美国
證券交易委員會
華盛頓特區20549
表格
按第13或15(d)條進行的季度報告
1934 年《證券交易所法》
截止至本季度結束
委員會檔案編號：
（根據其組織憲章規定的正式名稱）
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（成立或組織的）州或其他轄區 或組織成立的州或其他司法管轄區) |
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(國稅局雇主識別號碼) 識別號碼) |
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（總部地址） |
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（郵政編碼） |
(
（註冊人的電話號碼，包括區號）
根據法案第12(b)條規定註冊的證券：
每種類別的名稱 |
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交易 標的 |
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每個交易所的名稱 註冊在哪裡的 |
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請以勾選方式指示登記人：（1）是否已按照1934年證券交易法第13條或第15（d）條的規定提交所有應提交的報告，並（2）是否在過去12個月（或要求登記人提交此類報告的更短期間）及過去90天內一直受到此類提交要求的約束。
標示勾選，以表明在過去12個月內（或者在登記人需要提交這些文件的更短期間內）已經根據S-T規則第405條的規定，向電子提交了應提交的每個互動資料文件。
請勾選指示登記者是否為大型快速提交人、快速提交人、非快速提交人、較小的報告公司或新興成長型公司。請參閱交易所法規120億2條，了解「大型快速提交人」、「快速提交人」、「較小的報告公司」和「新興成長型公司」的定義。
☑ |
加速歸檔人 |
☐ |
非加速歸檔人 |
☐ |
小型報告公司 |
新興成長型企業 |
如果是新興成長型企業，在符合任何依據證券交易法第13(a)條所提供的任何新的或修改的財務會計準則的遵循的延伸過渡期方面，是否選擇不使用核准記號進行指示。☐
勾選表示申報人是否為外殼公司（定義於交易所法規第1202條）。
是 ☐ 沒有
請指示在最近切實可行的日期，申報人各類普通股的股份總數。
普通股股份數， 未滿值，2024年10月31日止仍由股東持有： |
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目錄 內容
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EX-101.INS 實例文件 |
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EX-101.SCH 模式文件 |
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EX-104 |
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第一部分. 財務資訊AL資訊
項目1. 財務報表所有聲明。
固特異輪胎和橡膠公司及其子公司
綜合損益表營運結果
(未經查核)
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結束於三個月的期間 |
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九個月結束了 |
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九月三十日， |
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九月三十日， |
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（單位：百萬美元，除每股金額外） |
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2024 |
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2023 |
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2024 |
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2023 |
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銷售淨額（附註2） |
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$ |
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$ |
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$ |
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營業成本 |
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銷售、行政和一般性費用 |
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無形資產減損（附註1） |
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合理化（附註3） |
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利息費用 |
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其他（收入）費用（附註4） |
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稅前淨利（淨損） |
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美國和外國稅費開支（附註5） |
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凈利潤（損失） |
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次要股東的凈利潤（虧損） |
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固特異淨利（損失） |
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固特異凈收益（損失）——每股普通股淨收益 |
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基礎 |
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加權平均已發行股份（附註6） |
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稀釋 |
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加權平均已發行股份（附註6） |
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附注是這些綜合基本報表的重要部分。
1
古代輪胎橡膠公司及子公司
綜合損益綜合表 綜合損益表
(未經查核)
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結束於三個月的期間 |
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九個月結束了 |
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九月三十日， |
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九月三十日， |
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（以百萬為單位） |
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2024 |
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2023 |
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2024 |
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2023 |
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凈利潤（損失） |
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$ |
( |
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$ |
( |
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$ |
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$ |
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其他綜合損益： |
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外幣翻譯，扣除稅項後 |
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確定福利計劃： |
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包含未认列税后德先前服务成本和未认列收益和损失的摊销 $ |
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凈核素損失變動，稅後（$ |
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前期服務成本和因縮水、解除或出售而產生的未實現收益和損失的即時承認，稅後 $ |
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通過計劃修訂所得的先前服務信用，稅後淨額為$ |
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推遲之衍生工具損益，稅後淨額為$ |
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再分類調整金額，稅後淨額為$ |
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其他綜合收益（損失） |
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綜合收益（損失） |
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其他：归属于少数股东的综合收益（损失） |
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固特异综合收益（损失） |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
2
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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September 30, |
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December 31, |
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(In millions, except share data) |
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2024 |
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2023 |
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Assets: |
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Current Assets: |
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Cash and Cash Equivalents |
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$ |
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$ |
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Accounts Receivable, less Allowance — $ |
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Inventories: |
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Raw Materials |
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Work in Process |
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Finished Products |
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Assets Held for Sale (Note 1) |
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Prepaid Expenses and Other Current Assets |
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Total Current Assets |
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Goodwill (Note 1) |
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Intangible Assets (Note 1) |
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Deferred Income Taxes (Note 5) |
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Other Assets |
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Operating Lease Right-of-Use Assets |
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Property, Plant and Equipment, less Accumulated Depreciation — $ |
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Total Assets |
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$ |
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$ |
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Liabilities: |
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Current Liabilities: |
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Accounts Payable — Trade |
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$ |
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$ |
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Compensation and Benefits (Notes 10 and 11) |
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Other Current Liabilities |
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Notes Payable and Overdrafts (Note 8) |
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Operating Lease Liabilities due Within One Year |
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Long Term Debt and Finance Leases due Within One Year (Note 8) |
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Total Current Liabilities |
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Operating Lease Liabilities |
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Long Term Debt and Finance Leases (Note 8) |
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Compensation and Benefits (Notes 10 and 11) |
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Deferred Income Taxes (Note 5) |
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Other Long Term Liabilities |
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Total Liabilities |
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Shareholders’ Equity: |
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Goodyear Shareholders’ Equity: |
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Common Stock, |
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Authorized, |
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Capital Surplus |
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Retained Earnings |
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Accumulated Other Comprehensive Loss (Note 14) |
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Goodyear Shareholders’ Equity |
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Minority Shareholders’ Equity — Nonredeemable |
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Total Shareholders’ Equity |
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Total Liabilities and Shareholders’ Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
3
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
(Unaudited)
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Accumulated |
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Minority |
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Other |
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Goodyear |
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Shareholders' |
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Total |
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Common Stock |
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Capital |
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Retained |
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Comprehensive |
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Shareholders' |
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Equity — Non- |
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Shareholders' |
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(In millions, except share data) |
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Shares |
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Amount |
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Surplus |
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Earnings |
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Loss |
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Equity |
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Redeemable |
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Equity |
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Balance at December 31, 2023 |
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(after deducting |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Net income (loss) |
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( |
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Other comprehensive income (loss) |
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( |
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Total Comprehensive Income (Loss) |
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Stock-based compensation plans |
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Dividends declared |
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Common stock issued from treasury |
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( |
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( |
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( |
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Balance at June 30, 2024 |
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(after deducting |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Net income (loss) |
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( |
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( |
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( |
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Other comprehensive income (loss) |
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Total comprehensive income (loss) |
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Stock-based compensation plans |
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Dividends declared |
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( |
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Common stock issued from treasury |
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Balance at September 30, 2024 |
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(after deducting |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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There were no dividends declared or paid during the three and nine months ended September 30, 2024.
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)
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Accumulated |
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Minority |
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Other |
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Goodyear |
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Shareholders' |
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Total |
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Common Stock |
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Capital |
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Retained |
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Comprehensive |
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Shareholders' |
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Equity — Non- |
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Shareholders' |
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(In millions, except share data) |
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Shares |
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Amount |
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Surplus |
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Earnings |
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Loss |
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Equity |
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Redeemable |
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Equity |
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Balance at December 31, 2022 |
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(after deducting |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Net income (loss) |
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( |
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( |
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( |
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Other comprehensive income (loss) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||
Stock-based compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
Common stock issued from treasury |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Balance at June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(after deducting |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||
Stock-based compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
Common stock issued from treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(after deducting |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
There were no dividends declared or paid during the three and nine months ended September 30, 2023.
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)
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
||
Net Income (Loss) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to Reconcile Net Income (Loss) to Cash Flows from Operating Activities: |
|
|
|
|
|
|
||
Depreciation and Amortization |
|
|
|
|
|
|
||
Amortization and Write-Off of Debt Issuance Costs |
|
|
|
|
|
|
||
Intangible Asset Impairment (Note 1) |
|
|
|
|
|
|
||
Provision for Deferred Income Taxes (Note 5) |
|
|
( |
) |
|
|
( |
) |
Net Pension Curtailments and Settlements |
|
|
( |
) |
|
|
|
|
Net Rationalization Charges (Note 3) |
|
|
|
|
|
|
||
Rationalization Payments |
|
|
( |
) |
|
|
( |
) |
Net (Gains) Losses on Asset Sales (Note 4) |
|
|
( |
) |
|
|
( |
) |
Gain on Insurance Recoveries for Damaged Property, Plant and Equipment |
|
|
( |
) |
|
|
|
|
Operating Lease Expense |
|
|
|
|
|
|
||
Operating Lease Payments |
|
|
( |
) |
|
|
( |
) |
Pension Contributions and Direct Payments |
|
|
( |
) |
|
|
( |
) |
Changes in Operating Assets and Liabilities, Net of Asset Acquisitions and Dispositions: |
|
|
|
|
|
|
||
Accounts Receivable |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
|
|
Accounts Payable — Trade |
|
|
( |
) |
|
|
( |
) |
Compensation and Benefits |
|
|
|
|
|
|
||
Other Current Liabilities |
|
|
( |
) |
|
|
|
|
Other Assets and Liabilities |
|
|
( |
) |
|
|
( |
) |
Total Cash Flows from Operating Activities |
|
|
( |
) |
|
|
( |
) |
Cash Flows from Investing Activities: |
|
|
|
|
|
|
||
Capital Expenditures |
|
|
( |
) |
|
|
( |
) |
Insurance Recoveries for Damaged Property, Plant and Equipment |
|
|
|
|
|
|
||
Cash Proceeds from Sale and Leaseback Transactions (Note 4) |
|
|
|
|
|
|
||
Asset Dispositions |
|
|
|
|
|
|
||
Short Term Securities Acquired |
|
|
|
|
|
( |
) |
|
Short Term Securities Redeemed |
|
|
|
|
|
|
||
Long Term Securities Acquired |
|
|
|
|
|
( |
) |
|
Long Term Securities Redeemed |
|
|
|
|
|
|
||
Notes Receivable |
|
|
( |
) |
|
|
( |
) |
Other Transactions |
|
|
|
|
|
( |
) |
|
Total Cash Flows from Investing Activities |
|
|
( |
) |
|
|
( |
) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
||
Short Term Debt and Overdrafts Incurred |
|
|
|
|
|
|
||
Short Term Debt and Overdrafts Paid |
|
|
( |
) |
|
|
( |
) |
Long Term Debt Incurred |
|
|
|
|
|
|
||
Long Term Debt Paid |
|
|
( |
) |
|
|
( |
) |
Common Stock Issued |
|
|
( |
) |
|
|
( |
) |
Transactions with Minority Interests in Subsidiaries |
|
|
( |
) |
|
|
( |
) |
Debt Related Costs and Other Transactions |
|
|
( |
) |
|
|
( |
) |
Total Cash Flows from Financing Activities |
|
|
|
|
|
|
||
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash |
|
|
( |
) |
|
|
( |
) |
Net Change in Cash, Cash Equivalents and Restricted Cash |
|
|
( |
) |
|
|
( |
) |
Cash, Cash Equivalents and Restricted Cash at Beginning of the Period |
|
|
|
|
|
|
||
Cash, Cash Equivalents and Restricted Cash at End of the Period |
|
$ |
|
|
$ |
|
||
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, 2023 (the “2023 Form 10-K”).
Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results expected in subsequent quarters or for the year ending December 31, 2024.
Recently Issued Accounting Standards
On March 6, 2024, the SEC issued final rules that require registrants to enhance and standardize climate-related disclosures in their annual reports beginning with periods ending December 31, 2025. The final rules will require information about climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, a registrant’s business strategy, results of operations or financial condition, the governance of climate-related matters, certain climate-related targets and goals, and certain greenhouse gas emissions. The rules will also require certain financial statement disclosures related to the impact of severe weather events and other natural disasters. On April 4, 2024, the SEC stayed the final rules pending completion of judicial review of several lawsuits challenging the rules that have been consolidated in the U.S. Court of Appeals for the 8th Circuit. We are currently assessing the impact of these rules on our disclosures in both our Annual Report on Form 10-K and the notes to the consolidated financial statements.
Goodwill and Intangible Assets
Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if an indicator of impairment is present. Intangible assets with finite lives are amortized over their useful lives and are reviewed for impairment whenever events or circumstances warrant such review. Goodwill and intangible assets are written down to fair value if considered impaired. Goodwill and Intangible Assets totaled $
In the third quarter, we experienced a decline in our market capitalization as a result of a decrease in our stock price. Our stock price has a history of volatility, however, given the decrease was sustained throughout the quarter, we viewed this event as a triggering event and performed a quantitative analysis of the fair value of the North America reporting unit in our Americas segment. We determined the estimated fair value of our North America reporting unit based on discounted cash flow projections. The most critical assumptions used in the calculation of the fair value of our North America reporting unit are the projected revenue, projected operating margin and discount rate. Our forecast of future cash flows is based on our best estimate of projected revenue and projected operating margin, based primarily on pricing, raw material costs, market share, industry outlook, general economic conditions and strategic actions to improve Americas' operating margin. Based on our interim impairment test, the North America reporting unit had an estimated fair value that exceeded its carrying value, including goodwill, by approximately
The fair value of the North America reporting unit’s goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected operating margin and discount rate used to evaluate the fair value of these assets. Although we believe our estimate of fair value is reasonable, the reporting unit’s future financial performance is dependent on our ability to execute our business plan and to successfully implement strategic actions which we expect will improve our long-term operating margin. If a reporting unit’s future financial performance falls below our expectations, there are adverse revisions to significant assumptions, or our market capitalization declines further or does not improve from the strategic actions we are implementing, this could be indicative that the fair values of each of our reporting units has declined below their carrying values, and therefore we may need to record a material, non-cash goodwill impairment charge in a future period.
7
During the third quarter, we experienced a decline in volumes primarily in our lower tier indefinite-lived intangible assets related to the acquisition of Cooper Tire as a result of increased competition from lower tier imports in the market. We viewed this event as a triggering event and performed a quantitative analysis of the fair value of our indefinite-lived intangible assets related to the acquisition of Cooper Tire as of September 30, 2024. Based on the results of the quantitative impairment assessments, the fair value of the intangible assets was less than the carrying value, resulting in a non-cash impairment charge of $
At September 30, 2024, after evaluating macroeconomic conditions and our current and future results of operations, we concluded that there were no triggering events and it was not more likely than not that the fair values of goodwill of our reporting unit within our Asia Pacific segment or remaining indefinite-lived intangible assets were less than their respective carrying values and, therefore, did not have any impairment.
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.
Assets and Liabilities Held for Sale
Assets and liabilities are classified as held for sale when management approves and commits to a formal plan to actively market the assets for sale at a price reasonable in relation to their estimated fair value, the assets are available for immediate sale in their present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the assets is probable and expected to be completed within one year, and it is unlikely that significant changes will be made to the plan. When all of these criteria have been met, the assets and liabilities are classified as held for sale in the balance sheet. Assets classified as held for sale are reported at the lower of their carrying value or fair value less costs to sell. Depreciation of assets ceases upon designation as held for sale.
On July 22, 2024, we signed a definitive agreement to sell our off-the-road ("OTR") tire business to The Yokohama Rubber Company, Limited ("Yokohama") for $
Restricted Cash
The following table provides a reconciliation of Cash, Cash Equivalents and Restricted Cash as reported within the Consolidated Statements of Cash Flows:
|
|
September 30, |
|
|||||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Cash and Cash Equivalents |
|
$ |
|
|
$ |
|
||
Restricted Cash |
|
|
|
|
|
|
||
Total Cash, Cash Equivalents and Restricted Cash |
|
$ |
|
|
$ |
|
||
Restricted Cash primarily represents amounts required to be set aside for accounts receivable factoring programs. The restrictions lapse when cash from factored accounts receivable is remitted to the purchaser of those receivables. At both September 30, 2024 and 2023, restricted cash was recorded in Prepaid Expenses and Other Current Assets in the Consolidated Balance Sheets.
Reclassifications and Adjustments
Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.
8
NOTE 2. NET SALES
The following tables show disaggregated net sales from contracts with customers by major source:
|
|
Three Months Ended September 30, 2024 |
|
|||||||||||||
|
|
|
|
|
Europe, Middle East |
|
|
|
|
|
|
|
||||
(In millions) |
|
Americas |
|
|
and Africa |
|
|
Asia Pacific |
|
|
Total |
|
||||
Tire unit sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other tire and related sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail services and service related sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chemical sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales by reportable segment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Three Months Ended September 30, 2023 |
|
|||||||||||||
|
|
|
|
|
Europe, Middle East |
|
|
|
|
|
|
|
||||
(In millions) |
|
Americas |
|
|
and Africa |
|
|
Asia Pacific |
|
|
Total |
|
||||
Tire unit sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other tire and related sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail services and service related sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chemical sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales by reportable segment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Nine Months Ended September 30, 2024 |
|
|||||||||||||
|
|
|
|
|
Europe, Middle East |
|
|
|
|
|
|
|
||||
(In millions) |
|
Americas |
|
|
and Africa |
|
|
Asia Pacific |
|
|
Total |
|
||||
Tire unit sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other tire and related sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail services and service related sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chemical sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales by reportable segment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Nine Months Ended September 30, 2023 |
|
|||||||||||||
|
|
|
|
|
Europe, Middle East |
|
|
|
|
|
|
|
||||
(In millions) |
|
Americas |
|
|
and Africa |
|
|
Asia Pacific |
|
|
Total |
|
||||
Tire unit sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other tire and related sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail services and service related sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chemical sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales by reportable segment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 $
9
The following table presents the balance of deferred revenue related to contracts with customers, and changes during the nine months ended September 30, 2024:
|
|
|
|
|
(In millions) |
|
|
|
|
Balance at December 31, 2023 |
|
$ |
|
|
Revenue deferred during period |
|
|
|
|
Revenue recognized during period |
|
|
( |
) |
Impact of foreign currency translation |
|
|
|
|
Balance at September 30, 2024 |
|
$ |
|
|
NOTE 3. COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS
In order to improve our global competitiveness and as part of our execution of the Goodyear Forward transformation plan ("Goodyear Forward"), we have implemented, and are implementing, rationalization actions 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, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2024 Charges |
|
|
|
|
|
|
|
|
|
|||
Incurred, net of foreign currency translation of $ |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reversed to the Statement of Operations |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
During the third quarter of 2024, as part of Goodyear Forward, we approved two rationalization plans to reduce Selling, Administrative and General expense ("SAG") and manufacturing costs, primarily in North America and Corporate functional areas. The plans include approximately
During the second quarter of 2024, we approved a rationalization plan to open a shared service center in Costa Rica and to exit certain Commercial Tire and Service Center (“CTSC”) locations. Total pre-tax charges are expected to be $
During the first quarter of 2024, we approved a rationalization plan in Asia Pacific to permanently close our Malaysia tire manufacturing facility as part of our strategy to improve profitability and reduce production costs. We have approximately $
The remainder of the accrual balance at September 30, 2024 includes $
At September 30, 2024 and December 31, 2023, $
10
The following table shows net rationalization charges included in Income (Loss) before Income Taxes:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Current Year Plans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Associate Severance and Other Related Costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other Exit Costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current Year Plans - Net Charges |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prior Year Plans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Associate Severance and Other Related Costs |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Other Exit Costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prior Year Plans - Net Charges |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total Net Charges |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Asset write-offs (recoveries), accelerated depreciation, and accelerated lease costs, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Substantially all of the new charges for the three and nine months ended September 30, 2024 and 2023 relate to future cash outflows. Net current year plan charges for the three months ended September 30, 2024 primarily relate to the plans to reduce SAG and manufacturing headcount. Net current year plan charges for the nine months ended September 30, 2024 also include the plan to open a new shared service center in Costa Rica, and the closure of our tire manufacturing facility in Malaysia. Net current year plan charges for the three months ended September 30, 2023 primarily relate to the rationalization and workforce reorganization plan in EMEA and the plan to improve profitability in Asia Pacific. Net current year plan charges for the nine months ended September 30, 2023 also include the plan to reduce production capacity at Fulda, the plan to streamline our EMEA distribution network, a plan to reduce costs associated with our global operations and technology organization, and a plan to reduce manufacturing staffing levels and capacity in EMEA.
Net prior year plan charges for the three months ended September 30, 2024 include $
Asset write-offs (recoveries), accelerated depreciation, and accelerated lease costs for both the three and nine months ended September 30, 2024 primarily relate to plans to improve our cost structure through announced closures of our Fulda, Fürstenwalde and Malaysia tire manufacturing facilities, as well as the closure of a development center and warehouse in the U.S.
