results for the second quarter and first halfsix months of 2021 continued to be2022 were still negatively influenced by the direct and indirect macroeconomic effects of the ongoing pandemic. Our global businesses are experiencing varying stages of recovery, as ongoing national and local efforts in manycertain countries to contain the spread of COVID-19 and its related variants, including renewed stay-at-home orders and other restrictions on mobility, continue to impact economic conditions, with some sectors of the global economy, such as the airline and travel industries, experiencing a more profound
31
continuing impact.conditions. Increased demand for consumer products and supply chain disruptions as a result of the pandemic and other global events, including port congestion and container shortages, has led to inflationary cost pressures, including higher costs for certain raw materials, higher transportation costs and higher energy costs. Also, shortages of certain automobile parts, such as semiconductors, which has affectedcontinue to affect OE manufacturers’ ability to produce consumer and commercial vehicles consistently.
MostCurrently, most of our global tire manufacturing facilities are operating at or near full capacity to meet current demand, as well as to increase the level of our finished goods inventory as we continue to restock in order to fulfill anticipated demand fornear-term demand. Earlier in the remaindersecond quarter of 2022, some of our facilities, including our facilities in Pulandian and Kunshan, China, had to temporarily shut down or limit production as a result of renewed stay-at-home orders or other events. Additionally, we continue to experience increased labor-related costs and manufacturing inefficiencies associated with the year.ongoing tight labor supply, particularly in the U.S. Our decisions to change production levels in the future will be based on an evaluation of market demand signals and inventory and supply levels, as well as the availability of sufficient qualified labor and our ability to continue to safeguard the health of our associates.
We continue to monitor the pandemic on a local basis, taking actions to protect the health and wellbeing of our associates, customers and communities, which remain our top priority. We also continue to follow guidance from the Centers for Disease Control and Prevention, which include preventative measures at our facilities, as appropriate, including limiting visitor access and business travel, remote and hybrid working, social distancing practices and frequent disinfection.appropriate.
On July 30, 2022, we reached a tentative agreement with the United Steelworkers ("USW") on a new four-year master labor contract covering nearly 5,900 workers at four plants in the United States. The tentative agreement is subject to a ratification vote by USW members at the plants covered by the contract.
While it remains challenging to operate our business in Ukraine, we were able to resume shipments of tires into the country on a limited basis during the second quarter of 2022. In addition, we previously suspended all shipments of tires to Russia during the first quarter of 2021, a severe winter storm2022. Goodyear’s sales in the U.S. caused temporary shutdowns of threeUkraine and Russia represented 0.3% and 1.2%, respectively, of our chemical facilities, limited production at three tiretotal 2021 net sales of $17.5 billion. We do not have manufacturing facilities,operations in either Ukraine or Russia, and we continue to take numerous actions to ensure continuity of supply for raw materials used in manufacturing, some of which are sourced from the impacted more than 170 consumerarea. These actions include increasing our safety stocks when possible, identifying substitutes where appropriate and commercial retail locations. We estimate thatbuilding alternate supplier relationships where necessary. Nonetheless, the negative impactongoing conflict has aggravated the already challenging macroeconomic trends discussed above, including global supply chain disruptions, higher costs for certain raw materials and higher transportation and energy costs. The situation continues to be very dynamic, and we are continually assessing all potential impacts on our earnings, primarily in Americas, for the threeassociates and six months ended June 30, 2021 was approximately $27 million ($22 million after-tax and minority) and $50 million ($40 million after-tax and minority), respectively.business.
Our results for the second quarter of 20212022 include an 84.3%a 21.5% increase in tire unit shipments compared to 2020,2021, reflecting the pandemic-related recovery noted above, as well as the addition of Cooper Tire'sthe operating results sinceof Cooper Tire and continued recovery from the Closing Date.impacts of the COVID-19 pandemic. In the second quarter of 2021,2022, we realizedincurred approximately $86$262 million of additional costs related to inflation and other cost savings, includingpressures, primarily higher transportation and energy costs.
Net sales in the second quarter of 2022 were $5,212 million, compared to $3,979 million in the second quarter of 2021. Net sales increased in 2022 primarily due to the addition of an incremental $663 million of net sales from Cooper Tire, global improvements in price and product mix, higher tire volume in EMEA and Asia Pacific, partially offset by lower tire volume in
26
our legacy business in Americas, and higher sales in other tire-related businesses, driven by higher aviation sales, primarily in Americas and EMEA, increased retail sales in Americas and growth in EMEA's Fleet Solutions. These increases were partially offset by unfavorable foreign currency translation, primarily in EMEA, driven by the weakening of the euro and Turkish lira.
In the second quarter of 2022, Goodyear net income was $166 million, or $0.58 per share, compared to $67 million, or $0.27 per share, in the second quarter of 2021. The increase in Goodyear net income was primarily due to an increase in Other Income driven by a one-time gain in the second quarter of 2022 for a sale and leaseback transaction involving certain consumer and commercial retail properties in Americas and higher segment operating income. These increases were partially offset by higher U.S. and Foreign Tax Expense reflecting higher pre-tax earnings and higher interest expense. Additionally, our results in the second quarter of 2021 included the impact of a severe winter storm in the U.S. estimated to negatively impact earnings by $27 million ($22 million after-tax and minority).
Total segment operating income for the second quarter of 2022 was $364 million, compared to $299 million in the second quarter of 2021. The increase was primarily due to global improvements in price and product mix of $560 million, which more than offset higher raw material costs of $419 million, higher tire volume of $43 million in EMEA and Asia Pacific, partially offset by lower tire volume in our legacy business in Americas, and increased earnings in other-tire related businesses of $19 million, driven by higher aviation sales in Americas and EMEA. These increases were partially offset by increased conversion costs of $100 million, higher transportation and import duty costs of $58 million and higher Selling, Administrative and General Expense ("SAG") of $37 million, all driven by the inflationary cost trends discussed above, as well as a favorable indirect tax ruling in Brazil of $69 million which exceeded($45 million after-tax and minority) in 2021 related to prior periods and a favorable out of period adjustment of $8 million ($6 million after-tax and minority) in 2021 related to accrued freight charges in Americas. The remainder of the impact of general inflation.
Net sales in the second quarter of 2021 were $3,979 million, compared to $2,144 million in the second quarter of 2020. Net sales increased in the second quarter of 2021 primarily due to higher global tire volume,change was driven by the addition of Cooper Tire's net sales of $256 million, higher sales in other tire-related businesses, primarily in Americas and EMEA, and favorable foreign currency translation.
In the second quarter of 2021, Goodyear net income was $67 million, or $0.27 per share, compared to a net loss of $696 million, or $2.97 per share, in the second quarter of 2020. The favorable change in Goodyear net income (loss) was primarily due to higher segment operating income, a decrease in other asset impairment charges and lower rationalization expense, partially offset by higher income tax expense.
Our total segment operating income for the second quarter of 2021 was $299 million, compared to an operating loss of $431 million in the second quarter of 2020. The $730 million favorable change was primarily due to lower conversion costs of $283 million, higher global tire volume of $268 million, improvements in price and product mix of $176 million, primarily in Americas and EMEA, higher earnings in other tire-related businesses of $94 million, driven by increased third-party chemical sales in Americas and increased global aviation tire sales, and a favorable indirect tax ruling in Brazil of $69 million. These improvements in segment operating income were partially offset by higher SAG of $115 million and higher raw material costs of $30 million, primarily in Americas and EMEA. Total segment operating income for the second quarter of 2021 includes an operating loss of $16 million related to Cooper Tire, including the negative impact of purchase accounting adjustments.results. Refer to “Results"Results of Operations — Segment Information”Information" for additional information.
Net sales in the first six months of 20212022 were $7,490$10,120 million, compared to $5,200$7,490 million in the first six months of 2020.2021. Net sales increased in the first six months of 20212022 primarily due to higher global tire volume, the addition of Cooper Tire'san incremental $1,532 million of net sales of $256 million,from Cooper Tire, global improvements in price and product mix, higher tire volume in EMEA and Asia Pacific, partially offset by lower tire volume in our legacy business in Americas, and higher sales in other tire-related businesses, driven by increased third-party chemical sales in Americas, higher aviation sales, primarily in Americas and EMEA, growth in EMEA's Fleet Solutions, and favorableincreased retail sales in Americas. These increases were partially offset by unfavorable foreign currency translation, primarily in EMEA, driven by the weakening of the euro and Asia Pacific.Turkish lira.
In the first six months of 2021,2022, Goodyear net income was $79$262 million, or $0.32$0.91 per share, compared to a net loss of $1,315$79 million, or $5.62$0.32 per share, in the first six months of 2020.2021. The favorable changeincrease in Goodyear net income (loss) was primarily due to higher segment operating income, a decreasean increase in goodwillOther Income driven by the one-time gain in the second quarter of 2022 for the sale and other asset impairment chargesleaseback transaction in Americas, and lower rationalization expense.
Our total segment operating income for the first six months of 2021 was $525 million, compared to an operating loss of $478 million in the first six months of 2020. The $1,003 million favorable change was primarily due to lower conversion costs of $358 million, higher global tire volume of $335 million, improvements in price and product mix of $251 million, primarily in Americas and EMEA, higher earnings in other tire-related businesses of $92 million, driven by increased third-party chemical and retail sales in Americas, as well as increased global aviation sales, and a favorable indirect tax ruling in Brazil of $69 million. These improvements in segment operating incomeincreases were partially offset by higher SAG of $81 millionU.S. and Foreign Tax Expense reflecting higher pre-tax earnings and higher raw material costsinterest expense. Additionally, our results in the first half of $152021 included the impact of a severe winter storm in the U.S. estimated to negatively impact earnings by $50 million primarily in Americas. ($40 million after-tax and minority).
Total segment operating income for the first six months of 2022 was $667 million, compared to $525 million in the first six months of 2021. The increase was primarily due to global improvements in price and product mix of $1,071 million, which more than offset higher raw material costs of $797 million, higher tire volume of $71 million in EMEA and Asia Pacific, partially offset by lower tire volume in our legacy business in Americas, and higher earnings in other tire-related businesses of $28 million, primarily driven by higher aviation sales in Americas and EMEA. These increases were partially offset by increased conversion costs of $168 million, higher transportation and import duty costs of $124 million and higher SAG of $83 million, all driven by the inflationary cost trends discussed above, as well as the favorable indirect tax ruling in Brazil of $69 million in 2021, includes an operating loss
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of $16which $66 million ($43 million after-tax and minority) related to prior periods. The remainder of the change was driven by the addition of Cooper Tire, including the negative impact of purchase accounting adjustments.Tire's operating results. Refer to "Results of Operations — Segment Information" for additional information.
Liquidity
At June 30, 2021,2022, we had $1,030$1,248 million of cash and cash equivalents as well as $4,112$3,210 million of unused availability under our various credit agreements, compared to $1,539$1,088 million and $3,881$4,345 million, respectively, at December 31, 2020. Cash2021. The increase in cash and cash equivalents decreased by $509of $160 million from December 31, 2020was primarily due to paymentnet borrowings of the $1,856 million cash portion of the Merger Consideration, net of cash and restricted cash acquired. In addition, capital expenditures were $385$1,129 million and cash used for operating activities was $71proceeds of $108 million received from the sale and leaseback transaction in the first six months of 2021. These uses of cash wereAmericas, partially offset by net borrowingscash used by operating activities of $1,889$533 million and capital expenditures of $511 million. Cash used forby operating activities reflects cash used for working capital of $540$1,242 million and rationalization payments of $123 million. Cash used for operating activities also reflects$59 million, partially offset by net income for the period of $89$266 million, which includes non-cash charges for depreciation and amortization of $405 million. Refer$481 million, a non-cash gain of $95 million on the sale and leaseback transaction in Americas, and the impact of other non-cash changes to "Liquidityvarious assets and Capital Resources" for additional information.liabilities on the Balance Sheet.
On April 6, 2021, we completed a public offering27
Outlook
DuringIn the second quarter of 2022, consumer replacement tire industry volume exceeded pre-pandemic levels in the Americas and in Europe, while the Asia Pacific industry remained below 2019 levels given continuing impacts related to the COVID-19 pandemic. Globally, OE manufacturers continue to be affected by shortages of components and materials, which are limiting vehicle production. In addition, the conflict in Ukraine has exacerbated continuing supply chain challenges and increases in the cost of certain raw materials, as well as in energy and transportation costs.
In the third quarter of 2021,2022, we expect our production to be at or near pre-pandemic levels to meet anticipated demand for the remainder of this yearcontinued volume growth in EMEA and as we continue building our inventory to meet future demand. Including the impact of Cooper Tire, we expect to reinvest $300 million to $500 million in working capital during 2021.
While markets have recovered considerably, we continue to face uncertainty in many countries around the globe as governments continue to implement, or are considering implementing, measures to slow the pandemic that have the potential to reduce economic activity and mobility. In addition, OE manufacturers have experienced shortages of certain automobile parts, such as semiconductors, which has limited automobile production globally. Also, our ability to ship products, particularly to locations where we do not have manufacturing, will continue to be impacted by disruptions that are ongoing in global logistics. In this environment, we expect industry volume in the third quarter of 2021 to continue to be below 2019 levels, although improving somewhat versus the first half of 2021.
For the full year of 2021, based on current spot prices, weAsia Pacific. We expect our raw material costs to increase $425approximately $1.0 billion in the second half of 2022 compared to 2021, including Cooper Tire, with approximately $600 million of those increases occurring in the third quarter of 2022. We anticipate price and product mix to $475 million, including the benefit ofcontinue to more than offset raw material cost saving measures. This expectation excludes raw material cost increasescosts in Cooper Tire’s business, which we acquired on June 7th, as the incrementalthird quarter of 2022, with a similar net impact of Cooper Tire’s results on our segment operating income will be reported throughearnings that we experienced in the first and second quarter of 2022.quarters. Natural and synthetic rubber prices and other commodity prices historically have been volatile, and this estimateour raw material costs could change significantly based on future cost fluctuations in the cost of these and other key raw materials andchanges in foreign exchange rates. We are continuingcontinue to focus on price and product mix, to substitute lower cost materials where possible, to work to identify additional substitution opportunities, to reduce the amount of material required in each tire, and to pursue alternative raw materials. We expect the benefits of price and product mix will exceedmaterials to minimize the impact of higher raw material costs.