Asset write-offs (recoveries) and accelerated depreciation for the three months ended September 30, 2023 primarily relate to the integration of Cooper Tire and the closure of Melksham. Asset write-offs (recoveries) and accelerated depreciation for the nine months ended September 30, 2023 primarily relate to the integration of Cooper Tire and the closure of Melksham, partially offset by recoveries of previously written-off accounts receivable and other assets in Russia.
Ongoing rationalization plans had approximately $
11
Approximately
NOTE 4. OTHER (INCOME) EXPENSE
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Non-service related pension and other postretirement benefits cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Financing fees and financial instruments expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net foreign currency exchange (gains) losses |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Interest income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
General and product liability expense - discontinued products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Royalty income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net (gains) losses on asset sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Miscellaneous (income) expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
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. Pension expense for the nine months ended September 30, 2024 includes a pension settlement credit of $
Net foreign currency exchange (gains) losses for the three and nine months ended September 30, 2023 include a $
Interest income for the three and nine months ended September 30, 2023 includes interest income in Argentina of $
Net gains on asset sales for the nine months ended September 30, 2024 include an $
Miscellaneous (income) expense for the three and nine months ended September 30, 2024 includes $
Other (Income) Expense also includes financing fees and financial instruments expense, which consists of commitment fees and charges incurred in connection with financing transactions; 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; and royalty income.
12
NOTE 5. INCOME TAXES
For the third quarter of 2024, we recorded income tax expense of $
For the third quarter of 2023, we recorded income tax expense of $
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
The Organisation for Economic Co-operation and Development (OECD) have published the Pillar Two model rules which adopt a global corporate minimum tax of
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 (including an assessment of their feasibility) to accelerate taxable income 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 September 30, 2024 and December 31, 2023, we had approximately $
In assessing our ability to utilize our net deferred tax assets, we primarily consider objectively verifiable evidence, including the improvement of our U.S. operating results during the first nine months of 2024 as a result of lower raw material and transportation costs and benefits from the Goodyear Forward plan compared to the first nine months of 2023. In addition, we consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets as well as the impact of tax planning strategies. These forecasts include the impact of recent trends and various macroeconomic factors such as the impact of raw material, transportation, labor and energy costs on our profitability. Our tax planning strategies include accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, repatriation of certain foreign royalty income, and other financing transactions, all of which would increase our domestic profitability.
We believe our improvement in U.S. operating results for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as well as forecasts of future profitability, provide us sufficient positive evidence to conclude that it is more likely than not that, at September 30, 2024, our U.S. net deferred tax assets will be fully utilized. However, macroeconomic factors such as raw material, transportation, labor and energy costs possess a high degree of volatility and can
13
significantly impact our profitability. In addition, certain tax provisions, such as the annual interest expense limitation under Section 163(j) of the Internal Revenue Code of 1986, if amended, could impact our analysis of the realizability of our U.S. deferred tax assets. If our U.S. operating results significantly decline in the future, we may need to record a valuation allowance which could adversely impact our operating results. As such, we will closely monitor our U.S. operations as well as any tax law changes to assess the realizability of our U.S. deferred tax assets.
At September 30, 2024 and December 31, 2023, we also had approximately $
For the nine months ended September 30, 2024, changes to our unrecognized tax benefits did
We are open to examination in the United States from 2021 onward and in Germany from 2018 onward. Generally, for our remaining tax jurisdictions, years from 2019 onward are still open to examination.
NOTE 6. 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 |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions, except per share amounts) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Earnings (loss) per share — basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodyear net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per common share — basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per share — diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodyear net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of stock options and other dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding — diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per common share — diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average shares outstanding — diluted for the three and nine months ended September 30, 2024 excludes the dilutive effect of approximately
14
NOTE 7. BUSINESS SEGMENTS
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Americas |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Segment Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Americas |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Segment Operating Income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Intangible Asset Impairment (Note 1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Rationalizations (Note 3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (income) expense (Note 4) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asset write-offs (recoveries), accelerated depreciation, |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate incentive compensation plans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retained expenses of divested operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (Loss) before Income Taxes |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
15
Rationalizations and asset write-offs (recoveries), accelerated depreciation, and accelerated lease costs, as described in Note to the Consolidated Financial Statements No. 3, Costs Associated with Rationalization Programs, and net (gains) losses on asset sales, as described in Note to the Consolidated Financial Statements No. 4, Other (Income) Expense, were not charged to the strategic business units ("SBUs") for performance evaluation purposes but were attributable to the SBUs as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Rationalizations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Americas |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe, Middle East and Africa |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Segment Rationalizations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Rationalizations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (Gains) Losses on Asset Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Americas |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asia Pacific |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Total Segment Net (Gains) Losses on Asset Sales |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset Write-offs (Recoveries), Accelerated Depreciation, and Accelerated Lease Costs, net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Americas |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Segment Asset Write-offs (Recoveries), Accelerated Depreciation, and Accelerated Lease Costs, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Asset Write-offs (Recoveries), Accelerated Depreciation, and Accelerated Lease Costs, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 8. FINANCING ARRANGEMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
At September 30, 2024, we had total credit arrangements of $
Notes Payable and Overdrafts, Long Term Debt and Finance Leases due Within One Year and Short Term Financing Arrangements
At September 30, 2024, we had short term committed and uncommitted credit arrangements totaling $
The following table presents amounts due within one year:
|
|
September 30, |
|
|
December 31, |
|
||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Chinese credit facilities |
|
$ |
|
|
$ |
|
||
Other foreign and domestic debt |
|
|
|
|
|
|
||
Notes Payable and Overdrafts |
|
$ |
|
|
$ |
|
||
Weighted average interest rate |
|
|
% |
|
|
% |
||
|
|
|
|
|
|
|
||
Chinese credit facilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
Other foreign and domestic debt (including finance leases) |
|
|
|
|
|
|
||
Long Term Debt and Finance Leases due Within One Year |
|
$ |
|
|
$ |
|
||
Weighted average interest rate |
|
|
% |
|
|
% |
||
Total obligations due within one year |
|
$ |
|
|
$ |
|
||
16
Long Term Debt and Finance Leases and Financing Arrangements
At September 30, 2024, we had long term credit arrangements totaling $
The following table presents long term debt and finance leases, net of unamortized discounts, and interest rates:
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
|
|
|
Interest |
|
|
|
|
|
Interest |
|
||||
(In millions) |
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
||||
Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Credit Facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien revolving credit facility due 2026 |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
European revolving credit facility due 2028 |
|
|
|
|
|
% |
|
|
|
|
|
|
||||
Pan-European accounts receivable facility |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Mexican credit facility |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Chinese credit facilities |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Other foreign and domestic debt(1) |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unamortized deferred financing fees |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease obligations(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less portion due within one year |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
NOTES
At September 30, 2024, we had $
On August 7, 2024 (the “Redemption Date”), we redeemed $
CREDIT FACILITIES
$
Our amended and restated first lien revolving credit facility matures on June 8, 2026 and is available in the form of loans or letters of credit. Up to $
Our obligations under the facility are guaranteed by most of our wholly-owned U.S. and Canadian 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. 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 $
17
may decrease below $
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 $
At September 30, 2024, we had $
€
The European revolving credit facility matures on January 14, 2028 and consists of (i) a €
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. first lien revolving credit facility 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, 2021. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
At September 30, 2024, there were $
Potential Future Financings
On July 22, 2024, we entered into a commitment letter (the “Commitment Letter”) to provide us a 364-day senior unsecured committed credit facility in an aggregate principal amount not to exceed $
Prior to any funding under the Committed Credit Facility, the aggregate commitments under the Commitment Letter for the Committed Credit Facility would be reduced by the amount of any proceeds received by us in respect of certain asset sales and by the amount of any 9.5% Notes redeemed, repurchased or otherwise repaid by us after the date of the Commitment Letter (other than the partial redemption of $
18
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 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 €
The facility involves an 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) 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 first lien revolving credit 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 16, 2025.
At September 30, 2024, the amounts available and utilized under this program totaled $
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. 16, Financing Arrangements and Derivative Financial Instruments, in our 2023 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 September 30, 2024, the gross amount of receivables sold was $
Supplier Financing
We have entered into supplier finance programs with several financial institutions. Under these programs, the financial institutions act as our paying agents with respect to accounts payable due to our suppliers. We agree to pay the financial institutions the stated amount of the confirmed invoices from the designated suppliers on the original due dates of the invoices. Invoice payment terms can be up to 120 days based on industry norms for the specific item purchased. We do not pay any fees to the financial institutions and we do not pledge any assets as security or provide other forms of guarantees for these programs. These programs allow our suppliers to sell their receivables to the financial institutions at the sole discretion of the suppliers and the financial institutions on terms that are negotiated among 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 these programs. The amounts available under these programs were $
Other Foreign Credit Facilities
A Mexican subsidiary and a U.S. subsidiary have a revolving credit facility in Mexico. At September 30, 2024, the amounts available and utilized under this facility were $
Our Chinese subsidiaries have several financing arrangements in China. These facilities contain covenants relating to these Chinese subsidiaries and have customary representations and warranties and defaults relating to these Chinese subsidiaries' ability to perform their respective obligations under these facilities. These facilities are also available for other off-balance sheet utilization, such as letters of credit and bank acceptances.
19
The following table presents the total amounts available and utilized under the Chinese financing arrangements:
|
|
September 30, |
|
|
December 31, |
|
||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Total available |
|
$ |
|
|
$ |
|
||
Amounts utilized: |
|
|
|
|
|
|
||
Notes Payable and Overdrafts |
|
$ |
|
|
$ |
|
||
Long Term Debt due Within One Year |
|
|
|
|
|
|
||
Long Term Debt |
|
|
|
|
|
|
||
Letters of credit, bank acceptances and other utilization |
|
|
|
|
|
|
||
Total utilized |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Maturities |
|
- |
|
|
- |
|
||
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 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:
|
|
September 30, |
|
|
December 31, |
|
||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Fair Values — Current asset (liability): |
|
|
|
|
|
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Other current liabilities |
|
|
( |
) |
|
|
( |
) |
At September 30, 2024 and December 31, 2023, these outstanding foreign currency derivatives had notional amounts of $
The following table presents fair values for foreign currency hedge contracts that meet the criteria to be accounted for as cash flow hedging instruments:
|
|
September 30, |
|
|
December 31, |
|
||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Fair Values — Current asset (liability): |
|
|
|
|
|
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Other current liabilities |
|
|
|
|
|
( |
) |
|
As of September 30, 2024, no such foreign currency derivatives were outstanding. At December 31, 2023, the outstanding foreign currency derivatives had notional amounts of $
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.
20
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 |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Amount of gains (losses) deferred to Accumulated Other Comprehensive Loss ("AOCL") |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Reclassification adjustment for amounts recognized in Cost of Goods Sold ("CGS") |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 default probabilities, 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.
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about assets and liabilities recorded at fair value on the Consolidated Balance Sheets at September 30, 2024 and December 31, 2023:
|
|
Total Carrying Value |
|
|
Quoted Prices in Active |
|
|
Significant Other |
|
|
Significant |
|
||||||||||||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Foreign Exchange Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Assets at Fair Value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign Exchange Contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total Liabilities at Fair Value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
The following table presents supplemental fair value information about long term fixed rate and variable rate debt, excluding finance leases, at September 30, 2024 and December 31, 2023:
|
|
September 30, |
|
|
December 31, |
|
||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Fixed Rate Debt:(1) |
|
|
|
|
|
|
||
Carrying amount — liability |
|
$ |
|
|
$ |
|
||
Fair value — liability |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Variable Rate Debt:(1) |
|
|
|
|
|
|
||
Carrying amount — liability |
|
$ |
|
|
$ |
|
||
Fair value — liability |
|
|
|
|
|
|
||
Long term debt with fair values of $
21
NOTE 10. 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. |
|
||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of net losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net periodic pension cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net curtailments/settlements/termination benefits |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total defined benefit pension cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Non-U.S. |
|
|
Non-U.S. |
|
||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior service cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of net losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net periodic pension cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net curtailments/settlements/termination benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total defined benefit pension cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 first nine months of 2024, a pension settlement credit of $
During the second quarter of 2023, we settled all plan benefits of the Cooper Tire U.S. Salaried defined benefit pension plan, with lump sum payments to electing participants and the purchase of a group annuity contract. During the second quarter of 2023, we also settled all plan benefits of the Ireland defined benefit pension plan. In the first nine months of 2023, pension settlement charges of $
In the third quarter of 2023, we recorded settlement charges of $
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 September 30, 2024 and 2023 was $
During the third quarter of 2024, we approved changes to one of our U.S. other postretirement benefit plans, effective January 1, 2025, which resulted in a $
We expect to contribute $
The expense recognized for our contributions to defined contribution savings plans for the three months ended September 30, 2024 and 2023 was $
22
NOTE 11. STOCK COMPENSATION PLANS
Our Board of Directors granted
We recognized stock-based compensation expense of $
NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES
Environmental Matters
We have recorded liabilities totaling $
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 $
General and Product Liability and Other Litigation
We have recorded liabilities for both asserted and unasserted claims totaling $
We have recorded an indemnification asset within Other Assets of $
23
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
A summary of recent approximate asbestos claims activity follows. Because claims are often filed and disposed of by settlement or dismissal 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.
|
|
Nine Months Ended |
|
|
Year Ended |
|
||
(Dollars in millions) |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Pending claims, beginning of period |
|
|
|
|
|
|
||
New claims filed |
|
|
|
|
|
|
||
Claims settled/dismissed |
|
|
( |
) |
|
|
( |
) |
Pending claims, end of period |
|
|
|
|
|
|
||
Payments(1) |
|
$ |
|
|
$ |
|
||
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 $
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 $
We believe that, at December 31, 2023, we had approximately $
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.
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
24
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 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.
Income 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 $
In 2015, as a result of the dissolution of the global alliance with SRI, we issued a guarantee of $
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, as applicable. We are unable to estimate the extent to which our 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. During the first quarter of 2024, the revolving loan commitment increased from $
25
NOTE 13. CAPITAL 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 nine months of 2024, we did
NOTE 14. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables present changes in AOCL, by component, for the nine months ended September 30, 2024 and 2023, after tax and minority interest.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
(In millions) Income (Loss) |
|
Foreign |
|
|
Unrealized Gains (Losses) from Securities |
|
|
Unrecognized |
|
|
Deferred |
|
|
Total |
|
|||||
Balance at December 31, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Other comprehensive income (loss) before reclassifications |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance at September 30, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
(In millions) Income (Loss) |
|
Foreign |
|
|
Unrealized Gains (Losses) from Securities |
|
|
Unrecognized |
|
|
Deferred |
|
|
Total |
|
|||||
Balance at December 31, 2022 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Other comprehensive income (loss) before |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance at September 30, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
The following table presents reclassifications out of AOCL:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
||||
(In millions) (Income) Expense |
|
Amount Reclassified |
|
|
Amount Reclassified |
|
|
Affected Line Item in the Consolidated |
||||||||||
Component of AOCL |
|
from AOCL |
|
|
from AOCL |
|
|
Statements of Operations |
||||||||||
Amortization of prior service cost and |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Other (Income) Expense |
||||
Immediate recognition of prior service cost |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Other (Income) Expense / Rationalizations |
|||
Unrecognized net actuarial losses and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tax effect |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
United States and Foreign Taxes |
Minority interest |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Minority Shareholders' Net Income |
||
Net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Goodyear Net Income (Loss) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred derivative (gains) losses, before tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Cost of Goods Sold |
||||
Tax effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
United States and Foreign Taxes |
||||
Net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Goodyear Net Income (Loss) |
||||
Total reclassifications |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Goodyear Net Income (Loss) |
||||
26
The following table presents the details of comprehensive income (loss) attributable to minority shareholders:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net Income (Loss) Attributable to Minority Shareholders |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other Comprehensive Income (Loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Comprehensive Income (Loss) Attributable to Minority Shareholders |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
27
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).
OVERVIEW
The Goodyear Tire & Rubber Company (the "Company," "Goodyear," "we," "us" or "our") 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 54 manufacturing facilities in 21 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.
Results of Operations
On November 15, 2023, we announced a transformation plan, Goodyear Forward, that is intended to optimize our portfolio of products, deliver segment operating margin expansion and reduce our leverage in order to drive sustainable, long-term shareholder value creation. Optimization of our portfolio consists of a strategic review of three major asset groups: our chemical operations which produces synthetic rubber and other chemical products in our Americas segment, the Dunlop brand for which we own rights in certain markets throughout the world, but is primarily used in our EMEA segment, and our off-the-road ("OTR") tire business. Our plans for margin expansion include brand optimization and tiering to capitalize on premium tire pricing and volume and a reduction of our overall exposure related to lower-tiered products either through margin expansion or product line rationalization. Our plans for margin expansion also include a reduction of our cost structure by approximately $1.2 billion, including actions related to our manufacturing footprint, plant optimization, further improvement of our purchasing leverage, reduction of Selling, Administrative and General expenses (“SAG”) and improvements in our supply chain planning and logistics. We anticipate the accumulated benefit of these actions will improve our segment operating margin to approximately 10% by the end of 2025. During the three and nine months ended September 30, 2024, the Goodyear Forward plan provided $123 million and $285 million, respectively, in benefits to segment operating income.
On July 22, 2024, we signed a definitive agreement to sell our OTR tire business to The Yokohama Rubber Company, Limited ("Yokohama") for $905 million in cash, subject to certain adjustments. Pursuant to a product supply agreement to be entered into with Yokohama in connection with the closing of the transaction, we will manufacture certain OTR tires for Yokohama at some of our manufacturing facilities for an initial period of up to five years after the closing of the transaction. The transaction is subject to regulatory approvals and other customary closing conditions and consultations and is expected to close in early 2025.
Our tire manufacturing facility in Debica, Poland (“Debica”) continues to recover from a fire in the third quarter of 2023 and achieved full ramp-up in the third quarter of 2024. During the nine months ended September 30, 2024, we received a benefit of $26 million ($17 million after-tax and minority) from insurance recoveries, net of fixed costs incurred during the ramp-up of the facility.
Our results for the third quarter of 2024 include a 6.2% decrease in tire unit shipments compared to 2023 due to lower global replacement tire volume, partially offset by growth in OE. In the third quarter of 2024, we experienced approximately $53 million of inflationary cost pressures.
Net sales in the third quarter of 2024 were $4,824 million, compared to $5,142 million in the third quarter of 2023. Net sales decreased in 2024 primarily due to lower global tire volume, the negative impact of changes in foreign exchange rates globally, driven by the strengthening of the U.S. dollar, and declines in price and product mix in Americas. These decreases were partially offset by higher sales in other tire-related businesses, primarily due to higher third-party chemical sales in Americas and Fleet Solutions in EMEA, and recovery of sales lost during the third quarter of 2023 due to a storm at our tire manufacturing facility in Tupelo, Mississippi ("Tupelo").
In the third quarter of 2024, Goodyear net loss was $34 million, or $0.12 per share, compared to Goodyear net loss of $89 million, or $0.31 per share, in the third quarter of 2023. The change in Goodyear net loss was primarily due to lower rationalizations and higher segment operating income, partially offset by an intangible asset impairment in the third quarter of 2024.
Total segment operating income for the third quarter of 2024 was $347 million, compared to $336 million in the third quarter of 2023. The $11 million increase was primarily due to benefits from the Goodyear Forward plan of $123 million, improvements in price and product mix of $26 million primarily in EMEA and Asia Pacific, a benefit of $20 million from insurance proceeds for property damage and business interruptions resulting from storm damage events in prior years in Americas, and higher earnings in other tire-related businesses of $17 million, primarily related to an increase in third-party chemical earnings in Americas. These increases were partially offset by higher conversion costs of $87 million, driven by the effect of lower tire production on fixed cost absorption and inflation, lower tire volume of $74 million, primarily in Americas, and higher raw material costs of $19 million. Refer to "Results of Operations — Segment Information" for additional information.
28
Net sales in the first nine months of 2024 were $13,931 million, compared to $14,950 million in the first nine months of 2023. Net sales decreased in 2024 primarily due to lower tire volume in Americas and EMEA, partially offset by higher tire volume in Asia Pacific, global declines in price and product mix and the negative impact of changes in foreign exchange rates globally, driven by the strengthening of the U.S. dollar. These decreases were partially offset by sales lost during the first nine months of 2023 due to the Tupelo storm and higher sales in other tire-related businesses, primarily due to Fleet Solutions in EMEA and higher third-party chemical sales in Americas.
In the first nine months of 2024, Goodyear net loss was $6 million, or $0.02 per share, compared to Goodyear net loss of $398 million, or $1.40 per share, in the first nine months of 2023. The change in Goodyear net loss was primarily due to higher segment operating income, lower rationalization charges and higher other income, primarily due to lower pension expense and higher net gains on asset sales. These decreases were partially offset by execution costs related to Goodyear Forward, including accelerated depreciation and accelerated lease costs related to announced facility closures and third-party consulting costs, an intangible asset impairment in the third quarter of 2024, and higher U.S. and Foreign Tax Expense as a result of improved operating results. Additionally, our results in the first nine months of 2023 included the impact of the Tupelo storm that negatively impacted earnings by $69 million ($56 million after-tax and minority).