In addition to higher raw material costs, we expect the impact of other inflationary cost pressures to continue to persist, particularly with respect to transportation, labor and energy costs with increases in the third quarter of 2021. 2022 compared to 2021 being similar to the levels we experienced in the second quarter of 2022. We continue to focus on actions to offset costs other than raw materials through cost savings initiatives, further price actions and improvements in product mix.
OurWe expect our operating results for the second half of 2021 willto be negatively impacted by the amortization of purchase accounting adjustments of approximately $100foreign currency translation by $25 million with approximately $85to $30 million impactingin the third quarter of 2021 based on2022 due to the preliminary allocationstrength of the Merger Consideration.U.S. dollar at current spot rates.
During 2022, we expect to reinvest approximately $300 million in working capital to rebuild inventory levels to meet customer demand and support service levels. We expect our capital expenditures to be between $1.1 billion and $1.2 billion. Our capital expenditures in 2022 will be focused on projects to modernize certain of our manufacturing facilities and expand others to address supply constraints and growing demand, in addition to capital expenditures sustaining our facilities.
Refer to “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20202021 (the “2020"2021 Form 10-K”10-K") and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 20212022 for a discussion of the factors that may impact our business, results of operations, financial condition or liquidity and “Forward-Looking Information — Safe Harbor Statement” in this Quarterly Report on Form 10-Q for a discussion of our use of forward-looking statements.
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RESULTS OF OPERATIONS
CONSOLIDATED
Three months endedMonths Ended June 30, 20212022 and 20202021
Net sales in the second quarter of 20212022 were $3,979$5,212 million, increasing $1,835$1,233 million, or 85.6%31.0%, from $2,144$3,979 million in the second quarter of 2020.2021. Goodyear net income was $166 million, or $0.58 per share, in the second quarter of 2022, compared to $67 million, or $0.27 per share, in the second quarter of 2021, compared to a net loss of $696 million, or $2.97 per share, in the second quarter of 2020.2021.
Net sales increased in the second quarter of 2021,2022, primarily due to the addition of an incremental $663 million of net sales from Cooper Tire, global improvements in price and product mix of $539 million, higher global tire volume of $1,294$193 million the addition of Cooper Tire's net sales of $256 million,in EMEA and Asia Pacific, partially offset by lower tire volume in our legacy business in Americas, and higher sales in other tire-related businesses of $226$47 million, driven by higher aviation sales, primarily in Americas and EMEA, increased third-party chemical and retail sales in Americas as well as increased global aviation sales, and favorablegrowth in EMEA's Fleet Solutions. These increases were partially offset by unfavorable foreign currency translation of $113$207 million, primarily in EMEA, driven by the weakening of the euro and Asia Pacific.Turkish lira.
Worldwide tire unit sales in the second quarter of 20212022 were 37.5 45.6million units, increasing 17.1 8.1million units, or 84.3%21.5%, from 20.437.5 million units in the second quarter of 2020.2021. Replacement tire volume increased globally by 12.9 6.6million units, or 78.2%.22.6%, driven by the addition of Cooper Tire's units. OE tire volume increased globally by 4.21.5 million units, or 109.0%.17.5%, reflecting continued recovery from the COVID-19 pandemic and the addition of Cooper Tire's units, despite ongoing challenges to vehicle production as a result of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors.
Cost of Goods Sold ("CGS") in the second quarter of 2022 was $4,172 million, increasing $1,094 million, or 35.5%, from $3,078 million in the second quarter of 2021. CGS increased primarily due to the addition of an incremental $474 million of CGS from Cooper Tire, higher raw material costs of $419 million, higher tire volume of $150 million in EMEA and Asia Pacific, partially offset by lower tire volume in our legacy business in Americas, higher conversion costs of $100 million, driven by inflation and
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higher energy costs, the favorable indirect tax ruling in Brazil of $69 million in 2021, and higher transportation and import duty costs of $58 million. These increases were partially offset by foreign currency translation of $176 million, primarily in EMEA, driven by the weakening of the euro and Turkish lira. CGS in the second quarter of 2022 included a gain of $14 million ($11 million after-tax and minority) due to a reduction in U.S. duty rates on certain commercial tires that were imported during 2020. CGS in the second quarter of 2021 was $3,078 million, increasing $862 million, or 38.9%, from $2,216 million in the second quarter of 2020. CGS increased primarily due to higher global tire volume of $1,026 million, the addition of Cooper Tire's CGS of $235 million, which includesincluded $38 million ($29 million after-tax and minority) of amortization expense related to a fair value adjustment to theirthe Closing Date inventory of Cooper Tire that was acquired by Goodyear, higher costs in other tire-related businesses of $132 million, driven by higher third-party chemical sales in Americas, foreign currency translation of $84 million, primarily in EMEA and Asia Pacific, and higher raw material costs of $30 million, primarily in Americas and EMEA. These increases were partially offset by lower conversion costs of $283 million, primarily due to favorable overhead absorption as a result of higher global factory utilization and savings from rationalization plans, lower costs related to product mix of $229 million, primarily in Americas, and a favorable indirect tax ruling in Brazil of $69 million ($45 million after-tax and minority) related to prior periods.Goodyear.
CGS in the second quarter of 20212022 and 20202021 included pension expense of $5$6 million and $4$5 million, respectively. CGS in the second quarter of 20202021 included accelerated depreciation$25 million of $86incremental year-over-year savings from rationalization plans. CGS was 80.0% of sales in the second quarter of 2022, compared to 77.4% in the second quarter of 2021.
SAG in the second quarter of 2022 was $717 million, ($65increasing $59 million, after-tax and minority)or 9.0%, from $658 million in the second quarter of 2021. SAG increased primarily due to the addition of Cooper Tire's operating results. SAG also included increases related to higher wages and benefits of $12 million and $27 million of other net cost increases reflecting the permanent closureinflationary cost pressures discussed above, partially offset by foreign currency translation of our Gadsden, Alabama manufacturing facility (“Gadsden").$34 million, primarily in EMEA, driven by the weakening of the euro and Turkish lira.
SAG in the second quarter of 2022 and 2021 included pension expense of $4 million and $5 million, respectively. SAG in the second quarter of 2022 included $1 million of incremental year-over-year savings from rationalization plans, compared to $3 million in 2021. SAG was 13.8% of sales in the second quarter of 2022, compared to 16.5% in the second quarter of 2021.
SAG and CGS in the second quarter of 2021 included incremental savings from rationalization plansa total of $25$6 million primarily in Americas, compared to $28 million in 2020. CGS was 77.4% of sales in the second quarter of 2021 compared to 103.4% in the second quarter of 2020.
SAG in the second quarter of 2021 was $658 million, increasing $207 million, or 45.9%, from $451 million in the second quarter of 2020. SAG increased primarily due to higher wages and benefits of $74 million, higher advertising expense of $32 million and higher third-party contracting costs of $17 million, all relating to pandemic-related actions taken in 2020, the addition of Cooper Tire's SAG of $42 million, and foreign currency translation of $25 million, primarily in EMEA and Asia Pacific.
SAG in the second quarter of 2021 and 2020 included pension expense of $5 million and $4 million, respectively. SAG in the second quarter of 2021 included incremental savings from rationalization plans of $3 million, compared to $1 million in 2020. SAG was 16.5% of sales in the second quarter of 2021, compared to 21.0% in the second quarter of 2020.
In the second quarter of 2020, we recorded a non-cash impairment charge of $148 million ($1134 million after-tax and minority) of transaction costs related to TireHub.the Cooper Tire acquisition.
We recorded net rationalization charges of $18$26 million ($1620 million after-tax and minority) in the second quarter of 20212022, primarily related to a current year plan to reduce duplicative global SAG headcount and $99close redundant warehouse locations in Americas as part of our ongoing Cooper Tire integration efforts, in line with previously announced planned synergies. We recorded $18 million ($7616 million after-tax and minority) in the second quarter of 2020. Netnet rationalization charges in the second quarter of 2021 primarily related to the permanent closure of our Gadsden, Alabama tire manufacturing facility ("Gadsden") and the plan to modernizemodernization of two of our tire manufacturing facilities in Germany. Net rationalization charges in the second quarter of 2020 primarily related to the permanent closure of Gadsden and additional termination benefits for associates at the closed Amiens, France facility. For further information, refer to Note to the Consolidated Financial Statements No. 4, Costs Associated with Rationalization Programs.
Interest expense in the second quarter of 20212022 was $97$110 million, increasing $12$13 million, or 14.1%13.4%, from $85$97 million in the second quarter of 2020. The average interest rate was 5.51% in the second quarter of 2021 compared to 5.04% in the second quarter of 2020. The average debt balance was $7,037 million in the second quarter of 2021 compared to $6,753 million in the second quarter of 2020.2021. Interest expense in the second quarter of 2021 included a $5 million ($4 million after-tax and minority) charge related to the redemption of our existing $1.0 billion 5.125% senior notes due 2023. The average interest rate was 5.25% in the second quarter of 2022, compared to 5.51% in the second quarter of 2021. The average debt balance was $8,387 million in the second quarter of 2022, compared to $7,037 million in the second quarter of 2021. The increase in average debt is primarily due to additional borrowings that were used to partially fund the Cooper Tire acquisition in the second quarter of 2021 and support our working capital requirements in 2022.
Other (Income) Expense in the second quarter of 20212022 was $30$65 million of expense,income, compared to $34$30 million of expense in the second quarter of 2020.2021. Other (Income) Expense for the three months ended June 30,second quarter of 2022 includes a gain on asset sales of $95 million ($71 million after-tax and minority) related to the sale and leaseback transaction in Americas and pension settlement charges of $18 million ($13 million after-tax and minority). Other (Income) Expense for the second quarter of 2021 includes $48 million ($32 million after-tax and minority) of interest income related to the favorable indirect tax ruling in Brazil, $42 million ($35 million after-tax and minority) of transaction and other costs related to the acquisition of Cooper Tire acquisition, and pension settlement charges of $19 million ($14 million after-tax and minority).
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minority). Other (Income) Expense inFor the second quarter of 2020 included2022, we recorded income tax expense of $82 million on income before income taxes of $252 million. Income tax expense for the three months ended June 30, 2022 includes net losses on asset salesdiscrete tax expense of $3$14 million ($314 million after-tax and minority). The remainderafter minority interest), primarily related to the write off of the change in Other (Income) Expense between the second quarter of 2021 and 2020 was driven by a decreasedeferred tax assets for tax loss carryforwards in the other components of non-service related pension and other postretirement benefits cost, primarily as a result of lower interest cost from decreases in discount rates.UK.
ForIn the second quarter of 2021, we recorded income tax expense of $27 million on income before income taxes of $98 million. Income tax expense for the three months ended June 30, 2021 includes a net discrete tax benefit of $32 million ($32 million after minority interest), primarily related to adjusting our deferred tax assets in England for an enacted increase in the tax rate, partially offset by a net discrete charge for various other items, including the settlement of a tax audit in Poland.
In the second quarter of 2020, we recorded a tax benefit of $186 million on a loss before income taxes of $889 million. Income tax benefit for the three months ended June 30, 2020 includes a net discrete charge of $2 million ($2 million after minority interest).
For further information regarding income taxes, refer to Note to the Consolidated Financial Statements No. 6, Income Taxes.
Minority shareholders’ net income in both the second quarter of 2022 and 2021 was $4 million, compared to a net lossmillion.
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Table of $7 million in 2020.contents
Six Months Ended June 30, 20212022 and 20202021
Net sales in the first six months of 20212022 were $7,490$10,120 million, increasing $2,290$2,630 million, or 44.0%35.1%, from $5,200$7,490 million in the first six months of 2020.2021. Goodyear net income was $262 million, or $0.91 per share, in the first six months of 2022, compared to $79 million, or $0.32 per share, in the first six months of 2021, compared to a net loss of $1,315 million, or $5.62 per share, in the first six months of 2020.2021.
Net sales increased in the first six months of 2021,2022, primarily due to the addition of an incremental $1,532 million of net sales from Cooper Tire, global improvements in price and product mix of $1,048 million, higher global tire volume of $1,578$296 million the addition of Cooper Tire's net sales of $256 million,in EMEA and Asia Pacific, partially offset by lower tire volume in our legacy business in Americas, and higher sales in other tire-related businesses of $253$149 million, driven by increased third-party chemical retreadsales in Americas, higher aviation sales, primarily in Americas and EMEA, growth in EMEA's Fleet Solutions and increased retail sales in Americas, and favorableAmericas. These increases were partially offset by unfavorable foreign currency translation of $154$393 million, primarily in EMEA, driven by the weakening of the euro and Asia Pacific.Turkish lira.
Worldwide tire unit sales in the first six months of 20212022 were 72.590.6 million units, increasing 20.818.1 million units, or 40.3%25.0%, from 51.772.5 million units in the first six months of 2020.2021. Replacement tire volume increased globally by 16.115.8 million units, or 40.9%.28.6%, driven by the addition of Cooper Tire's units. OE tire volume increased globally by 4.72.3 million units, or 38.7%.13.2%, primarily in Asia Pacific and Americas, reflecting continued recovery from the COVID-19 pandemic and the addition of Cooper Tire's units, despite ongoing challenges to vehicle production as a result of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors.