Total segment operating income for the first nine months of 2024 was $933 million, compared to $585 million in the first nine months of 2023. The $348 million increase was primarily due to lower raw material costs of $402 million, benefits from the Goodyear Forward plan of $285 million, lower transportation costs of $67 million, $55 million related to the 2023 negative impact of the Tupelo storm, a benefit from insurance recoveries related to the Debica fire of $50 million, partially offset by the continued impact of the fire on Debica fixed costs incurred during ramp-up of $20 million, a benefit of $39 million from insurance proceeds for business interruptions and property damage recoveries resulting from storm damage events in prior years, and a favorable $8 million tax item in Brazil. These increases were partially offset by increased conversion costs of $256 million driven by inflation and the effect of lower tire production on fixed cost absorption, declines in price and product mix of $167 million, primarily in Americas and EMEA, and lower tire volume of $143 million, primarily in Americas and EMEA. Refer to "Results of Operations — Segment Information" for additional information.
Liquidity
At September 30, 2024, we had $905 million of cash and cash equivalents as well as $2,508 million of unused availability under our various credit agreements, compared to $902 million and $4,247 million, respectively, at December 31, 2023. The increase in cash and cash equivalents of $3 million was primarily due to net borrowings of $1,366 million, proceeds from asset dispositions and sale and leaseback transactions of $126 million, primarily from the sale of a distribution center in Germany and the sale and leaseback of a warehouse in Americas, and insurance recoveries of $48 million for the replacement of equipment damaged in the Debica fire and Tupelo storm, partially offset by capital expenditures of $912 million, net cash used for operating activities of $591 million, and loans to TireHub LLC ("TireHub") of $28 million. Net cash used for operating activities reflects cash used for working capital of $1,124 million, rationalization payments of $149 million, and pension contributions of $45 million, as well as the Company's net loss for the period of $12 million, which includes non-cash charges for depreciation and amortization of $800 million, an intangible asset impairment of $125 million, net rationalization charges of $52 million, a non-cash gain on asset sales of $95 million, and a gain on insurance recoveries for damaged property, plant and equipment of $61 million. Refer to "Liquidity and Capital Resources" for additional information.
Outlook
In the fourth quarter of 2024, we expect our unit volume will continue to be affected by weak underlying industry trends, including high distribution channel inventories of low-end imported products in the U.S. and Europe. We expect our global tire unit volume in the fourth quarter of 2024 to be lower compared to the fourth quarter of 2023 by approximately 4%. We also expect unabsorbed overhead to be approximately $40 million higher in the fourth quarter of 2024 compared to the fourth quarter of 2023 due to lower production in the third quarter of 2024.
As we continue to make progress on our Goodyear Forward transformation plan, we expect fourth quarter benefits from the program of approximately $165 million in segment operating income, and full year benefits of approximately $450 million.
We expect approximately $100 million of raw material headwinds in the fourth quarter of 2024 compared to the fourth quarter of 2023. We also expect price and product mix to be a headwind of approximately $15 million driven by higher OE sales volume in the fourth quarter of 2024 compared to the fourth quarter of 2023. Natural and synthetic rubber prices and other commodity prices historically have been volatile, and our raw material costs could change based on future cost fluctuations and changes in foreign exchange rates. We continue 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 to minimize the impact of higher raw material costs.
29
We expect non-raw material inflation and other costs, net of other expected cost improvements, to be approximately $35 million higher in the fourth quarter of 2024 when compared with the fourth quarter of 2023. We continue to focus on actions to offset costs other than raw materials through cost savings initiatives, including initiatives related to the Goodyear Forward plan, rationalization actions, and improvements in price and product mix.
For the full year of 2024, we expect working capital to be a $150 million to $200 million use of operating cash flows. We anticipate our capital expenditures to be approximately $1,200 million, excluding approximately $50 million of capital expenditures covered by insurance. We anticipate our cash flows will include rationalization payments of approximately $225 million, as we continue to implement elements of our Goodyear Forward plan to improve our cost structure.
Refer to "Item 1A. Risk Factors" in the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 and in the 2023 Form 10-K 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.
RESULTS OF OPERATIONS
CONSOLIDATED
Three Months Ended September 30, 2024 and 2023
Net sales in the third quarter of 2024 were $4,824 million, decreasing $318 million, or 6.2%, from $5,142 million in the third quarter of 2023. Goodyear net loss was $34 million, or $0.12 per share, in the third quarter of 2024, compared to Goodyear net loss of $89 million, or $0.31 per share, in the third quarter of 2023.
Net sales decreased in the third quarter of 2024 primarily due to lower tire volume of $333 million, representing lower tire volume globally, the negative impact of changes in foreign exchange rates globally of $73 million, driven by the strengthening of the U.S. dollar, and declines in price and product mix of $3 million, primarily in Americas, partially offset by higher sales in other tire-related businesses of $46 million, primarily due to increased third-party chemical sales in Americas and growth in Fleet Solutions in EMEA, and $33 million of sales lost during the third quarter of 2023 due to the Tupelo storm.
Worldwide tire unit sales in the third quarter of 2024 were 42.5 million units, decreasing 2.8 million units, or 6.2%, from 45.3 million units in the third quarter of 2023. Replacement tire volume decreased globally by 3.1 million units, or 9.0%. OE tire volume increased globally by 0.3 million units, or 2.5%.
Cost of Goods Sold ("CGS") in the third quarter of 2024 was $3,881 million, decreasing $290 million, or 7.0%, from $4,171 million in the third quarter of 2023. CGS decreased primarily due to lower tire volume of $259 million, savings related to the Goodyear Forward plan of $77 million, foreign currency translation of $56 million, lower mix of $29 million in Americas and Asia Pacific, and a benefit of $20 million ($15 million after-tax and minority) from insurance proceeds for property damage and business interruptions resulting from storm damage events in prior years. These decreases were partially offset by higher conversion costs of $87 million driven by inflation and the effect of lower tire production on fixed cost absorption, higher costs in other tire-related businesses of $29 million, primarily related to Fleet Solutions in EMEA and higher third-party chemical and retail sales in Americas, higher raw material costs of $19 million, an increase in accelerated depreciation and asset write-offs of $11 million primarily related to the announced plant closures in EMEA and Asia Pacific, and $3 million ($2 million after-tax and minority) as a result of the Debica fire, primarily comprised of repair costs.
CGS in the third quarter of 2024 and 2023 included pension expense of $4 million and $3 million, respectively. CGS in the third quarter of 2024 included $3 million of incremental savings from rationalization plans. CGS was 80.5% of sales in the third quarter of 2024, compared to 81.1% in the third quarter of 2023.
SAG in the third quarter of 2024 was $663 million, decreasing $10 million, or 1.5%, from $673 million in the third quarter of 2023. SAG decreased primarily due to savings related to the Goodyear Forward plan of $33 million and lower advertising costs of $13 million. These decreases were partially offset by an increase in costs associated with the Goodyear Forward plan of $14 million ($10 million after-tax and minority), primarily related to third-party advisory, legal and consulting fees and costs associated with planned asset sales, increases in wages and benefits of $8 million, inflation on non-wage and benefits costs of $8 million, and an increase in accelerated lease costs and asset write-offs of $5 million.
SAG in the third quarter of 2024 and 2023 included pension expense of $3 million and $4 million, respectively. SAG in the third quarter of 2024 included $7 million of incremental savings from rationalization plans, compared to $12 million in 2023. SAG was 13.7% of sales in the third quarter of 2024, compared to 13.1% in the third quarter of 2023.
30
We recorded an intangible asset impairment charge of $125 million ($94 million after-tax and minority) in the third quarter of 2024 primarily related to our lower tier indefinite-lived intangible assets related to the acquisition of Cooper Tire as a result of increased competition from lower tier imports in the market.
We recorded net rationalization charges of $11 million ($9 million after-tax and minority) in the third quarter of 2024 and $198 million ($177 million after-tax and minority) in the third quarter of 2023. Net rationalization charges in the third quarter of 2024 primarily related to a reduction in headcount in Americas, partially offset by reversals primarily related to our rationalization and workforce reorganization plan in EMEA due to voluntary attrition. Net rationalization charges in the third quarter of 2023 primarily related to the rationalization and workforce reorganization plan in EMEA and the exit of our retail operations in Australia and New Zealand. For further information, refer to Note to the Consolidated Financial Statements No. 3, Costs Associated with Rationalization Programs.
CGS and SAG in the third quarter of 2024 included $25 million ($23 million after-tax and minority) of asset write-offs, accelerated depreciation and accelerated lease charges, primarily related to plans to improve our cost structure through announced closures of our Fulda, Fürstenwalde and Malaysia tire manufacturing facilities, as well as the closure of a development center and warehouse in the U.S. CGS and SAG in the third quarter of 2023 included $8 million ($7 million after-tax and minority) of accelerated depreciation and asset write-offs related to rationalization activities, primarily related to the integration of Cooper Tire and closure of Cooper Tire's Melksham, United Kingdom tire manufacturing facility ("Melksham").
Interest expense in the third quarter of 2024 was $135 million, decreasing $3 million, or 2.2%, from $138 million in the third quarter of 2023. The average interest rate was 6.17% in the third quarter of 2024 compared to 6.32% in the third quarter of 2023. The average debt balance was $8,751 million in the third quarter of 2024 compared to $8,738 million in the third quarter of 2023.
Other (Income) Expense in the third quarter of 2024 was $34 million of expense, compared to $21 million of expense in the third quarter of 2023. The change in Other (Income) Expense was primarily due to transaction costs of $11 million ($9 million after-tax and minority) incurred in the third quarter of 2024 related to the anticipated sale of the OTR business, lower interest income of $7 million and lower net gains on asset sales of $5 million. Additionally, there were pension settlement charges of $4 million ($2 million after-tax and minority) and expense for non-indemnified costs for product liability claims related to products manufactured by a formerly consolidated joint venture entity of $4 million in the third quarter of 2023.
In the third quarter of 2024, we recorded income tax expense of $9 million on a loss before income taxes of $25 million. Income tax expense for the three months ended September 30, 2024 includes net discrete tax expense of $7 million ($7 million after minority interest). In the third quarter of 2023, we recorded income tax expense of $25 million on a loss before income taxes of $59 million. Income tax expense for the three months ended September 30, 2023 includes a net discrete tax benefit of $8 million ($8 million after minority interest).