CGS in the first six months of 20212022 was $5,829$8,138 million, increasing $1,061$2,309 million, or 22.3%39.6%, from $4,768$5,829 million in the first six months of 2020.2021. CGS increased primarily due to the addition of an incremental $1,193 million of CGS from Cooper Tire, higher globalraw material costs of $797 million, higher tire volume of $1,243$225 million in EMEA and Asia Pacific, partially offset by lower tire volume in our legacy business in Americas, higher conversion costs of $168 million, driven by inflation and higher energy costs, higher transportation and import duty costs of $124 million, higher costs in other tire-related businesses of $121 million, driven by increased third-party chemical sales and retail sales in Americas as well as growth in EMEA's Fleet Solutions, and the additionfavorable indirect tax ruling in Brazil of Cooper Tire's$69 million in 2021. These increases were partially offset by foreign currency translation of $322 million, primarily in EMEA, driven by the weakening of the euro and Turkish lira. CGS in the first six months of $2352022 included a gain of $14 million which includes($11 million after-tax and minority) due to a reduction in U.S. duty rates on certain commercial tires that were imported during 2020. CGS in the first six months of 2021 included $38 million ($29 million after-tax and minority) of amortization expense related to a fair value adjustment to theirthe Closing Date inventory of Cooper Tire that was acquired by Goodyear, higher costs in other tire-related businesses of $161 million, driven by higher third-party chemical and retread sales in Americas, foreign currency translation of $113 million, primarily in EMEA and Asia Pacific, and higher raw material costs of $15 million, primarily in Americas. These increases were partially offset by lower conversion costs of $358 million, primarily due to favorable overhead absorption as a result of higher global factory utilization and savings from rationalization plans, lower costs related to product mix of $202 million, primarily in Americas and Asia Pacific, partially offset by EMEA, a favorable indirect tax ruling in Brazil of $69 million, of which $66 million ($43 million after-tax and minority) related to prior years, and $26 million of pandemic-related work in process inventory write-offs in 2020, primarily in Americas and EMEA.Goodyear.
CGS in the first six months of 20212022 and 20202021 included pension expense of $9$11 million and $8$9 million, respectively. CGS in the first six months of 20202022 included accelerated depreciation$1 million of $90 million ($69 million after-tax and minority), primarily related to the permanent closure of Gadsden. CGS in the first six months of 2021 included incremental year-over-year savings from rationalization plans, ofcompared to $57 million primarily in Americas, compared to $28 million in 2020.2021. CGS was 77.8%80.4% of sales in the first six months of 20212022, compared to 91.7%77.8% in the first six months of 2020.2021.
SAG in the first six months of 20212022 was $1,222$1,405 million, increasing $190$183 million, or 18.4%15.0%, from $1,032$1,222 million in the first six months of 2020.2021. SAG increased primarily due to the addition of Cooper Tire's operating results. SAG also included increases related to higher wages and benefits of $78 million and higher advertising expense of $25 million, both relating to pandemic-related actions taken in 2020, the addition of Cooper Tire's SAG of $42 million, including the impact of higher incentive compensation, and $64 million of other net cost increases reflecting the inflationary cost pressures discussed above, partially offset by foreign currency translation of $41$62 million, primarily in EMEA, driven by the weakening of the euro and Asia Pacific.Turkish lira.
SAG in the first six months of 20212022 and 20202021 included pension expense of $9$8 million and $8$9 million, respectively. SAG in the first six months of 20212022 included $2 million of incremental year-over-year savings from rationalization plans, ofcompared to $5 million compared to $2 million in 2020.2021. SAG was 16.3%13.9% of sales in the first six months of 2021,2022, compared to 19.8%16.3% in the first six months of 2020.2021.
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InSAG and CGS in the first six months of 2020, we recorded2021 included a non-cash impairment chargetotal of $182$6 million ($1784 million after-tax and minority) of transaction costs related to goodwill of our EMEA reporting unit and a $148 million non-cash impairment charge ($113 million after-tax and minority) related to our investment in TireHub.the Cooper Tire acquisition.
We recorded net rationalization charges of $37 million ($29 million after-tax and minority) in the first six months of 2022 and $68 million ($61 million after-tax and minority) in the first six months of 2021 and $108 million ($83 million after-tax and minority)2021. Net rationalization charges in the first six months of 2020.2022 primarily related to the plan to reduce duplicative global SAG headcount and close redundant warehouse locations in Americas as part of our ongoing Cooper Tire integration efforts. Net rationalization charges in the first six months of 2021 primarily related to the plan to modernizemodernization of two of our tire manufacturing facilities in Germany, a plan to reduce SAG headcount in EMEA, and the permanent closure of Gadsden. Net rationalization charges in the first six months of 2020 primarily related to the permanent closure of Gadsden and additional termination benefits for associates at the closed Amiens, France manufacturing facility. For further information, refer to Note to the Consolidated Financial Statements No. 4, Costs Associated with Rationalization Programs.
Interest expense in the first six months of 20212022 was $176$214 million, increasing $18$38 million, or 11.4%21.6%, from $158$176 million in the first six months of 2020. The average interest rate was 5.38% in the first six months of 2021 compared to 4.92% in the first six months of 2020. The average debt balance was $6,542 million in the first six months of 2021 compared to $6,423 million in the first six months of 2020.2021. Interest expense in the first six months of 2021 included a $5 million ($4 million after-tax and minority) charge related to the redemption of our existing $1.0 billion 5.125% senior notes due 2023. The average interest rate was 5.26% in the first six months of 2022 compared to 5.38% in the first six months of 2021. The average debt balance was $8,135 million in the
30
first six months of 2022 compared to $6,542 million in the first six months of 2021. The increase in average debt is primarily due to additional borrowings that were used to partially fund the Cooper Tire acquisition in the second quarter of 2021 and support our working capital requirements in 2022.
Other (Income) Expense in the first six months of 20212022 was $64$60 million of expense,income, compared to $61$64 million of expense in the first six months of 2020.2021. Other (Income) Expense for the first six months ended June 30,of 2022 includes net gains on asset sales of $98 million ($75 million after-tax and minority), primarily related to the sale and leaseback transaction in Americas and pension settlement charges of $18 million ($13 million after-tax and minority). Other (Income) Expense for the first six months of 2021 includes $49 million ($41 million after-tax and minority) of transaction and other costs related to the Cooper Tire acquisition, $48 million ($32 million after-tax and minority) of interest income related to the favorable indirect tax ruling in Brazil, $49 million of transaction and other costs related to the acquisition of Cooper Tire and pension settlement charges of $19 million ($14 million after-tax and minority). Other (Income) Expense in the first six months of 2021 also includes and an out of period adjustment of $7 million ($7 million after-tax and minority) of expense related to foreign currency exchange in Americas. Other (Income) ExpenseThe remainder of the change was driven by a $7 million increase in royalty income, primarily due to an increase in chemical royalties in Americas.
For the first six months of 2020 included pension settlement2022, we recorded income tax expense of $120 million on income before income taxes of $386 million. Income tax expense for the six months ended June 30, 2022 includes net discrete tax expense of $18 million ($18 million after minority interest), including charges of $3$14 million ($2to write off deferred tax assets related to tax loss carryforwards in the UK and $11 million after-tax and minority) andto establish a full valuation allowance on our net losses on asset sales of $2 million ($2 million after-tax and minority). The remainder of the changedeferred tax assets in Other (Income) Expense between the first six months of 2021 and 2020 was drivenRussia, partially offset by a decrease in thenet benefit of $7 million for various other components of non-service related pension and other postretirement benefits cost, primarily as a result of lower interest cost from decreases in discount rates.items.
ForIn the first six months of 2021, we recorded income tax expense of $42 million on income before income taxes of $131 million. Income tax expense for the six months ended June 30, 2021 includes a net discrete tax benefit of $29 million ($29 million after minority interest), primarily related to adjusting our deferred tax assets in England for an enacted increase in the tax rate, partially offset by a net discrete charge for various other items, including the settlement of a tax audit in Poland.
In the first six months of 2020, we recorded income tax expense of $63 million on a loss before income taxes of $1,257 million. Income tax expense for the six months ended June 30, 2020 includes a net discrete charge of $293 million ($293 million after minority interest), primarily related to the establishment of a $295 million valuation allowance on certain deferred tax assets for foreign tax credits during the first quarter of 2020.
We record taxes based on overall estimated annual effective tax rates. The difference between our effective tax rate and the U.S. statutory rate of 21% for the six months ended June 30, 20212022 primarily relates to the tax on a favorable indirect tax ruling in Brazil, losses in foreign jurisdictions in which no tax benefits are recorded and the discrete items noted above. The difference between our effective tax rate and the U.S. statutory rate of 21% for the six months ended June 30, 20202021 primarily relates to the discrete items noted above, a first quarter non-cash goodwill impairment charge of $182 million, and forecastedtax on the favorable indirect tax ruling in Brazil, losses for the full year in foreign jurisdictions in which no tax benefits are recorded, which were accentuated during 2020 by business interruptions resulting fromand the COVID-19 pandemic.discrete items noted above.
At both June 30, 20212022 and December 31, 2020,2021, we had approximately $800 million and $1.2 billion of U.S. federal, state and local net deferred tax assets, respectively, net of valuation allowances totaling $368$26 million primarily for foreignstate tax creditsloss carryforwards with limited lives. At June 30, 2021, approximately $500 million of these U.S. net deferred tax assets have unlimited lives and approximately $300 million have limited lives and expire between 2025 and 2041. The decrease in our U.S. net deferred tax assets from December 31, 2020 primarily reflects the establishment of deferred tax liabilities for the tax impacts of certain fair value and other purchase accounting adjustments related to the Cooper Tire acquisition. In the U.S., we have a cumulative loss for the three-year period ending June 30, 2021.2022. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only include the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including recentcontinued favorable recoveryoverall volume trends in the tire industry and our tire volume as well as expected continued improvement.compared to 2020 levels. In addition, the Cooper Tire acquisition is expected to generatehas generated significant incremental domestic earnings since the Closing Date and provideprovides opportunities for cost and other operating synergies to further improve our U.S. profitability. These favorable trends, together with tax planning strategies, may provide sufficient objectively verifiable information to reverse a portion or all of our U.S. valuation allowances for foreign tax credits within the next twelve months.
36
At both June 30, 20212022 and December 31, 2020,2021, our U.S. net deferred tax assets included $150include $339 million and $133 million, respectively, of foreign tax credits with limited lives, net of valuation allowances of $328 million, generated primarily from the receipt of foreign dividends.$3 million. Our earnings and forecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income, provide us sufficient positive evidence that we will be able to utilize our remainingthese net foreign tax credits thatwhich expire between 2025 and 2031.through 2030. Our sources of foreign income are (1) 100% of our domestic profitability can be re-characterized as foreign source income under current U.S. tax law to the extent domestic losses have offset foreign source income in prior years, (2) annual net foreign source income, exclusive of dividends, primarily from royalties, and (3) tax planning strategies, including capitalizing research and development costs, accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, and reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, all of which would increase our domestic profitability.
We consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets, including our foreign tax credits. As noted above, theseThese forecasts include the impact of recent trends, including various macroeconomic factors such as the impact of the COVID-19 pandemic,higher raw material, transportation, labor and energy costs, on our profitability, as well as the impact of tax planning strategies. MacroeconomicThese macroeconomic factors including the impact of the COVID-19 pandemic, possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future earnings will not be sufficient to fully utilize our U.S. net deferred tax assets, including our remaining foreign tax credits. However, we believe our forecasts of future profitability along with the three significant sources of foreign income described above provide us sufficient positive, objectively verifiable evidence to conclude that it is more likely than not that, at June 30, 2021,2022, our U.S. net deferred tax assets, including our foreign tax credits, net of valuation allowances, will be fully utilized.
31
At June 30, 20212022 and December 31, 2020,2021, we also had approximately $1.4$1.2 billion and $1.3 billion of foreign net deferred tax assets, respectively, and related valuation allowances of $1.1$1.0 billion. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $933$800 million on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances having a significant impact on our financial position or results of operations will exist within the next twelve months.
For further information regarding income taxes and the realizability of our deferred tax assets, including our foreign tax credits, refer to Note to the Consolidated Financial Statements No. 6, Income Taxes.
Minority shareholders’ net income in the first six months of 20212022 was $10$4 million, compared to a net loss of $5$10 million in 2020.2021.
SEGMENT INFORMATION
Segment information reflects our strategic business units (“SBUs”), which are organized to meet customer requirements and global competition and are segmented on a regional basis. Since the Closing Date, Cooper Tire's operating results have been incorporated into each of our SBUs. We discuss the impact of Cooper Tire's net sales and operating income separately within each SBU for periods presented that are not fully comparable.
Results of operations are measured based on net sales to unaffiliated customers and segment operating income. Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions. Segment operating income is computed as follows: Net Sales less CGS (excluding asset write-off and accelerated depreciation charges) and SAG (including certain allocated corporate administrative expenses). Segment operating income also includes certain royalties and equity in earnings of most affiliates. Segment operating income does not include net rationalization charges (credits), asset sales goodwill and other asset impairment charges, and certain other items.
Total segment operating income for the second quarter of 2022 was $364 million, an increase of $65 million, or 21.7%, from $299 million in the second quarter of 2021. Total segment operating margin in the second quarter of 2022 was 7.0%, compared to 7.5% in the second quarter of 2021. Total segment operating income for the first six months of 2022 was $667 million, an increase of $142 million, or 27.0%, from $525 million in the first six months of 2021. Total segment operating margin in the first six months of 2022 was 6.6%, compared to 7.0% in the first six months of 2021.
Management believes that total segment operating income is useful because it represents the aggregate value of income created by our SBUs and excludes items not directly related to the SBUs for performance evaluation purposes. Total segment operating income is the sum of the individual SBUs’ segment operating income. Refer to Note to the Consolidated Financial Statements No. 8, Business Segments, for further information and for a reconciliation of total segment operating income to Income (Loss) before Income Taxes.
Total segment operating income for the second quarter of 2021 was $299 million, a favorable change of $730 million from total segment operating loss of $431 million in the second quarter of 2020. Total segment operating margin (segment operating income divided by segment sales) in the second quarter of 2021 was 7.5% compared to (20.1)% in the second quarter of 2020. Total segment operating income for the first six months of 2021 was $525 million, a favorable change of $1,003 million from total segment operating loss of $478 million in the first six months of 2020. Total segment operating margin in the first six months of 2021 was 7.0% compared to (9.2)% in the first six months of 2020.
37
Americas
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| Change |
|
| Percent |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| Percent |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| Percent |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| Percent |
| ||||||||||||||||
Tire Units |
| 19.0 |
| 8.5 |
| 10.5 |
| 125.1 | % |
| 34.5 |
| 23.0 |
| 11.5 |
| 50.5 | % |
|
| 23.3 |
|
|
| 19.0 |
|
|
| 4.3 |
|
|
| 22.4 | % |
|
| 45.5 |
|
|
| 34.5 |
|
|
| 11.0 |
|
|
| 32.0 | % | ||||||||||||||
Net Sales |
| $ | 2,256 |
| $ | 1,134 |
| $ | 1,122 |
| 98.9 | % |
| $ | 4,043 |
| $ | 2,807 |
| $ | 1,236 |
| 44.0 | % |
| $ | 3,147 |
|
| $ | 2,256 |
|
| $ | 891 |
|
|
| 39.5 | % |
| $ | 6,062 |
|
| $ | 4,043 |
|
| $ | 2,019 |
|
|
| 49.9 | % | ||||||||
Operating Income (Loss) |
| 233 |
| (287 | ) |
| 520 |
| N/M |
|
| 347 |
| (287 | ) |
| 634 |
| N/M |
| ||||||||||||||||||||||||||||||||||||||||||||
Operating Income |
|
| 293 |
|
|
| 233 |
|
|
| 60 |
|
|
| 25.8 | % |
|
| 509 |
|
|
| 347 |
|
|
| 162 |
|
|
| 46.7 | % | ||||||||||||||||||||||||||||||||
Operating Margin |
| 10.3 | % |
| (25.3 | )% |
|
|
|
|
|
|
| 8.6 | % |
| (10.2 | )% |
|
|
|
|
|
|
|
| 9.3 | % |
|
| 10.3 | % |
|
|
|
|
|
|
| 8.4 | % |
|
| 8.6 | % |
|
|
|
|
|
|
Three Months EndedJune 30, 20212022 and 20202021
Americas unit sales in the second quarter of 20212022 increased 10.54.3 million units, or 125.1%22.4%, to 19.023.3 million units. Replacement tire volume increased 8.63.8 million units, or 119.6%24.4%, andprimarily due to the addition of Cooper Tire's units, partially offset by a decrease in our consumer business in the United States. OE tire volume increased 1.90.5 million units, or 155.4%12.5%, primarily indriven by our consumer business in the United States and Brazil, drivenCanada and by continued recovery from the economic impacts of the COVID-19 pandemic and the addition of Cooper Tire's units. Consumer OE volume continued to be negatively affected by impacts to vehicle production driven by global supply chain disruptions and shortages of key manufacturing components, including semiconductors.
Net sales in the second quarter of 20212022 were $2,256$3,147 million, increasing $1,122$891 million, or 98.9%39.5%, from $1,134$2,256 million in the second quarter of 2020.2021. The increase in net sales was primarily due to an incremental $599 million of net sales from Cooper Tire, favorable price and product mix of $319 million, driven by higher volume of $791 million, the addition of Cooper Tire's net sales of $223 million,price increases, higher sales in other tire-related businesses of $176$29 million, primarily due to an increase in third-party sales of chemical products and higher aviation, retail and retreadthird-party chemical sales, and favorable foreign currency translation of $17$24 million, primarily related to the Canadian dollar.a stronger Brazilian real. These increases were partially offset by unfavorable price and product mixlower tire volume in our legacy
32
Table of $85 million, primarily due to lower proportionate salescontents
business of commercial tires. In$81 million. We estimate that the first quarter of 2021, a severe winter storm in the U.S. had a significant impact to our operations, including temporarily shutting down three chemical facilities, curtailing production at three tire plants, and impacting more than 170 consumer and commercial retail locations, which we estimate negatively impacted Americas net sales in the second quarter net salesof 2021 by approximately $11 million.
Operating income in the second quarter of 20212022 was $233$293 million, a change of $520increasing $60 million, or 25.8%, from an operating loss of $287$233 million in the second quarter of 2020.2021. The favorable changeincrease in operating income (loss) was due to lower conversion costs of $181 million, primarily due to favorable overhead absorption as a result of higher factory utilization, higher tire volume of $134 million, improvements in price and product mix of $127$311 million, which more than offset higher raw material costs of $15$183 million, and higher earnings in other tire-related businesses of $73 million, primarily due to an increase in third-party sales of chemical products and higher retail and aviation sales, a$6 million. These increases were partially offset by the favorable indirect tax ruling in Brazil of $69 million in 2021, higher conversion costs of $52 million, driven by inflation, increased transportation and import duty costs of $47 million, lower tire volume in our legacy business of $23 million, and a favorable out of period adjustment of $8 million ($6 million after-tax and minority)in 2021 related to accrued freight charges. These increases were partially offsetThe remainder of the change was driven by higher SAGthe addition of $53 million, primarily related to higher wages and benefits and increased advertising, both relating to pandemic-related actions taken in 2020. Conversion costs and SAG include incremental savings from rationalization plans of $25 million and $2 million, respectively, primarily related to Gadsden. Price and product mix includes TireHub equity income of $3 million in 2021 while 2020 includes losses of $14 million.Cooper Tire's operating results. We estimate that the severe winter storm in the U.S. as well as a national strike in Colombia negatively impacted Americas operating income forin the second quarter of 2021 by approximately $24 million and $4 million ($4 million after-tax and minority), respectively. Segment operating income in the second quarter of 2021 includes an operating loss of $14 million related to Cooper Tire, including the negative impact of purchase accounting adjustments.
Operating income in the second quarter of 20212022 excluded net rationalization charges of $8$11 million and net gains on asset sales of $95 million, primarily related to the permanent closure of Gadsden.sale and leaseback transaction for certain consumer and commercial retail locations in the United States. Operating lossincome in the second quarter of 20202021 excluded the TireHub non-cash impairment charge of $148 million, as well as asset write-offs and accelerated depreciation of $86 million andnet rationalization charges of $69 million, primarily related to Gadsden.$8 million.
Six Months EndedJune 30, 20212022 and 20202021
Americas unit sales in the first six months of 20212022 increased 11.511.0 million units, or 50.5%32.0%, to 34.545.5 million units. Replacement tire volume increased 9.810.4 million units, or 54.2%, and OE tire volume increased 1.7 million units, or 36.6%37.6%, primarily due to the addition of Cooper Tire's units, partially offset by a decrease in our consumer business in the United StatesStates. OE tire volume increased 0.6 million units, or 8.5%, despite the ongoing negative impacts to vehicle production as a result of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors, and Brazil,was driven by recovery fromour consumer business in Canada and the economic impacts of the COVID-19 pandemic andUnited States, as well as the addition of Cooper Tire's units. Consumer OE volume continued to be negatively affected by impacts to vehicle production driven by global supply chain disruptions and shortages of key manufacturing components, including semiconductors.
Net sales in the first six months of 20212022 were $4,043$6,062 million, increasing $1,236$2,019 million, or 44.0%49.9%, from $2,807$4,043 million in the first six months of 2020.2021. The increase in net sales was driven by higher volume of $879 million,primarily due to the addition of Cooper Tire'san incremental $1,355 million of net sales from Cooper Tire, favorable price and product mix of $223$650 million, anddriven by price increases, higher sales in other tire-related businesses of $202$101 million, primarily due to an increase in third-partyhigher chemical, aviation and retail sales, and favorable foreign currency translation of chemical products and higher retail and retread sales.$20 million, primarily related to a stronger Brazilian real. These increases were partially offset by unfavorable price and product mixlower tire volume in our legacy business of $50 million, primarily due to lower proportionate sales of commercial tires, and unfavorable foreign currency
38
translation of $19 million, primarily related to the Brazilian real partially offset by favorability in the Canadian dollar.$107 million. We estimate that the severe winter storm in the U.S. negatively impacted Americas net sales for the first six months of 2021 by approximately $35 million.
Operating income in the first six months of 20212022 was $347$509 million, a change of $634increasing $162 million, or 46.7%, from an operating loss of $287$347 million in the first six months of 2020.2021. The favorable changeincrease in operating income (loss) was due to lower conversion costs of $207 million, primarily due to favorable overhead absorption as a result of higher factory utilization, higher tire volume of $154 million, improvements in price and product mix of $170$633 million, which more than offset higher raw material costs of $22$387 million, higher earnings in other tire-related businesses of $77 million, primarily due to an increase in third-party sales of chemical products and higher retail and aviation sales, a favorable indirect tax ruling in Brazil of $69 million, and $13 million, of pandemic-related work in process inventory write-offs in 2020. These increases were partially offset by higher SAG of $29 million, primarily related to higher wages and benefits and increased advertising, both relating to pandemic-related actions taken in 2020, and the net impact of out of period adjustments in 2021 totaling $6 million ($6 million after-tax and minority) of expense primarily related to inventory and accrued freight charges. ConversionThese increases were partially offset by increased transportation and import duty costs and SAG include incremental savings from rationalization plans of $54$101 million, the favorable indirect tax ruling in Brazil of $69 million in 2021, higher conversion costs of $66 million, driven by inflation, lower tire volume in our legacy business of $30 million, and $4higher SAG of $24 million, respectively, primarily relateddue to Gadsden. Pricehigher wages and product mix includes TireHub equity incomebenefits and inflation. The remainder of $1 million in the first six monthschange was driven by the addition of 2021 and losses of $26 million in the first six months of 2020.Cooper Tire's operating results. We estimate that the severe winter storm in the U.S. as well as a national strike in Colombia negatively impacted Americas operating income for the first six months ofin 2021 by approximately $41 million and $4 million ($4 million after-tax and minority), respectively. Segment operating income for the first six months of 2021 includes an operating loss of $14 million related to Cooper Tire, including the negative impact of purchase accounting adjustments.
Operating income in the first six months of 20212022 excluded net rationalization charges of $18 million and net gains on asset sales of $98 million, primarily related to the permanent closure of Gadsden.sale and leaseback transaction. Operating lossincome in the first six months of 20202021 excluded the TireHub non-cash impairment charge of $148 million, as well as asset write-offs and accelerated depreciation of $89 million andnet rationalization charges of $72 million, primarily related to Gadsden.$18 million.
3933
Europe, Middle East and Africa
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| Change |
|
| Percent |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| Percent |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| Percent |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| Percent |
| ||||||||||||||||
Tire Units |
| 12.0 |
| 7.3 |
| 4.7 |
| 62.7 | % |
| 24.7 |
| 18.9 |
| 5.8 |
| 30.5 | % |
|
| 14.5 |
|
|
| 12.0 |
|
|
| 2.5 |
|
|
| 20.8 | % |
|
| 29.0 |
|
|
| 24.7 |
|
|
| 4.3 |
|
|
| 17.5 | % | ||||||||||||||
Net Sales |
| $ | 1,230 |
| $ | 676 |
| $ | 554 |
| 82.0 | % |
| $ | 2,461 |
| $ | 1,671 |
| $ | 790 |
| 47.3 | % |
| $ | 1,497 |
|
| $ | 1,230 |
|
| $ | 267 |
|
|
| 21.7 | % |
| $ | 2,923 |
|
| $ | 2,461 |
|
| $ | 462 |
|
|
| 18.8 | % | ||||||||
Operating Income (Loss) |
| 43 |
| (110 | ) |
| 153 |
| N/M |
|
| 117 |
| (163 | ) |
| 280 |
| N/M |
| ||||||||||||||||||||||||||||||||||||||||||||
Operating Income |
|
| 52 |
|
|
| 43 |
|
|
| 9 |
|
|
| 20.9 | % |
|
| 111 |
|
|
| 117 |
|
|
| (6 | ) |
|
| (5.1 | )% | ||||||||||||||||||||||||||||||||
Operating Margin |
| 3.5 | % |
| (16.3 | )% |
|
|
|
|
|
|
| 4.8 | % |
| (9.8 | )% |
|
|
|
|
|
|
|
| 3.5 | % |
|
| 3.5 | % |
|
|
|
|
|
|
| 3.8 | % |
|
| 4.8 | % |
|
|
|
|
|
|
Three Months EndedJune 30, 20212022 and 20202021
Europe, Middle East and AfricaEMEA unit sales in the second quarter of 20212022 increased 4.72.5 million units, or 62.7%20.8%, to 12.014.5 million units. Replacement tire volume increased 3.22.3 million units, or 51.7%25.2%, primarily in our consumer business, reflecting increased industry demand due to continued recovery from the economic impacts of the COVID-19 pandemic, and the recovery of some volume lost in 2020 as a result of our ongoing initiative to align distribution in Europe.Europe and the addition of Cooper Tire’s units. OE tire volume increased 1.50.2 million units, or 111.6%7.0%, reflecting increased industry demand due to recovery from the economic impacts of the COVID-19 pandemicimproved vehicle production and share gains driven by new consumer fitments. Overall, shortages of certain automobile parts, such as semiconductors, continue to affect OE manufacturers' ability to produce consumer and commercial vehicles consistently.
Net sales in the second quarter of 20212022 were $1,230$1,497 million, increasing $554$267 million, or 82.0%21.7%, from $676$1,230 million in the second quarter of 2020.2021. Net sales increased primarily due to higher volumeimprovements in price and product mix of $397 million, favorable foreign currency translation of $65$206 million, driven by a stronger euro,price increases, higher tire volume of $205 million, the addition of an incremental $43 million of net sales from Cooper Tire, and higher sales in other tire-related businesses of $44$23 million, primarily due to growth in Fleet Solutions and an increase in aviation sales. These increases were partially offset by unfavorable foreign currency translation of $207 million, driven by growtha weaker euro and Turkish lira.