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 months ended September 30, 2024 and 2023 primarily relates to losses in foreign jurisdictions in which no tax benefits are recorded and the discrete items noted above.
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. 5, Income Taxes.
There was no minority shareholders’ net income in the third quarter of 2024, compared to $5 million in the third quarter of 2023.
Nine Months Ended September 30, 2024 and 2023
Net sales in the first nine months of 2024 were $13,931 million, decreasing $1,019 million, or 6.8%, from $14,950 million in the first nine months of 2023. Goodyear net loss was $6 million, or $0.02 per share, in the first nine months of 2024, compared to Goodyear net loss of $398 million, or $1.40 per share, in the first nine months of 2023.
Net sales decreased in the first nine months of 2024 primarily due to lower tire volume of $736 million, representing lower tire volume in Americas and EMEA, partially offset by higher tire volume in Asia Pacific, global declines in price and product mix of $299 million and the negative impact of changes in foreign exchange rates of $168 million globally, driven by the strengthening of the U.S. dollar, partially offset by $110 million of sales lost during the first nine months of 2023 due to the Tupelo storm and higher sales in other tire-related businesses of $40 million, primarily driven by growth in Fleet Solutions in EMEA and increased third-party chemical sales in Americas.
Worldwide tire unit sales in the first nine months of 2024 were 123.0 million units, decreasing 4.9 million units, or 3.8%, from 127.9 million units in the first nine months of 2023. Replacement tire volume decreased globally by 7.4 million units, or 7.7%. OE tire volume increased globally by 2.5 million units, or 8.0%.
CGS in the first nine months of 2024 was $11,218 million, decreasing $1,269 million, or 10.2%, from $12,487 million in the first nine months of 2023. CGS decreased primarily due to lower tire volume of $593 million, lower raw material costs of $402
31
million, savings related to the Goodyear Forward plan of $194 million, foreign currency translation of $137 million, lower global mix of $132 million, a benefit from insurance recoveries related to the Debica fire of $50 million, partially offset by the continued impact of the fire on Debica fixed costs during ramp-up and other property damage of $20 million, a benefit of $39 million ($30 million after-tax and minority) from insurance proceeds for property damage and business interruptions resulting from storm damage events in Americas in prior years, and a favorable $8 million ($6 million after-tax and minority) tax item in Brazil. These decreases were partially offset by higher conversion costs of $256 million, driven by inflation and the effect of lower tire production on fixed cost absorption, and an increase in accelerated depreciation and asset write-offs of $63 million primarily related to the announced plant closures in Asia Pacific and EMEA. CGS in the first nine months of 2024 includes a $3 million ($3 million after-tax and minority) charge related to a flood in South Africa. CGS in the first nine months of 2023 included a $5 million ($4 million after-tax and minority) benefit related to the reversal of a portion of the estimated cleanup costs associated with the permanent closure of our Gadsden, Alabama tire manufacturing facility ("Gadsden") and the favorable impact of a successful legal claim of $3 million ($3 million after-tax and minority) related to a 2005 warehouse fire in Spain.
CGS in the first nine months of 2024 and 2023 included pension expense of $11 million for each period. CGS in the first nine months of 2024 included $12 million of incremental savings from rationalization plans. CGS was 80.5% of sales in the first nine months of 2024, compared to 83.5% in the first nine months of 2023.
SAG in the first nine months of 2024 was $2,090 million, increasing $45 million, or 2.2%, from $2,045 million in the first nine months of 2023. SAG increased primarily due to an increase in costs associated with the Goodyear Forward plan of $81 million ($61 million after-tax and minority), primarily related to third-party advisory, legal and consulting fees and costs associated with planned asset sales, an increase in accelerated lease costs and asset write-offs of $36 million, and inflation of $30 million. These increases were partially offset by savings related to the Goodyear Forward plan of $57 million, foreign currency translation of $21 million, and lower advertising costs of $15 million.
SAG in the first nine months of 2024 and 2023 included pension expense of $9 million for each period. SAG in the first nine months of 2024 included $33 million of incremental savings from rationalization plans, compared to $34 million in 2023. SAG was 15.0% of sales in the first nine months of 2024, compared to 13.7% in the first nine months of 2023.
We recorded an intangible asset impairment charge of $125 million ($94 million after-tax and minority) in the first nine months of 2024 primarily related to our lower tier indefinite-lived intangible assets related to the acquisition of Cooper Tire as a result of increased competition from lower tier imports in the market.
We recorded net rationalization charges of $52 million ($40 million after-tax and minority) in the first nine months of 2024 and $302 million ($262 million after-tax and minority) in the first nine months of 2023. Net rationalization charges in the first nine months of 2024 primarily related to the closures of our Malaysia, Melksham, Fulda and Fürstenwalde tire manufacturing facilities, as well as the closure of a development center and warehouse in the U.S., and the plan to open a new shared services center in Costa Rica, partially offset by reversals related to our rationalization and workforce reorganization plan in EMEA due to voluntary attrition. Net rationalization charges in the first nine months of 2023 primarily related to the rationalization and workforce reorganization plan in EMEA, the plan to reduce production capacity at Fulda, the plan to improve profitability in our Australia and New Zealand operations, and the plan to streamline our EMEA distribution network. For further information, refer to Note to the Consolidated Financial Statements No. 3, Costs Associated with Rationalization Programs.
CGS and SAG in the first nine months of 2024 included $119 million ($101 million after-tax and minority) of asset write-offs, accelerated depreciation and accelerated lease charges, primarily related to plant closures in Asia Pacific and EMEA, closure of a development center in the U.S. and the exit of our retail operations in Australia and New Zealand. CGS and SAG in the first nine months of 2023 included $21 million ($16 million after-tax and minority) of accelerated depreciation and asset write-offs related to rationalization activities, primarily related to the integration of Cooper Tire and the closure of Melksham, including the impact of $10 million of recoveries of previously written-off accounts receivable and other assets in Russia.
Interest expense in the first nine months of 2024 was $391 million, decreasing $12 million, or 3.0%, from $403 million in the first nine months of 2023. The average interest rate was 6.24% in the first nine months of 2024 compared to 6.18% in the first nine months of 2023. The average debt balance was $8,355 million in the first nine months of 2024 compared to $8,700 million in the first nine months of 2023.
Other (Income) Expense in the first nine months of 2024 was $8 million of income, compared to $82 million of expense in the first nine months of 2023. The change in Other (Income) Expense was primarily due to net foreign exchange gains of $3 million in the first nine months of 2024 compared to net foreign exchange losses of $38 million in the first nine months of 2023, which were driven by the weakening of the Argentine peso and Turkish lira, and a pension settlement credit of $5 million ($4 million after-tax and minority) in the first nine months of 2024 compared to pension settlement charges of $40 million ($30 million after-tax and minority) in 2023. Additionally, the change in Other (Income) Expense reflects net gains on asset and other sales in the first nine months of 2024 of $87 million ($61 million after-tax and minority), primarily related to the sale of distribution centers in EMEA and Americas, compared to a net gain on asset and other sales of $58 million ($41 million after-tax and minority) in
32
2023, primarily related to a sale and leaseback transaction in Americas. Other (Income) Expense for the first nine months of 2024 had lower interest income of $14 million compared to the first nine months of 2023. Other (Income) Expense for the first nine months of 2024 also includes transaction costs of $11 million ($9 million after-tax and minority) related to the anticipated sale of the OTR business and a favorable $2 million ($1 million after-tax and minority) tax item in Brazil. Other (Income) Expense in the first nine months of 2023 also includes $19 million ($14 million after-tax and minority) of expense for non-indemnified costs for product liability claims related to products manufactured by a formerly consolidated joint venture entity, $11 million ($8 million after-tax and minority) of income related to a favorable court decision setting aside a previous unfavorable verdict on intellectual property-related legal claims, and $5 million ($5 million after-tax and minority) of income related to the write-off of accumulated foreign currency translation in Russia.
For the first nine months of 2024, we recorded income tax expense of $75 million on income before income taxes of $63 million. Income tax expense for the nine months ended September 30, 2024 was unfavorably impacted by net discrete tax expense of $6 million ($6 million after minority interest).
In the first nine months of 2023, we recorded income tax expense of $22 million on a loss before income taxes of $369 million. Income tax expense for the nine months ended September 30, 2023 was favorably impacted by a net discrete tax benefit of $5 million ($6 million after minority interest).
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 nine months ended September 30, 2024 and 2023 primarily relates to losses in foreign jurisdictions in which no tax benefits are recorded and the discrete items noted above.
The Organisation for Economic Co-operation and Development (OECD) have published the Pillar Two model rules which adopt a global corporate minimum tax of 15% for multinational enterprises with average revenue in excess of €750 million. Certain jurisdictions in which we operate enacted legislation consistent with one or more of the OECD Pillar Two model rules effective in 2024. The model rules include minimum domestic top-up taxes, income inclusion rules, and undertaxed profit rules all aimed to ensure that multinational corporations pay a minimum effective corporate tax rate of 15% in each jurisdiction in which they operate. We do not expect the Pillar Two model rules to materially impact our annual effective tax rate in 2024. However, we are continuing to evaluate the Pillar Two model rules and related legislation and their potential impact on future periods.
At September 30, 2024 and December 31, 2023, we had approximately $1.3 billion and $1.2 billion of U.S. federal, state and local net deferred tax assets, respectively, inclusive of valuation allowances totaling $29 million and $22 million, respectively, in each period, primarily for state tax loss carryforwards with limited lives. As of September 30, 2024, approximately $1.1 billion of these U.S. net deferred tax assets had unlimited lives and approximately $200 million had limited lives, including $22 million of foreign tax credits, and the majority do not start to expire until 2030. As of December 31, 2023, approximately $1.0 billion of these U.S. net deferred tax assets had unlimited lives and approximately $200 million had limited lives, including $22 million of foreign tax credits, and the majority do not start to expire until 2030. In the U.S., as of December 31, 2023, we emerged from a three-year cumulative loss which was driven by business disruptions created by the COVID-19 pandemic. Our U.S. cumulative income for the three-years ended September 30, 2024 is primarily a result of gains from other comprehensive income rather than consistently profitable U.S. operating results. Our U.S. operating results for the first nine months of 2024 have shown improvement when compared to the first nine months of 2023.
In assessing our ability to utilize our net deferred tax assets, we primarily consider objectively verifiable evidence, including the improvement of our U.S. operating results during the first nine months of 2024 as a result of lower raw material and transportation costs and benefits from the Goodyear Forward plan compared to the first nine months of 2023. In addition, we consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets as well as the impact of tax planning strategies. These forecasts include the impact of recent trends and various macroeconomic factors such as the impact of raw material, transportation, labor and energy costs on our profitability. Our tax planning strategies include accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, repatriation of certain foreign royalty income, and other financing transactions, all of which would increase our domestic profitability.
We believe our improvement in U.S. operating results for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as well as forecasts of future profitability, provide us sufficient positive evidence to conclude that it is more likely than not that, at September 30, 2024, our U.S. net deferred tax assets will be fully utilized. However, macroeconomic factors such as raw material, transportation, labor and energy costs possess a high degree of volatility and can significantly impact our profitability. In addition, certain tax provisions, such as the annual interest expense limitation under Section 163(j) of the Internal Revenue Code of 1986, if amended, could impact our analysis of the realizability of our U.S. deferred tax assets. If our U.S. operating results significantly decline in the future, we may need to record a valuation allowance
33
which could adversely impact our operating results. As such, we will closely monitor our U.S. operations as well as any tax law changes to assess the realizability of our U.S. deferred tax assets.
At September 30, 2024 and December 31, 2023, we also had approximately $1.6 billion and $1.5 billion of foreign net deferred tax assets, respectively, and related valuation allowances of approximately $1.3 billion and $1.2 billion, respectively. 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 $1.1 billion 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 on our foreign deferred tax assets 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. 5, Income Taxes.
Minority shareholders’ net loss in the first nine months of 2024 was $6 million, primarily due to the closure of our Malaysia tire manufacturing facility, compared to net income of $7 million in the first nine months of 2023.
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.
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 and certain other items.
Total segment operating income for the third quarter of 2024 was $347 million, an increase of $11 million, or 3.3%, from $336 million in the third quarter of 2023. Total segment operating margin in the third quarter of 2024 was 7.2%, compared to 6.5% in the third quarter of 2023. Total segment operating income for the first nine months of 2024 was $933 million, an increase of $348 million, or 59.5%, from $585 million in the first nine months of 2023. Total segment operating margin in the first nine months of 2024 was 6.7%, compared to 3.9% in the first nine months of 2023.
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. 7, Business Segments, for further information and for a reconciliation of total segment operating income to Income (Loss) before Income Taxes.
Americas
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Percent |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Percent |
|
||||||||
Tire Units |
|
|
21.0 |
|
|
|
22.9 |
|
|
|
(1.9 |
) |
|
|
(8.3 |
)% |
|
|
59.6 |
|
|
|
64.2 |
|
|
|
(4.6 |
) |
|
|
(7.2 |
)% |
Net Sales |
|
$ |
2,858 |
|
|
$ |
3,120 |
|
|
$ |
(262 |
) |
|
|
(8.4 |
)% |
|
$ |
8,143 |
|
|
$ |
8,926 |
|
|
$ |
(783 |
) |
|
|
(8.8 |
)% |
Operating Income |
|
|
251 |
|
|
|
258 |
|
|
|
(7 |
) |
|
|
(2.7 |
)% |
|
|
671 |
|
|
|
440 |
|
|
|
231 |
|
|
|
52.5 |
% |
Operating Margin |
|
|
8.8 |
% |
|
|
8.3 |
% |
|
|
|
|
|
|
|
|
8.2 |
% |
|
|
4.9 |
% |
|
|
|
|
|
|
||||
Three Months Ended September 30, 2024 and 2023
Americas unit sales in the third quarter of 2024 decreased 1.9 million units, or 8.3%, to 21.0 million units. Replacement tire volume decreased 2.3 million units, or 11.3%, primarily in our consumer business, driven by increased competitiveness in the U.S. from the lower tier market and the transitory impact from distribution changes in Latin America. OE tire volume increased 0.4 million units, or 7.9%, primarily in our consumer business in Brazil.
Net sales in the third quarter of 2024 were $2,858 million, decreasing $262 million, or 8.4%, from $3,120 million in the third quarter of 2023. The decrease in net sales was primarily due to lower tire volume of $264 million, unfavorable foreign currency translation of $46 million, primarily related to the weakening of the Brazilian real and Mexican peso, and unfavorable price and product mix of $35 million. These decreases were partially offset by increased sales in other tire-related businesses of $37 million,
34
primarily due to higher third-party chemical and retail sales, $33 million of sales lost during the third quarter of 2023 due to the Tupelo storm, and a $13 million benefit related to the Goodyear Forward plan.
Operating income in the third quarter of 2024 was $251 million, decreasing $7 million, or 2.7%, from $258 million in the third quarter of 2023. The decrease in operating income was due to lower tire volume of $59 million, higher conversion costs of $55 million, driven by the effect of lower tire production on fixed cost absorption and inflation, unfavorable price and product mix of $17 million, unfavorable foreign currency translation of $9 million, and higher raw material costs of $1 million. These decreases were partially offset by a $79 million benefit related to the Goodyear Forward plan, a benefit of $20 million from insurance proceeds for property damage and business interruptions resulting from storm damage events in prior years, increased earnings in other tire-related businesses of $19 million, primarily due to higher third-party chemical earnings, lower imported tire costs of $8 million, and $5 million related to the 2023 negative impact of the Tupelo storm. Operating income for the third quarter of 2024 includes incremental savings from rationalization plans of $7 million.
Operating income in the third quarter of 2024 excluded net rationalization charges of $5 million and asset write-offs, accelerated depreciation and accelerated lease costs of $1 million. Operating income in the third quarter of 2023 excluded net gains on asset sales of $6 million, net rationalization charges of $4 million, and asset write-offs and accelerated depreciation of $3 million.
Nine Months Ended September 30, 2024 and 2023
Americas unit sales in the first nine months of 2024 decreased 4.6 million units, or 7.2%, to 59.6 million units. Replacement tire volume decreased 5.2 million units, or 9.8%, primarily in our consumer business, driven by increased competitiveness in the U.S. from the lower tier market and the transitory impact from distribution changes in Latin America. OE tire volume increased 0.6 million units, or 5.2%, primarily in our consumer business in Brazil and the U.S.
Net sales in the first nine months of 2024 were $8,143 million, decreasing $783 million, or 8.8%, from $8,926 million in the first nine months of 2023. The decrease in net sales was primarily due to lower tire volume of $697 million, unfavorable price and product mix of $233 million, and unfavorable foreign currency translation of $23 million, primarily related to the weakening of the Brazilian real. These decreases were partially offset by $110 million of sales lost during the nine months of 2023 due to the Tupelo storm, a $34 million benefit related to the Goodyear Forward plan, and increased sales in other tire-related businesses of $26 million, primarily due to higher third-party retail and chemical sales.
Operating income in the first nine months of 2024 was $671 million, increasing $231 million, or 52.5%, from $440 million in the first nine months of 2023. The increase in operating income was due to lower raw material costs of $240 million, a $177 million benefit related to the Goodyear Forward plan, lower transportation and imported tire costs of $111 million, $55 million related to the 2023 negative impact of the Tupelo storm, a benefit of $39 million from insurance proceeds for property damage and business interruptions resulting from storm damage events in prior years, increased earnings in other tire-related businesses of $33 million, primarily due to higher third-party chemical and retail earnings, and lower SAG of $23 million. These increases were partially offset by unfavorable price and product mix of $194 million, lower tire volume of $141 million, and higher conversion costs of $115 million, driven by inflation and the effect of lower tire production on fixed cost absorption. Operating income for the first nine months of 2024 includes incremental savings from rationalization plans of $31 million.
Operating income in the first nine months of 2024 excluded net rationalization charges of $20 million, net gains on asset sales of $14 million, and asset write-offs, accelerated depreciation and accelerated lease costs of $11 million. Operating income in the first nine months of 2023 excluded net gains on asset sales of $68 million, asset write-offs and accelerated depreciation of $18 million, and net rationalization charges of $12 million.
Europe, Middle East and Africa
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Percent |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Percent |
|
||||||||
Tire Units |
|
|
12.2 |
|
|
|
12.5 |
|
|
|
(0.3 |
) |
|
|
(2.9 |
)% |
|
|
36.3 |
|
|
|
37.5 |
|
|
|
(1.2 |
) |
|
|
(3.1 |
)% |
Net Sales |
|
$ |
1,348 |
|
|
$ |
1,374 |
|
|
$ |
(26 |
) |
|
|
(1.9 |
)% |
|
$ |
3,974 |
|
|
$ |
4,207 |
|
|
$ |
(233 |
) |
|
|
(5.5 |
)% |
Operating Income |
|
|
24 |
|
|
|
22 |
|
|
|
2 |
|
|
|
9.1 |
% |
|
|
67 |
|
|
|
11 |
|
|
|
56 |
|
|
|
509.1 |
% |
Operating Margin |
|
|
1.8 |
% |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
1.7 |
% |
|
|
0.3 |
% |
|
|
|
|
|
|
||||
Three Months Ended September 30, 2024 and 2023
EMEA unit sales in the third quarter of 2024 decreased 0.3 million units, or 2.9%, to 12.2 million units. Replacement tire volume decreased 0.1 million units, or 2.1%, mainly driven by our consumer business, reflecting lower tire volume in Eastern Europe, particularly Turkey. OE tire volume decreased 0.2 million units, or 5.6%, primarily in our consumer business, driven by lower vehicle production.
35
Net sales in the third quarter of 2024 were $1,348 million, decreasing $26 million, or 1.9%, from $1,374 million in the third quarter of 2023. The decrease in net sales was primarily due to lower tire volume of $36 million and the negative impact of changes in foreign exchange rates of $25 million, driven by a weaker Turkish lira and euro, partially offset by a stronger Polish zloty. These decreases were partially offset by improvements in price and product mix of $24 million and higher sales in other tire-related businesses of $11 million, primarily due to growth in Fleet Solutions.
Operating income in the third quarter of 2024 was $24 million, increasing $2 million, or 9.1%, from $22 million in the third quarter of 2023. The increase in operating income was primarily due to a benefit related to the Goodyear Forward plan of $33 million, favorable price and product mix of $24 million, higher earnings in other tire-related businesses of $1 million, primarily due to Fleet Solutions, and favorable foreign currency translation of $1 million. These improvements were partially offset by higher conversion costs of $36 million, driven by the effect of decreased tire production on fixed cost absorption and inflation, lower tire volume of $7 million, higher raw material costs of $6 million, higher SAG of $5 million, primarily due to higher bad debt, and $3 million as a result of the Debica fire, primarily comprised of repair costs. Operating income for third quarter of 2024 includes incremental SAG savings from rationalization plans of $2 million.
Operating income in the third quarter of 2024 includes accelerated depreciation of $17 million and net rationalization reversals of $2 million. Operating income in the third quarter of 2023 excluded net rationalization charges of $139 million and accelerated depreciation of $5 million.