Operating income in our Fleet Solutions business and increased motorcycle and racing tire sales,the second quarter of 2022 was $52 million, increasing $9 million, or 20.9%, from $43 million in the second quarter of 2021. The increase in operating income was primarily due to improvements in price and product mix of $31$217 million, which more than offset higher raw material costs of $182 million, higher tire volume of $50 million and the additionhigher earnings in other tire related businesses of Cooper Tire's net sales$12 million. These increases were partially offset by higher conversion costs of $18$44 million, reflecting higher energy costs and other inflationary cost pressures, higher SAG of $33 million, driven by inflation, and higher transportation costs of $9 million.
Operating income in the second quarter of 2021 was $43 million, a change2022 excluded net rationalization charges of $153 million, from an operating loss of $110 million in the second quarter of 2020. The favorable change in operating income (loss) was primarily due to higher volume of $106 million, lower conversion costs of $71 million, primarily due to favorable overhead absorption as a result of higher factory utilization, and improvements in price and product mix of $39$9 million. These increases were partially offset by higher SAG of $47 million, primarily related to higher wages and benefits and higher advertising expenses, both relating to pandemic-related actions taken in 2020, and higher raw material costs of $14 million. SAG includes incremental savings from rationalization plans of $1 million.
Operating income in the second quarter of 2021 excluded net rationalization charges of $7 million. Operating loss in the second quarter of 2020 excluded net rationalization charges of $30 million and net losses on asset sales of $3 million.
Six Months EndedJune 30, 20212022 and 20202021
Europe, Middle East and AfricaEMEA unit sales in the first six months of 20212022 increased 5.84.3 million units, or 30.5%17.5%, to 24.729.0 million units. Replacement tire volume increased 4.14.4 million units, or 28.0%23.8%, primarily in our consumer business, reflecting increased industry demand due to continued recovery from the economic impacts of the COVID-19 pandemic, and the recovery of some volume lost in 2020 as a result of our ongoing initiative to align distribution in Europe.Europe and the addition of Cooper Tire’s units. OE tire volume increased 1.7decreased 0.1 million units, or 38.9%1.7%, reflecting the negative impact on vehicle production of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors, partially offset by share gains driven by new consumer fitments.
Net sales in the first six months of 20212022 were $2,461$2,923 million, increasing $790$462 million, or 47.3%18.8%, from $1,671$2,461 million in the first six months of 2020.2021. Net sales increased primarily due to higher volume of $493 million, favorable foreign currency translation of $119 million, driven by the strengthening of the euro, improvements in price and product mix of $109$370 million, driven by price increases, higher tire volume of $308 million, the addition of an incremental $105 million of net sales from Cooper Tire, and higher sales in other tire-related businesses of $52$54 million, primarily due to growth in our Fleet Solutions business and increasedan increase in aviation, motorcycle and racingretread sales. These increases were partially offset by unfavorable foreign currency translation of $373 million, driven by a weaker euro and Turkish lira.
Operating income in the first six months of 2022 was $111 million, decreasing $6 million, or 5.1%, from $117 million in the first six months of 2021. The decrease in operating income was primarily due to higher conversion costs of $93 million, reflecting higher energy costs and other inflationary cost pressures, higher SAG of $59 million, primarily related to higher inflation, wages and benefits and advertising costs, higher transportation costs of $20 million, and unfavorable foreign currency translation of $11 million, driven by a weaker euro and Turkish lira. These decreases were partially offset by improvements in price and product mix of $383 million, which more than offset higher raw material costs of $309 million, higher tire sales,volume of $78 million, higher earnings in other tire-related businesses of $13 million, and $9 million of expense in 2021 related to inventory revaluations. The remainder of the change was driven by the addition of Cooper Tire's net sales of $18 million.Tire’s operating results.
Operating income in the first six months of 2021 was $117 million, a change2022 excluded net rationalization charges of $280 million, from an operating loss of $163 million in the first six months of 2020. The favorable change in operating income (loss) was primarily due to higher volume of $130 million, lower conversion costs of $108 million, primarily due to favorable overhead absorption as a result of higher factory utilization, improvements in price and product mix of $71 million and $12 million of pandemic-related work in process inventory write-offs in 2020. These increases were partially offset by higher SAG of $32 million, primarily related to higher wages and benefits and higher advertising expenses, both relating to pandemic-related actions taken in 2020. Conversion costs and SAG include incremental savings from rationalization plans of $3 million and $1 million, respectively.
$14 million. Operating income in the first six months of 2021 excluded net rationalization charges of $44 million. Operating loss in the first six months of 2020 excluded a non-cash goodwill impairment charge of $182 million, net rationalization charges of $36 million, net losses on asset sales of $2 million and accelerated depreciation of $1 million.
4034
Asia Pacific
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| Change |
|
| Percent |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| Percent |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| Percent |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| Percent |
| ||||||||||||||||
Tire Units |
| 6.5 |
| 4.6 |
| 1.9 |
| 43.1 | % |
| 13.3 |
| 9.8 |
| 3.5 |
| 35.7 | % |
|
| 7.8 |
|
|
| 6.5 |
|
|
| 1.3 |
|
|
| 19.9 | % |
|
| 16.1 |
|
|
| 13.3 |
|
|
| 2.8 |
|
|
| 20.7 | % | ||||||||||||||
Net Sales |
| $ | 493 |
| $ | 334 |
| $ | 159 |
| 47.6 | % |
| $ | 986 |
| $ | 722 |
| $ | 264 |
| 36.6 | % |
| $ | 568 |
|
| $ | 493 |
|
| $ | 75 |
|
|
| 15.2 | % |
| $ | 1,135 |
|
| $ | 986 |
|
| $ | 149 |
|
|
| 15.1 | % | ||||||||
Operating Income (Loss) |
| 23 |
| (34 | ) |
| 57 |
| N/M |
|
| 61 |
| (28 | ) |
| 89 |
| N/M |
| ||||||||||||||||||||||||||||||||||||||||||||
Operating Income |
|
| 19 |
|
|
| 23 |
|
|
| (4 | ) |
|
| (17.4 | )% |
|
| 47 |
|
|
| 61 |
|
|
| (14 | ) |
|
| (23.0 | )% | ||||||||||||||||||||||||||||||||
Operating Margin |
| 4.7 | % |
| (10.2 | )% |
|
|
|
|
|
|
| 6.2 | % |
| (3.9 | )% |
|
|
|
|
|
|
|
| 3.3 | % |
|
| 4.7 | % |
|
|
|
|
|
|
| 4.1 | % |
|
| 6.2 | % |
|
|
|
|
|
|
Three Months EndedJune 30, 20212022 and 20202021
Asia Pacific unit sales in the second quarter of 20212022 increased 1.91.3 million units, or 43.1%19.9%, to 6.57.8 million units. Replacement tire volume increased 1.1 million units, or 34.7%. OE tire volume increased 0.8 million units, or 62.6%,38.3%. Replacement tire volume increased 0.5 million units, or 10.4%. These increases primarily inrelated to our consumer business in India. These increases were primarily due to continued recovery fromIndia and the economic impactsaddition of Cooper Tire’s units, partially offset by decreases in China as a result of renewed COVID-19 stay-at-home orders earlier in the COVID-19 pandemic.quarter.
Net sales in the second quarter of 20212022 were $493$568 million, increasing $159$75 million, or 47.6%15.2%, from $334$493 million in the second quarter of 2020.2021. Net sales increased primarily due to higher tire volume of $106$69 million, the addition of an incremental $21 million of net sales from Cooper Tire, and favorable price and product mix of $14 million, driven by price increases. These increases were partially offset by unfavorable foreign currency translation of $31$24 million, primarily related to the strengtheningweakening of the Japanese yen and Australian dollar and Chinese yuan, and the addition of Cooper Tire's net sales of $15 million.dollar.
Operating income in the second quarter of 20212022 was $23$19 million, a change of $57decreasing $4 million, or 17.4%, from an operating loss of $34$23 million in the second quarter of 2020.2021. The favorable changedecrease in operating income (loss) was primarily due to lowerhigher raw material costs of $54 million, higher conversion costs of $31$4 million, driven by the stay-at-home orders in China and higher energy costs, partially offset by higher production volume due to business growth in India, Japan and Malaysia, and higher SAG of $3 million, primarily due to favorable overhead absorption as a result of higher factory utilization, higher volume of $28 million,inflation. These decreases were partially offset by favorable price and product mix of $10$32 million, higher tire volume of $16 million and higher earningsthe addition of Cooper Tire's operating results.
Operating income in other tire-related businessesthe second quarter of $8 million, primarily due to higher aviation sales. These increases were partially offset by higher SAG2022 excluded net rationalization charges of $15 million, primarily related to higher wages and benefits and higher advertising expense, both relating to pandemic-related actions taken in 2020.$1 million.
Six Months EndedJune 30, 20212022 and 20202021
Asia Pacific unit sales in the first six months of 20212022 increased 3.52.8 million units, or 35.7%20.7%, to 13.316.1 million units. OE tire volume increased 1.8 million units, or 40.3%. Replacement tire volume increased 2.21.0 million units, or 32.8%10.7%. OE tire volume increased 1.3 millionThese increases primarily related to the addition of Cooper Tire’s units or 41.6%, primarily inand our consumer business in India. These increases were primarily due to continued recovery from the economic impacts of the COVID-19 pandemic.
Net sales in the first six months of 20212022 were $986$1,135 million, increasing $264$149 million, or 36.6%15.1%, from $722$986 million in the first six months of 2020.2021. Net sales increased primarily due to higher tire volume of $206$95 million, favorable foreign currency translation of $54 million, primarily related to the strengthening of the Australian dollar and Chinese yuan, and the addition of Cooper Tire'san incremental $72 million of net sales from Cooper Tire, and favorable price and product mix of $15 million.$28 million, driven by price increases. These increases were partially offset by unfavorable priceforeign currency translation of $40 million, primarily related to the weakening of the Japanese yen and product mix of $10 million.Australian dollar.
Operating income in the first six months of 20212022 was $61$47 million, a change of $89decreasing $14 million, or 23.0%, from an operating loss of $28$61 million in the first six months of 2020.2021. The favorable changedecrease in operating income (loss) was primarily due to higher volumeraw material costs of $51$101 million lowerand higher conversion costs of $43$9 million, primarilydriven by the stay-at-home orders in China and higher energy costs, partially offset by higher production volume due to favorable overhead absorption as a result of higher factory utilization,business growth in India, Japan and Malaysia. These decreases were partially offset by favorable price and product mix of $10$55 million, higher tire volume of $23 million and lower raw material coststhe addition of $4 million. These increases were partially offset by higher SAGCooper Tire's operating results.
35
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash generated from our operating and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements and our cash flows from financing activities are dependent upon our ability to access credit or other capital.
In 2021, we completed several financing actions to provide funding for the acquisition of Cooper Tire and to improve our debt maturity profile.
On April 6, 2021, we issued $550 million of 5.25% senior notes due April 2031 and $450 million of 5.625% senior notes due 2033. The net proceeds from these notes, together with cash and cash equivalents, were used to redeem our existing $1.0 billion 5.125% senior notes due 2023 on May 6, 2021 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest to the redemption date.
41
On May 18, 2021, we issued $850 million of 5% senior notes due 2029 and $600 million of 5.25% senior notes due July 2031. The net proceeds from these notes, together with cash and cash equivalents and borrowings under our first lien revolving credit facility, were used to fund the cash portion of the Merger Consideration and related transaction costs.
On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026, increasing the amount of the facility to $2.75 billion, and including Cooper Tire's accounts receivable and inventory in the borrowing base for the facility. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points.
Following the Cooper Tire acquisition, $117 million in aggregate principal amount of Cooper Tire's 7.625% senior notes due 2027 remain outstanding. These notes also include a $19 million fair value step-up, which will be amortized to interest expense over the remaining life of the notes.
At June 30, 2021,2022, we had $1,030$1,248 million in cash and cash equivalents, compared to $1,539$1,088 million at December 31, 2020.2021. For the six months ended June 30, 2021,2022, net cash used by operating activities was $71$533 million, reflecting cash used for working capital of $540$1,242 million and rationalization payments of $123 million. Net cash used for operating activities also reflects$59 million, partially offset by net income for the period of $89$266 million, which includes non-cash charges for depreciation and amortization of $405 million.$481 million, a non-cash gain of $95 million on the sale and leaseback transaction in Americas, and the impact of other non-cash changes to various assets and liabilities on the Balance Sheet. Net cash used by investing activities was $2,233$403 million, primarily representing the $1,856 million cash portion of the Merger Consideration, net of cash and restricted cash acquired, related to the Cooper Tire acquisition, as well as capital expenditures of $385 million.$511 million, partially offset by cash proceeds of $108 million received from the sale and leaseback transaction in Americas. Cash provided by financing activities was $1,820$1,132 million, primarily due to net borrowings of $1,889$1,129 million.
At June 30, 2021,2022, we had $4,112$3,210 million of unused availability under our various credit agreements, compared to $3,881$4,345 million at December 31, 2020.2021. The table below presents unused availability under our credit facilities at those dates:
(In millions) |
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
First lien revolving credit facility |
| $ | 2,308 |
| $ | 1,535 |
|
| $ | 2,069 |
|
| $ | 2,314 |
| |
European revolving credit facility |
| 951 |
| 982 |
|
|
| 522 |
|
|
| 908 |
| |||
Chinese credit facilities |
| 349 |
| 297 |
|
|
| 303 |
|
|
| 374 |
| |||
Mexican credit facilities |
| — |
| 48 |
| |||||||||||
Mexican credit facility |
|
| — |
|
|
| 42 |
| ||||||||
Other foreign and domestic debt |
| 25 |
| 380 |
|
|
| 22 |
|
|
| 147 |
| |||
Short term credit arrangements |
|
| 479 |
|
|
| 639 |
|
|
| 294 |
|
|
| 560 |
|
| $ | 4,112 |
|
| $ | 3,881 |
|
| $ | 3,210 |
|
| $ | 4,345 |
|
We have deposited our cash and cash equivalents and entered into various credit agreements and derivative contracts with financial institutions that we considered to be substantial and creditworthy at the time of such transactions. We seek to control our exposure to these financial institutions by diversifying our deposits, credit agreements and derivative contracts across multiple financial institutions, by setting deposit and counterparty credit limits based on long term credit ratings and other indicators of credit risk such as credit default swap spreads, and by monitoring the financial strength of these financial institutions on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to financial institutions in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a financial institution. However, we cannot provide assurance that we will not experience losses or delays in accessing our deposits or lines of credit due to the nonperformance of a financial institution. Our inability to access our cash deposits or make draws on our lines of credit, or the inability of a counterparty to fulfill its contractual obligations to us, could have a material adverse effect on our liquidity, financial condition or results of operations in the period in which it occurs.
The borrowing base under our first lien revolving credit facility is dependent, in significant part, on our eligible accounts receivable and inventory. Overall, our inventory levels have declined as a result of the impacts of the COVID-19 pandemic. A decline in our borrowing base reduces our availability under the first lien revolving credit facility. Additionally, the amounts available to us from our pan-European accounts receivable securitization facility and other accounts receivable factoring programs have declined due to the decline in our accounts receivable as a result of the impacts of the COVID-19 pandemic on our sales.
We expect our 20212022 cash flow needs to include capital expenditures of approximately $1.0$1.1 billion to $1.2 billion. We also expect interest expense to be $400$450 million to $425$475 million; rationalization payments to be approximately $225$100 million; income tax payments to be $125$150 million to $150$200 million, excluding one-time items; and contributions to our funded pension plans to be $50$25 million to $75$50 million. We expect working capital to be a use of cash for the full year of 20212022 of approximately $300 million to $500 million.
We are continuing to actively monitor our liquidity and intend to operate our business in a way that allows us to address our cash flow needs with our existing cash and available credit if they cannot be funded by cash generated from operating or other financing activities. We believe that our liquidity position is adequate to fund our operating and investing needs and debt maturities for the next twelve months and to provide us with the ability to respond to further changes in the business environment.
42
Our ability to service debt and operational requirements is also dependent, in part, on the ability of our subsidiaries to make distributions of cash to various other entities in our consolidated group, whether in the form of dividends, loans or otherwise. In certain countries where we operate, such as China, South Africa, Serbia and Argentina, transfers of funds into or out of such countries by way of dividends, loans, advances or payments to third-party or affiliated suppliers are generally or periodically subject to certain requirements, such as obtaining approval from the foreign government and/or currency exchange board before net assets can be transferred out of the country. In addition, certain of our credit agreements and other debt instruments limit the ability of foreign subsidiaries to make distributions of cash. Thus, we would have to repay and/or amend these credit agreements and other debt instruments in order to use this cash to service our consolidated debt. Because of the inherent uncertainty of satisfactorily meeting these requirements or limitations, we do not consider the net assets of our subsidiaries, including our Chinese, South African, Serbian and Argentinian subsidiaries, which are subject to such requirements or limitations to be integral to our liquidity or our ability to service our debt and operational requirements. At June 30, 2021,2022, approximately $990$910 million of net assets, including approximately $170$246 million of cash and cash equivalents, were subject to such requirements. The
36
requirements we must comply with to transfer funds out of China, South Africa, Serbia and Argentina have not adversely impacted our ability to make transfers out of those countries.
Operating Activities
Net cash used by operating activities was $71$533 million in the first six months of 2021,2022, compared to net cash used by operating activities of $820$71 million in the first six months of 2020.
2021. The $749$462 million improvementincrease in net cash used by operating activities was primarily due to ana net increase in operating income fromcash used for working capital of $702 million, partially offset by higher earnings in our SBUs of $1,003 million. This improvement to$142 million, lower cash flows from operating activities was partially offset by (i) year-over-year changes in balance sheet accountspayments for Compensationrationalizations of $64 million, and Benefits, Other Current Liabilities and Other Assets and Liabilities totaling $143a $31 million driven by prior year cost actions, payroll tax deferrals and other pandemic-related impacts to our 2020 balance sheet, (ii) an increasedecrease in cash income tax payments of $63 million, primarily as a result of higher earnings in 2021 and the receipt of certain tax refunds in 2020, (iii) cash paid for transaction and other costs related to the Cooper Tire acquisition of $33 million, (iv) a $22 million increase in cash used for rationalization payments, and (v) a net increase in cash used for working capital of $20 million.acquisition.
The net increase in cash used for working capital reflects increases in cash used for Inventory of $846 million and Accounts Receivable of $581$479 million largelyand Inventory of $348 million, partially offset by an increase in cash provided by Accounts Payable –- Trade of $1,407$125 million. These changes were driven by our continued recovery from the impacts of the COVID-19 pandemic, which include higher sales volume, the impact of current year inflationary cost pressures on our manufacturing operations and pricing, an increase in finished goods inventory as we continue to restock in order to meet anticipated 2021 demand.near-term demand and the incremental working capital of Cooper Tire.
Investing Activities
Net cash used by investing activities was $403 million in the first six months of 2022, compared to $2,233 million in the first six months of 2021, compared to $390 million in the first six months of 2020.2021. Net cash used by investing activities in the first six months of 2021 includes the payment of the $1,856 million for the cash portion of the Merger Consideration,purchase price related to the Cooper Tire acquisition, net of cash and restricted cash acquired,acquired. Capital expenditures were $511 million in the first six months of 2022, including $98 million related to the Cooper Tire, acquisition. Capital expenditures werecompared to $385 million in the first six months of 2021, comparedincluding $17 million related to $363 million in the first six months of 2020.Cooper Tire. Beyond expenditures required to sustain our facilities, capital expenditures in 20212022 and 20202021 primarily related to investments in additional 17-inchthe modernization and above capacityexpansion of tire manufacturing facilities around the world. Net cash provided by investing activities in the first six months of 2022 also includes $108 million of cash proceeds related to the sale and leaseback transaction in Americas.
Financing Activities
Net cash provided by financing activities was $1,820$1,132 million in the first six months of 2021,2022, compared to net cash provided by financing activities of $1,324$1,820 million in the first six months of 2020.2021. Financing activities in the first six months of 2022 included net borrowings of $1,129 million. Financing activities in the first six months of 2021 included net borrowings of $1,889 million, which were partially offset by $73 million of debt-related costs and other financing transactions of $73 million. Financing activities in 2020 included net borrowings of $1,414 million, which were partially offset by debt-related costs and other financing transactions of $53 million and dividends on our common stock of $37 million.transactions.
Credit Sources
In aggregate, we had total credit arrangements of $11,951$11,475 million available at June 30, 2021,2022, of which $4,112$3,210 million were unused, compared to $9,707$11,628 million available at December 31, 2020,2021, of which $3,881$4,345 million were unused. At June 30, 2021,2022, we had long term credit arrangements totaling $10,983$10,649 million, of which $3,633$2,916 million were unused, compared to $8,632$10,624 million and $3,242$3,785 million, respectively, at December 31, 2020.2021. At June 30, 2021,2022, we had short term committed and uncommitted credit arrangements totaling $968$826 million, of which $479$294 million were unused, compared to $1,075$1,004 million and $639$560 million, respectively, at December 31, 2020.2021. The continued availability of the short term uncommitted arrangements is at the discretion of the relevant lender and may be terminated at any time.
43
Outstanding Notes
At June 30, 2021,2022, we had $5,436$5,551 million of outstanding notes compared to $3,860$5,591 million at December 31, 2020. The increase from December 31, 2020 was primarily due to the issuance of $1.45 billion of senior notes to fund a portion of the acquisition of Cooper Tire.2021.
$2.75 billion Amended and Restated First Lien Revolving Credit Facility due 2026
On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026, increasing the amount of the facility to $2.75 billion, and including Cooper Tire's accounts receivable and inventory in the borrowing base for the facility. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points, based on our current liquidity as described below.
Our amended and restated first lien revolving credit facility is available in the form of loans or letters of credit. Up to $800 million in letters of credit and $50 million of swingline loans are available for issuance under the facility. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to $250 million. Based on our current liquidity, amounts drawn under this facility bear interest at LIBOR plus 125 basis points, and undrawn amounts under the facility will be subject to an annual commitment fee of 25 basis points.
Availability under the facility is subject to a borrowing base, which is based on (i) eligible accounts receivable and inventory of The Goodyear Tire & Rubber Company and certain of its U.S. and Canadian subsidiaries, (ii) the value of our principal trademarks in an amount not to exceed $400 million, (iii) the value of eligible machinery and equipment, and (iv) certain cash in an amount not to exceed $275 million. To the extent that our eligible accounts receivable, inventory and other components of the borrowing base decline in value, our borrowing base will decrease and the availability under the facility may decrease below $2.75 billion. As of June 30, 2021,2022, our borrowing base, and therefore our availability, under this facility was $423$108 million below the facility's stated amount of $2.75 billion.
If Available Cash (as defined in the facility) plus the availability under the facility is greater than $750 million, amounts drawn under the facility will bear interest, at our option, at (i) 125 basis points over LIBOR or (ii) 25 basis points over an alternative base rate (the higher37
At June 30, 2022, we had $570 million of borrowings and $3 million of letters of credit issued under the revolving credit facility. At December 31, 2021, we had no borrowings and $19 million of letters of credit issued under the revolving credit facility. At December 31, 2020, we had no borrowings and $11 million of letters of credit issued under the revolving credit facility.
AtJune 30, 2021, we had$321 millionin letters of credit issued under bilateral letter of credit agreements.
Amended and Restated Second Lien Term Loan Facility due 2025
Our amended and restated second lien term loan facility matures on March 7, 2025. The term loan bears interest, at our option, at (i) 200 basis points over LIBOR or (ii) 100 basis points over an alternative base rate (the higher of (a) the prime rate, (b) the federal funds effective rate or the overnight bank funding rate plus 50 basis points or (c) LIBOR plus 100 basis points). In addition, if the Total Leverage Ratio is equal to or less than 1.25 to 1.00, we have the option to further reduce the spreads described above by 25 basis points. "Total Leverage Ratio" has the meaning given it in the facility.
At both June 30, 2021 and December 31, 2020, the amount outstanding under this facility was $400 million.
€800 million Amended and Restated Senior Secured European Revolving Credit Facility due 2024
Our amended and restated European revolving credit facility consists of (i) a €180 million German tranche that is available only to Goodyear Dunlop Tires Germany GmbH (“GDTG”) and (ii) a €620 million all-borrower tranche that is available to Goodyear Europe B.V. (“GEBV”("GEBV"), GDTGGoodyear Germany and Goodyear Dunlop Tires Operations S.A. Up to €175 million of swingline loans and €75 million in letters of credit are available for issuance under the all-borrower tranche. Amounts drawn under this facility will bear interest at LIBOR plus 150 basis points for loans denominated in U.S. dollars, or pounds sterling and EURIBOR plus 150 basis points for loans denominated in euros, and undrawnSONIA plus 150 basis points for loans denominated in pounds sterling. Undrawn amounts under the facility are subject to an annual commitment fee of 25 basis points. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to €200 million.
At both June 30, 20212022, there were no borrowings outstanding under the German tranche, $310 million (€298 million) of borrowings outstanding under the all-borrower tranche and no letters of credit outstanding under the European revolving credit facility. At December 31, 2020, there were2021, we had no borrowings and no letters of credit outstanding under the European revolving credit facility.
Each of our first lien revolving credit facility and our European revolving credit facility have customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material
44
respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2020 under the first lien facility and December 31, 2018 under the European facility.
Accounts Receivable Securitization Facilities (On-Balance Sheet)
GEBV and certain other of our European subsidiaries are parties to a pan-European accounts receivable securitization facility that expires in 2023.2027. The terms of the facility provide the flexibility to designate annually the maximum amount of funding available under the facility in an amount of not less than €30 million and not more than €450 million. For the period from October 18, 201819, 2021 through October 15, 2020, the designated maximum amount of the facility was €320 million. For the period from October 16, 2020 through October 18, 2021,19, 2022, the designated maximum amount of the facility is €280€300 million.
The facility involves thean ongoing daily sale of substantially all of the trade accounts receivable of certain GEBV subsidiaries. These subsidiaries retain servicing responsibilities. Utilization under this facility is based on eligible receivable balances.
The funding commitments under the facility will expire upon the earliest to occur of: (a) September 26, 2023,October 19, 2027, (b) the non-renewal and expiration (without substitution) of all of the back-up liquidity commitments, (c) the early termination of the facility according to its terms (generally upon an Early Amortisation Event (as defined in the facility), which includes, among other things, events similar to the events of default under our senior securedfirst lien revolving credit facilities;facility; certain tax law changes; or certain changes to law, regulation or accounting standards), or (d) our request for early termination of the facility. The facility’s current back-up liquidity commitments will expire on October 18, 2021.19, 2022.
At June 30, 2021,2022, the amounts available and utilized under this program totaled $246 million (€207237 million). At December 31, 2020,2021, the amounts available and utilized under this program totaled $291$279 million (€237246 million). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Finance Leases.
Accounts Receivable Factoring Facilities (Off-Balance Sheet)
We have sold certain of our trade receivables under off-balance sheet programs. For these programs, we have concluded that there is generally no risk of loss to us from non-payment of the sold receivables. At June 30, 2021,2022, the gross amount of receivables sold was $518$597 million, compared to $451$605 million at December 31, 2020. The increase from December 31, 2020 is primarily due to the addition2021.
Letters of Cooper Tire's off-balance sheet factoring programs.Credit
At June 30, 2022, we had $230 million in letters of credit issued under bilateral letter of credit agreements and other foreign credit facilities.
Supplier Financing
We have entered into payment processing agreements with several financial institutions. Under these agreements, the financial institution acts as our paying agent with respect to accounts payable due to our suppliers. These agreements also allow our suppliers to sell their receivables to the financial institutions at the sole discretion of both the supplier and the financial institution on terms that are negotiated between them. We are not always notified when our suppliers sell receivables under these programs. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our suppliers' decisions to sell their receivables under the programs. Agreements for such supplier financing programs totaled up to $500810 million and $630 million at June 30, 20212022 and December 31, 2020.2021, respectively. The increase from December 31, 2021 is primarily due to the overall increase in our accounts payable base as a result of the Cooper Tire acquisition.
38
Further Information
On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR (“IBA”), confirmed its previously announced plans to cease publication of USD LIBOR on December 31, 2021 for only the one week and two month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. In addition, the IBA will also ceaseceased publication of all tenors of euro and Swiss franc LIBOR and most tenors of Japanese yen and British pound LIBOR on December 31, 2021. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee that has been convened by the Federal Reserve Board and the Federal Reserve Bank of New York to encourage market participants’participants' use of the Secured Overnight Financing Rate, known as SOFR. Additionally, the International Swaps and Derivatives Association, Inc. launched a consultation on technical issues relatedpublished amendments to its definition book to incorporate new benchmark fallbacks for derivative contracts that reference certain interbank offered rates, including LIBOR. We cannot currently predict the effect of the discontinuation of, or other changes to, LIBOR or any establishment of alternative reference rates in the United States, the United Kingdom, the European Union or elsewhere on the global capital markets. The uncertainty regarding the future of LIBOR, as well as the transition from LIBOR to any alternative reference rate or rates, could have adverse impacts on floating rate obligations, loans, deposits, derivatives and other financial instruments that currently use LIBOR as a benchmark rate. We have identified and evaluated our financing obligations and other contracts that refer to LIBOR and expect to be able to transition those obligations and contracts to an alternative reference rate upon the discontinuation of LIBOR. Our amended and restated first lien revolving credit facility, our second lien term loan facility and our European revolving credit facility, which constitute the most significant of our LIBOR-based debt obligations, contain “fallback”"fallback" provisions that address the potential discontinuation of LIBOR and facilitate the adoption of an alternate rate of interest. We have not issued any long term floating rate notes. Our amended and restated first lien revolving credit facility and second lien term loan facility also containcontains express provisions for the use, at our option, of an alternative base rate (the higher of
45
(a) the prime rate, (b) the federal funds effective rate or the overnight bank funding rate plus 50 basis points or (c) LIBOR plus 100 basis points). We do not believe that the discontinuation of LIBOR, or its replacement with an alternative reference rate or rates, will have a material impact on our results of operations, financial position or liquidity.
For a further description of the terms of our outstanding notes, first lien revolving credit facility, second lien term loan facility, European revolving credit facility and pan-European accounts receivable securitization facility, refer to Note to the Consolidated Financial Statements No. 15,16, Financing Arrangements and Derivative Financial Instruments, in our 20202021 Form 10‑K and Note to the Consolidated Financial Statements No. 9, Financing Arrangements and Derivative Financial Instruments, in this Form 10-Q.
Covenant Compliance
Our first and second lien revolving credit facilitiesfacility and some of the indentures governing our notes contain certain covenants that, among other things, limit our ability to incur additional debt or issue redeemable preferred stock, pay dividends, repurchase shares or make certain other restricted payments or investments, incur liens, sell assets, incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, enter into affiliate transactions, engage in sale and leaseback transactions, and consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. Our first and second lien revolving credit facilitiesfacility and the indentures governing our notes also have customary defaults, including cross-defaults to material indebtedness of Goodyear and its subsidiaries.
We have an additional financial covenants in our first and second lien credit facilities that are currently not applicable. We only become subject to these financial covenants when certain events occur. These financial covenants and related events are as follows:
In addition, our European revolving credit facility contains non-financial covenants similar to the non-financial covenants in our first and second lien revolving credit facilitiesfacility that are described above and a financial covenant applicable only to GEBV and its subsidiaries. This financial covenant provides that we are not permitted to allow GEBV’s ratio of Consolidated Net GEBV Indebtedness to Consolidated GEBV EBITDA for a period of four consecutive fiscal quarters to be greater than 3.0 to 1.0 at the end of any fiscal quarter. Consolidated Net GEBV Indebtedness is determined net of the sum of cash and cash equivalents in excess of $100 million held by GEBV and its subsidiaries, cash and cash equivalents in excess of $150 million held by the Parent Company and its U.S. subsidiaries, and availability under our first lien revolving credit facility if the ratio of EBITDA to Consolidated Interest Expense described above is not applicable and the conditions to borrowing under the first lien revolving credit facility are met. Consolidated Net GEBV Indebtedness also excludes loans from other consolidated Goodyear entities. This financial covenant is also included in our pan-European accounts receivable securitization facility. At June 30, 2021,2022, we were in compliance with this financial covenant.
Our credit facilities also state that we may only incur additional debt or make restricted payments that are not otherwise expressly permitted if, after giving effect to the debt incurrence or the restricted payment, our ratio of EBITDA to Consolidated Interest Expense for the prior four fiscal quarters would exceed 2.0 to 1.0. Certain of our senior note indentures have substantially similar
39
limitations on incurring debt and making restricted payments. Our credit facilities and indentures also permit the incurrence of additional debt through other provisions in those agreements without regard to our ability to satisfy the ratio-based incurrence test described above. We believe that these other provisions provide us with sufficient flexibility to incur additional debt necessary to meet our operating, investing and financing needs without regard to our ability to satisfy the ratio-based incurrence test.
Covenants could change based upon a refinancing or amendment of an existing facility, or additional covenants may be added in connection with the incurrence of new debt.
At June 30, 2021,2022, we were in compliance with the currently applicable material covenants imposed by our principal credit facilities and indentures.
46
The terms “Available Cash,” “EBITDA,” “Consolidated Interest Expense,” “Consolidated Net Secured Indebtedness,” “Pro Forma Senior Secured Leverage Ratio,” “Consolidated Net GEBV Indebtedness” and “Consolidated GEBV EBITDA” have the meanings given them in the respective credit facilities.
Potential Future Financings
In addition to the financing activities described above, we may seek to undertake additional financing actions which could include restructuring bank debt or capital markets transactions, possibly including the issuance of additional debt or equity. Given the inherent uncertainty of market conditions, access to the capital markets cannot be assured.
Our future liquidity requirements will make it necessary for us to incur additional debt. However, a substantial portion of our assets are already subject to liens securing our indebtedness. As a result, we are limited in our ability to pledge our remaining assets as security for additional secured indebtedness. In addition, no assurance can be given as to our ability to raise additional unsecured debt.
Dividends and Common Stock Repurchase ProgramRepurchases
Under our primary credit facilities and some of our note indentures, we are permitted to pay dividends on and repurchase our capital stock (which constitute restricted payments) as long as no default will have occurred and be continuing, additional indebtedness can be incurred under the credit facilities or indentures following the payment, and certain financial tests are satisfied.
In the first six months of 2020, we paid cash dividends of $37 million on our common stock, all of which was paid in the first quarter of 2020. This amount excludes dividends earned on stock-based compensation plans of approximately $1 million. On April 16, 2020, we announced that we have suspended theWe do not currently pay a quarterly dividend on our common stock.
From time to time, weWe may repurchase shares delivered to us by employees as payment for the exercise price of our common stock under programs approved byoptions and the Boardwithholding taxes due upon the exercise of Directors.stock options or the vesting or payment of stock awards. During the first six months of 2021,2022, we did not repurchase any shares of our common stock under such programs.from employees.
The restrictions imposed by our credit facilities and indentures are not expected to significantly affect our ability to pay dividends or repurchase our capital stock in the future.
Asset Dispositions
The restrictions on asset sales and sale and leaseback transactions imposed by our material indebtedness have not affected our ability to divest non-core businesses or assets, and those divestitures have not affected our ability to comply with those restrictions.
Supplemental Guarantor Financial Information
Certain of our subsidiaries, which are listed on Exhibit 22.1 to this Quarterly Report on Form 10-Q and are generally holding or operating companies, have guaranteed our obligations under the $800 million outstanding principal amount of 9.5% senior notes due 2025, the $900 million outstanding principal amount of 5% senior notes due 2026, the $700 million outstanding principal amount of 4.875% senior notes due 2027, the $850 million outstanding principal amount of 5% senior notes due 2029, the $550 million outstanding principal amount of 5.25% senior notes due April 2031, the $600 million outstanding principal amount of 5.25% senior notes due July 2031 and the $450 million outstanding principal amount of 5.625% senior notes due 2033 (collectively, the “Notes”).
The Notes have been issued by The Goodyear Tire & Rubber Company (the “Parent Company”) and are its senior unsecured obligations. The Notes rank equally in right of payment with all of our existing and future senior unsecured obligations and senior to any of our future subordinated indebtedness. The Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the assets securing that indebtedness. The Notes are fully and unconditionally guaranteed on a joint and several basis by each of our wholly-owned U.S. and Canadian subsidiaries that also guarantee our obligations under certain of our senior securedfirst lien revolving credit facilitiesfacility (such guarantees, the “Guarantees”; and, such guaranteeing subsidiaries, the “Subsidiary Guarantors”). The Guarantees are senior unsecured obligations of the Subsidiary Guarantors and rank equally in right of payment
40
with all existing and future senior unsecured obligations of our Subsidiary Guarantors. The Guarantees are effectively subordinated to existing and future secured indebtedness of the Subsidiary Guarantors to the extent of the assets securing that indebtedness.
The Notes are structurally subordinated to all of the existing and future debt and other liabilities, including trade payables, of our subsidiaries that do not guarantee the Notes (the “Non-Guarantor Subsidiaries”). The Non-Guarantor Subsidiaries will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make funds available to pay those amounts. Certain Non-Guarantor Subsidiaries are limited in their ability to remit funds to us by means of dividends, advances or loans due to required foreign government and/or currency exchange board approvals or limitations in credit agreements or other debt instruments of those subsidiaries.
47
The Subsidiary Guarantors, as primary obligors and not merely as sureties, jointly and severally irrevocably and unconditionally guarantee on a senior unsecured basis the performance and full and punctual payment when due of all obligations of the Parent Company under the Notes and the related indentures, whether for payment of principal of or interest on the Notes, expenses, indemnification or otherwise. The Guarantees of the Subsidiary Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions.
Although the Guarantees provide the holders of Notes with a direct unsecured claim against the assets of the Subsidiary Guarantors, under U.S. federal bankruptcy law and comparable provisions of U.S. state fraudulent transfer laws, in certain circumstances a court could cancel a Guarantee and order the return of any payments made thereunder to the Subsidiary Guarantor or to a fund for the benefit of its creditors.
A court might take these actions if it found, among other things, that when the Subsidiary Guarantors incurred the debt evidenced by their Guarantee (i) they received less than reasonably equivalent value or fair consideration for the incurrence of the debt and (ii) any one of the following conditions was satisfied:
In applying the above factors, a court would likely find that a Subsidiary Guarantor did not receive fair consideration or reasonably equivalent value for its Guarantee, except to the extent that it benefited directly or indirectly from the issuance of the Notes. The determination of whether a guarantor was or was not rendered “insolvent” when it entered into its guarantee will vary depending on the law of the jurisdiction being applied. Generally, an entity would be considered insolvent if the sum of its debts (including contingent or unliquidated debts) is greater than all of its assets at a fair valuation or if the present fair salable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts, including contingent or unliquidated debts, as they mature.
Under Canadian federal bankruptcy and insolvency laws and comparable provincial laws on preferences, fraudulent conveyances or other challengeable or voidable transactions, the Guarantees could be challenged as a preference, fraudulent conveyance, transfer at undervalue or other challengeable or voidable transaction. The test to be applied varies among the different pieces of legislation, but as a general matter these types of challenges may arise in circumstances where:
41
In addition, in certain insolvency proceedings a Canadian court may subordinate claims in respect of the Guarantees to other claims against a Subsidiary Guarantor under the principle of equitable subordination if the court determines that (1) the holder of Notes engaged in some type of inequitable or improper conduct, (2) the inequitable or improper conduct resulted in injury to other creditors or conferred an unfair advantage upon the holder of Notes and (3) equitable subordination is not inconsistent with the provisions of the relevant solvency statute.
If a court canceled a Guarantee, the holders of Notes would no longer have a claim against that Subsidiary Guarantor or its assets.
Each Guarantee is limited, by its terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Guarantee, as it relates to that Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.
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Each Subsidiary Guarantor is a consolidated subsidiary of the Parent Company at the date of each balance sheet presented. The following tables present summarized financial information for the Parent Company and the Subsidiary Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the Subsidiary Guarantors and (ii) equity in earnings from and investments in any Non-Guarantor Subsidiary.
|
| Summarized Balance Sheets |
|
| Summarized Balance Sheets |
| ||||||||||
(In millions) |
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
Total Current Assets(1) |
| $ | 4,139 |
| $ | 4,662 |
|
| $ | 6,127 |
|
| $ | 5,161 |
| |
Total Non-Current Assets |
| 5,451 |
| 5,426 |
|
|
| 8,455 |
|
|
| 8,406 |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Current Liabilities |
| $ | 2,160 |
| $ | 1,960 |
|
| $ | 3,037 |
|
| $ | 2,932 |
| |
Total Non-Current Liabilities |
| 8,893 |
| 7,538 |
|
|
| 9,469 |
|
|
| 8,967 |
|
|
| Summarized Statements of Operations |
| |||||
(In millions) |
| Six Months Ended |
|
| Year Ended |
| ||
Net Sales |
| $ | 3,577 |
|
| $ | 6,114 |
|
Cost of Goods Sold |
|
| 2,834 |
|
|
| 5,277 |
|
Selling, Administrative and General Expense |
|
| 573 |
|
|
| 1,094 |
|
Goodwill and Other Asset Impairments |
|
| — |
|
|
| 148 |
|
Rationalizations |
|
| 18 |
|
|
| 95 |
|
Interest Expense |
|
| 144 |
|
|
| 257 |
|
Other (Income) Expense |
|
| 53 |
|
|
| (58 | ) |
Income (Loss) before Income Taxes(2) |
| $ | (45 | ) |
| $ | (699 | ) |
|
|
|
|
|
| |||
Net Income (Loss) |
| $ | (51 | ) |
| $ | (806 | ) |
Goodyear Net Income (Loss) |
| $ | (51 | ) |
| $ | (806 | ) |
|
| Summarized Statements of Operations |
| |||||
(In millions) |
| Six Months Ended |
|
| Year Ended |
| ||
Net Sales |
| $ | 5,667 |
|
| $ | 9,549 |
|
Cost of Goods Sold |
|
| 4,655 |
|
|
| 7,623 |
|
Selling, Administrative and General Expense |
|
| 755 |
|
|
| 1,457 |
|
Rationalizations |
|
| 22 |
|
|
| 37 |
|
Interest Expense |
|
| 166 |
|
|
| 322 |
|
Other (Income) Expense |
|
| (122 | ) |
|
| (93 | ) |
Income before Income Taxes(2) |
| $ | 191 |
|
| $ | 203 |
|
| �� |
|
|
|
|
| ||
Net Income |
| $ | 155 |
|
| $ | 542 |
|
Goodyear Net Income |
| $ | 155 |
|
| $ | 542 |
|
4942
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may alter such estimates and affect our results of operations and financial position in future periods.
Acquisitions.We allocate the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess value of the purchase price for an acquired business over the estimated fair value of the assets acquired and liabilities assumed is recognized as goodwill. The valuation of the acquired assets and liabilities will impact the determination of future operating results. We use a variety of information sources to determine the fair value of acquired assets and liabilities including: third-party appraisers for the values and lives of property, identifiable intangibles and inventories; and actuaries and other third-party specialists for defined benefit pension plans, workers' compensation and general and product liabilities. Goodwill is assigned to reporting units as of the date of the related acquisition. If goodwill is assigned to more than one reporting unit, we utilize a method that is consistent with the manner in which the amount of goodwill in a business combination is determined. Transaction costs related to the acquisition of a business are expensed as incurred.
We estimate the fair value of acquired customer relationships using the multi-period excess earnings method. Fair value is estimated as the present value of the benefits anticipated from ownership of the asset, in excess of the returns required on the investment in contributory assets which are necessary to realize those benefits. The intangible asset’s estimated earnings are determined as the residual earnings after quantifying estimated earnings from contributory assets. Assumptions used in these calculations are considered from a market participant perspective and include revenue growth rates, estimated earnings, contributory asset charges, customer attrition rates and discount rates.
We estimate the fair value of trade names (definite and indefinite) using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the assets. Assumed royalty rates are applied to projected revenue for the remaining useful lives of the assets to estimate the royalty savings. Assumptions used in the determination of the fair value of a trade name include revenue growth rates, the royalty rate and the discount rate.
While we use our best estimates and assumptions, fair value estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments required after the measurement period are recorded in the consolidated statement of operations.
Future changes in the judgments, assumptions and estimates that are used in our acquisition valuations and intangible asset and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.
Refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies" in our 2020 Form 10-K for a discussion of our other critical accounting policies, including those related to pensions and other postretirement benefits, workers' compensation, general and product liability and other litigation, and recoverability of goodwill.
FORWARD-LOOKING INFORMATION — SAFE HARBOR STATEMENT
Certain information in this Form 10-Q (other than historical data and information) may constitute forward-looking statements regarding events and trends that may affect our future operating results and financial position. The words “estimate,” “expect,” “intend” and “project,” as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including:
50
43
It is not possible to foresee or identify all such factors. We will not revise or update any forward-looking statement or disclose any facts, events or circumstances that occur after the date hereof that may affect the accuracy of any forward-looking statement.
5144
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We utilize derivative financial instrument contracts and nonderivative instruments to manage interest rate, foreign exchange and commodity price risks. We have established a control environment that includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. We do not hold or issue derivative financial instruments for trading purposes.
Commodity Price Risk
The raw material costs to which our operations are principally exposed include the cost of natural rubber, synthetic rubber, carbon black, fabrics, steel cord and other petrochemical-based commodities. Approximately two-thirds of our raw materials are petroleum-based, the cost of which may be affected by fluctuations in the price of oil. We currently do not hedge commodity prices. We do, however, use various strategies to partially offset cost increases for raw materials, including centralizing purchases of raw materials through our global procurement organization in an effort to leverage our purchasing power, expanding our capabilities to substitute lower cost raw materials, and reducing the amount of material required in each tire.
Interest Rate Risk
We continuously monitor our fixed and floating rate debt mix. Within defined limitations, we manage the mix using refinancing. At June 30, 2021, 23%2022, approximately 27% of our debt was at variable interest rates averaging 2.98%4.07%.
The following table presents information about long term fixed rate debt, excluding finance leases, at June 30, 2021:2022:
(In millions) |
|
|
|
|
|
| ||
Carrying amount — liability |
| $ | 5,632 |
|
| $ | 5,682 |
|
Fair value — liability |
| 5,924 |
|
|
| 5,081 |
| |
Pro forma fair value — liability |
| 6,180 |
|
|
| 5,314 |
|
The pro forma information assumes a 100 basis point decrease in market interest rates at June 30, 2021,2022, and reflects the estimated fair value of fixed rate debt outstanding at that date under that assumption. The sensitivity of our fixed rate debt to changes in interest rates was determined using current market pricing models.
Foreign Currency Exchange Risk
We enter into foreign currency contracts in order to reduce the impact of changes in foreign exchange rates on our consolidated results of operations and future foreign currency-denominated cash flows. These contracts reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted transactions resulting primarily from trade purchases and sales, equipment acquisitions, intercompany loans and royalty agreements. Contracts hedging short term trade receivables and payables normally have no hedging designation.
The following table presents net foreign currency contract information at June 30, 2021:2022:
(In millions) |
|
|
|
|
|
| ||
Fair value — asset (liability) |
| $ | 15 |
|
| $ | 26 |
|
Pro forma decrease in fair value |
| (119 | ) |
|
| (120 | ) | |
Contract maturities |
| 7/21-6/22 |
|
| 7/22-6/23 |
|
The pro forma decrease in fair value assumes a 10% adverse change in underlying foreign exchange rates at June 30, 2021,2022, and reflects the estimated change in the fair value of contracts outstanding at that date under that assumption. The sensitivity of our foreign currency positions to changes in exchange rates was determined using current market pricing models.
Fair values are recognized on the Consolidated Balance Sheet at June 30, 20212022 as follows:
(In millions) |
|
|
|
|
|
| ||
Current asset (liability): |
|
|
|
|
|
| ||
Accounts receivable |
| $ | 21 |
|
| $ | 29 |
|
Other current liabilities |
| (6 | ) |
|
| (3 | ) |
For further information on foreign currency contracts, refer to Note to the Consolidated Financial Statements No. 9, Financing Arrangements and Derivative Financial Instruments. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for a discussion of our management of counterparty risk.
5245
ITEM 4. CONTROLS AND PROCEDURES.
Management’s Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” which, consistent with Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, we define to mean controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of June 30, 20212022 (the end of the period covered by this Quarterly Report on Form 10-Q).
Changes in Internal Control Over Financial Reporting
On June 7, 2021, we completed the acquisition of Cooper Tire, which operated under its own set of systems and internal controls. Subsequent to the acquisition, we began the process of integrating certain of Cooper Tire's systems and processes towith our systems and internal controlcontrols over financial reporting environment. This integration will continue during the first year of the business combination.
reporting. There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
5346
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Asbestos Litigation
As reported in our Form 10-K for the year ended December 31, 2020,2021, we were one of numerous defendants in legal proceedings in certain state and federal courts involving approximately 38,70038,200 claimants relating to their alleged exposure to materials containing asbestos in products allegedly manufactured by us or asbestos materials present in our facilities. During the first six months of 2021,2022, approximately 500 new claims were filed against us and approximately 700500 were settled or dismissed. The amounts expended on asbestos defense and claim resolution by us and our insurers during the first six months of 20212022 was $7$8 million. At June 30, 2021,2022, there were approximately 38,50038,200 asbestos claims pending against us. The plaintiffs are seeking unspecified actual and punitive damages and other relief. Refer to Note to the Consolidated Financial Statements No. 13, Commitments and Contingent Liabilities, for additional information on asbestos litigation.
Shareholder Derivative Litigation
On October 24, 2018, a purported shareholder of the Company filed a derivative action on behalf of the Company in the Court of Common Pleas for Summit County, Ohio against certain of our directors, our chief executive officer, and certain former officers and directors. The complaint also names the Company as a nominal defendant. The lawsuit alleges, among other things, breach of fiduciary duties, waste of corporate assets and fraudulent concealment in connection with certain G159 tires manufactured by us from 1996 until 2003. The lawsuit seeks unspecified monetary damages, an award of attorney’s fees and expenses, and other legal and equitable relief. On September 25, 2020, the Court of Common Pleas dismissed the derivative action and the purported shareholder has appealed that dismissal. On June 30, 2021, the Ohio Court of Appeals for the Ninth Judicial District reversed the trial court’s judgment and remanded the case for further proceedings.
Litigation Relating to the Cooper Tire Merger
On March 19, 2021, a purported Cooper Tire stockholder filed an action against Cooper Tire and the members of the Cooper Tire Board of Directors (the “Cooper Tire Board”), captioned Stein v. Cooper Tire & Rubber Company, et al., No. 1:21-cv-00407, in the United States District Court for the District of Delaware (the “Stein action”). On March 25, 2021, a purported Cooper Tire stockholder filed an action against Cooper Tire and the members of the Cooper Tire Board, captioned Miles v. Cooper Tire & Rubber Company, et al., No. 2:21-cv-06762, in the United States District Court for the District of New Jersey (the “Miles action”). On March 26, 2021, a purported Cooper Tire stockholder filed an action against Cooper Tire, the members of the Cooper Tire Board, Goodyear and Merger Sub, captioned Griffin v. Cooper Tire & Rubber Company, et al., No. 1:21-cv-00452, in the United States District Court for the District of Delaware (the “Griffin action”). On April 5, 2021, a purported Cooper Tire stockholder filed an action against Cooper Tire and the members of the Cooper Tire Board, captioned Rosenfeld Family Foundation v. Cooper Tire & Rubber Company, et al., No. 1:21-cv-00497, in the United States District Court for the District of Delaware (the “Rosenfeld action”). On April 6, 2021, a purported Cooper Tire stockholder filed an action against Cooper Tire and the members of the Cooper Tire Board, captioned Parshall v. Cooper Tire & Rubber Company, et al., No. 1:21-cv-00504, in the United States District Court for the District of Delaware (the “Parshall action,” and together with the Stein action, the Miles action, the Griffin action and the Rosenfeld action, the “Stockholder actions”). The Stockholder actions generally allege that Cooper Tire and its directors violated the federal securities laws, including Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, by issuing a materially incomplete and misleading registration statement on Form S-4. The Stockholder actions seek, among other things, to enjoin the transactions contemplated by the Merger Agreement and an award of attorneys’ fees and expenses.
All of the Stockholder actions have been voluntarily dismissed by the respective plaintiffs.
Reference is made to Item 3 of Part I of our 20202021 Form 10-K and to Item 1 of Part II of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 20212022 for additional discussion of legal proceedings.
ITEM 1A. RISK FACTORS.
Refer to “Item 1A. Risk Factors” in our 20202021 Form 10-K and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 20212022 for a discussion of our risk factors.
ITEM 6. EXHIBITS.
Refer to the Index of Exhibits, which is by specific reference incorporated into and made a part of this Quarterly Report on Form 10-Q.
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THE GOODYEAR TIRE & RUBBER COMPANY
Quarterly Report on Form 10-Q
For the Quarter EndedJune 30, 20212022
INDEX OF EXHIBITS
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Exhibit Table Item No. | Description of Exhibit | Exhibit Number | ||
10 | Material Contracts | |||
(a) | ||||
(b) | ||||
(c) | ||||
(d) | ||||
(e) | ||||
(f) | ||||
(g) | ||||
(h) | ||||
(i) | ||||
(j) | ||||
22 | Subsidiary Guarantors of Guaranteed Securities | |||
(a) | 22.1 | |||
31 | Rule 13a-14(a) Certifications | |||
(a) | 31.1 | |||
(b) | 31.2 | |||
32 | Section 1350 Certifications | |||
(a) | 32.1 |
48
Exhibit Table Item No. | Description of Exhibit | Exhibit Number | ||
101 | Interactive Data Files | |||
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | 101.INS | |||
Inline XBRL Taxonomy Extension Schema Document. | 101.SCH | |||
Inline XBRL Taxonomy Extension Calculation Linkbase Document. | 101.CAL | |||
Inline XBRL Taxonomy Extension Definition Linkbase Document. | 101.DEF | |||
Inline XBRL Taxonomy Extension Label Linkbase Document. | 101.LAB | |||
Inline XBRL Taxonomy Extension Presentation Linkbase Document. | 101.PRE | |||
104 | Cover Page Interactive Data File | |||
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, |
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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 thereunto duly authorized.
THE GOODYEAR TIRE & RUBBER COMPANY | |||
(Registrant) | |||
Date: | August | By | /s/ EVAN M. SCOCOS |
Evan M. Scocos, Vice President and Controller (Signing on behalf of the Registrant as a duly authorized officer of the Registrant and signing as the Principal Accounting Officer of the Registrant.) |
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