Nine Months Ended September 30, 2024 and 2023
EMEA unit sales in the first nine months of 2024 decreased 1.2 million units, or 3.1%, to 36.3 million units. Replacement tire volume decreased 1.0 million units, or 3.6%, mainly driven by our consumer business, reflecting the impacts of competitiveness from the lower tier market, and lower tire volume, particularly in Turkey. OE tire volume decreased 0.2 million units, or 1.5%, primarily in our consumer business, driven by lower vehicle production.
Net sales in the first nine months of 2024 were $3,974 million, decreasing $233 million, or 5.5%, from $4,207 million in the first nine months of 2023. The decrease in net sales was primarily driven by the negative impact of changes in foreign exchange rates of $112 million, driven by a weaker Turkish lira, partially offset by a stronger Polish zloty, British pound and euro, lower tire volume of $103 million, and unfavorable price and product mix of $33 million. These decreases were partially offset by higher sales in other tire-related businesses of $15 million, primarily due to growth in Fleet Solutions.
Operating income in the first nine months of 2024 was $67 million, increasing $56 million, or 509.1%, from $11 million in the first nine months of 2023. The increase in operating income was primarily due to lower raw material costs of $155 million and a benefit related to the Goodyear Forward plan of $84 million. These improvements were partially offset by higher conversion costs of $147 million, driven by the effect of decreased tire production on fixed cost absorption and inflation, higher SAG of $18 million, primarily due to higher bad debt and rent costs, and lower tire volume of $18 million. Operating income for the first nine months of 2024 includes incremental CGS and SAG savings from rationalization plans of $8 million and $7 million, respectively.
Operating income in the first nine months of 2024 excluded an $80 million gain on asset sales, accelerated depreciation and accelerated lease costs of $50 million, and net rationalization charges of $8 million. Operating income in the first nine months of 2023 excluded net rationalization charges of $227 million, accelerated depreciation of $13 million and recoveries of previously written-off accounts receivable and other assets of $10 million in Russia.
Asia Pacific
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Percent |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
Percent |
|
||||||||
Tire Units |
|
|
9.3 |
|
|
|
9.9 |
|
|
|
(0.6 |
) |
|
|
(5.4 |
)% |
|
|
27.1 |
|
|
|
26.2 |
|
|
|
0.9 |
|
|
|
3.5 |
% |
Net Sales |
|
$ |
618 |
|
|
$ |
648 |
|
|
$ |
(30 |
) |
|
|
(4.6 |
)% |
|
$ |
1,814 |
|
|
$ |
1,817 |
|
|
$ |
(3 |
) |
|
|
(0.2 |
)% |
Operating Income |
|
|
72 |
|
|
|
56 |
|
|
|
16 |
|
|
|
28.6 |
% |
|
|
195 |
|
|
|
134 |
|
|
|
61 |
|
|
|
45.5 |
% |
Operating Margin |
|
|
11.7 |
% |
|
|
8.6 |
% |
|
|
|
|
|
|
|
|
10.7 |
% |
|
|
7.4 |
% |
|
|
|
|
|
|
||||
Three Months Ended September 30, 2024 and 2023
Asia Pacific unit sales in the third quarter of 2024 decreased 0.6 million units, or 5.4%, to 9.3 million units. Replacement tire volume decreased 0.7 million units, or 13.0%, due to softness in consumer replacement in most of our key markets, including Australia, China and India. OE tire volume increased 0.1 million units, or 3.6%, primarily driven by an increase in consumer EV fitments in China.
Net sales in the third quarter of 2024 were $618 million, decreasing $30 million, or 4.6%, from $648 million in the third quarter of 2023. The decrease in net sales was primarily due to lower tire volume of $33 million, lower sales in other tire-related
36
businesses of $2 million, and unfavorable foreign currency translation of $2 million due to the strengthening of the U.S. dollar. The decrease is partially offset by favorable price and product mix of $8 million.
Operating income in the third quarter of 2024 was $72 million, increasing $16 million, or 28.6%, from $56 million in the third quarter of 2023. The increase in operating income was primarily due to favorable price and product mix of $19 million, a benefit related to the Goodyear Forward plan of $11 million, and lower SAG of $6 million, partially offset by higher raw material costs of $12 million and lower tire volume of $8 million.
Operating income in the third quarter of 2024 excluded asset write-offs, accelerated depreciation and accelerated lease costs of $7 million, net rationalization charges of $1 million, and net gains on asset sales of $1 million. Operating income in the third quarter of 2023 excluded net rationalization charges of $20 million.
Nine Months Ended September 30, 2024 and 2023
Asia Pacific unit sales in the first nine months of 2024 increased 0.9 million units, or 3.5%, to 27.1 million units. OE tire volume increased 2.1 million units, or 19.0%, primarily due to an increase in consumer EV fitments in China. Replacement tire volume decreased 1.2 million units, or 8.1%, due to softness in consumer replacement in most of our key markets, including Australia, China and India.
Net sales in the first nine months of 2024 were $1,814 million, decreasing $3 million, or 0.2%, from $1,817 million in the first nine months of 2023. The decrease in net sales was primarily due to unfavorable price and product mix of $33 million driven by the Australia transformation, unfavorable foreign currency translation of $33 million due to the strengthening of the U.S. dollar, and lower sales in other tire-related businesses of $1 million, partially offset by higher tire volume of $64 million.
Operating income in the first nine months of 2024 was $195 million, increasing $61 million, or 45.5%, from $134 million in the first nine months of 2023. The increase in operating income was primarily due to favorable price and product mix of $27 million, a benefit related to the Goodyear Forward plan of $24 million, higher tire volume of $16 million, and lower conversion costs of $6 million. These increases were partially offset by unfavorable foreign currency translation of $4 million and lower income in other tire-related businesses of $2 million.
Operating income in the first nine months of 2024 excluded asset write-offs, accelerated depreciation and accelerated lease costs of $37 million, net rationalization charges of $14 million, and net gains on asset sales of $1 million. Operating income in the first nine months of 2023 excluded net rationalization charges of $23 million.
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.
At September 30, 2024, we had $905 million in cash and cash equivalents, compared to $902 million at December 31, 2023. For the nine months ended September 30, 2024, net cash used for operating activities was $591 million, reflecting cash used for working capital of $1,124 million and rationalization payments of $149 million, as well as the Company's net loss for the period of $12 million, which included non-cash charges for depreciation and amortization of $800 million, an intangible asset impairment of $125 million, net rationalization charges of $52 million, a non-cash gain on asset sales of $95 million, and a gain on insurance recoveries for damaged property, plant and equipment of $61 million. Net cash used for investing activities was $759 million, primarily representing capital expenditures of $912 million and loans to TireHub of $28 million, partially offset by proceeds from asset sales of $126 million, primarily related to the sale of a distribution center in Germany and the sale and leaseback of a warehouse in Americas, and insurance recoveries of $48 million for replacement of equipment damaged in the Debica fire and building damage in the Tupelo storm. Net cash provided by financing activities was $1,315 million, primarily due to net borrowings of $1,366 million.
At September 30, 2024, we had $2,508 million of unused availability under our various credit agreements, compared to $4,247 million at December 31, 2023. The table below presents unused availability under our credit facilities at those dates:
(In millions) |
|
September 30, |
|
|
December 31, |
|
||
First lien revolving credit facility |
|
$ |
1,609 |
|
|
$ |
2,241 |
|
European revolving credit facility |
|
|
358 |
|
|
|
884 |
|
Chinese credit facilities |
|
|
342 |
|
|
|
657 |
|
Mexican credit facility |
|
|
— |
|
|
|
116 |
|
Other foreign and domestic debt |
|
|
199 |
|
|
|
349 |
|
|
|
$ |
2,508 |
|
|
$ |
4,247 |
|
37
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 default probabilities, 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.
We expect our 2024 full-year cash flow needs to include capital expenditures of approximately $1,200 million, excluding approximately $50 million of capital expenditures covered by insurance. We also expect interest expense to be approximately $525 million; rationalization payments to be approximately $225 million; income tax payments to be approximately $175 million, excluding one-time items; and contributions to our funded pension plans to be $25 million to $35 million. We expect working capital to be a $150 million to $200 million use of operating cash flows.
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.
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 September 30, 2024, approximately $828 million of net assets, including approximately $172 million of cash and cash equivalents, were subject to such requirements. The 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.
On October 22, 2024, one of our distributors, American Tire Distributors, Inc. and twelve related legal entities (“ATD”) filed Chapter 11 bankruptcy petitions. We have approximately $135 million in accounts receivable currently outstanding from ATD. As is customary in some Chapter 11 cases, the court entered an interim order authorizing, but not directing, ATD to pay pre-petition claims of certain critical vendors. We have reached an agreement with ATD regarding the payment of substantially all of our pre-petition claims with ATD. We do not currently expect ATD’s bankruptcy to have a material impact on our operating results, financial condition or liquidity.
Operating Activities
Net cash used for operating activities was $591 million in the first nine months of 2024, compared to net cash used for operating activities of $204 million in the first nine months of 2023. The $387 million increase in net cash used for operating activities was primarily due to an increase in cash used for working capital of $313 million, year-over-year changes in balance sheet accounts for Other Current Liabilities and Other Assets and Liabilities totaling $291 million, $81 million of costs related to the Goodyear Forward plan, and higher rationalization payments of $77 million, partially offset by higher earnings in our SBUs of $348 million.
The increase in cash used for working capital reflects an increase in cash used for Inventory of $849 million, partially offset by a decrease in cash used for Accounts Payable — Trade of $378 million and Accounts Receivable of $158 million. These changes were driven by lower sales volume in the first nine months 2024 compared to the first nine months of 2023.
Investing Activities
Net cash used for investing activities was $759 million in the first nine months of 2024, compared to $818 million in the first nine months of 2023. Capital expenditures were $912 million in the first nine months of 2024, compared to $807 million in the
38
first nine months of 2023. Cash provided by asset dispositions and sale and leaseback transactions in the first nine months of 2024 was $126 million, compared to $76 million in the first nine months of 2023. Additionally, investing activities in the first nine months of 2024 include insurance recoveries of $48 million for the replacement of equipment damaged in the Debica fire and building damage in Tupelo and net loans to TireHub of $28 million, while investing activities in the first nine months of 2023 included net loans to TireHub of $61 million. Beyond expenditures required to sustain our facilities, capital expenditures in 2024 and 2023 primarily related to the modernization and expansion of tire manufacturing facilities around the world. Capital expenditures in 2024 also included the replacement of equipment in Debica and building assets in Tupelo.
Financing Activities
Net cash provided by financing activities was $1,315 million in the first nine months of 2024, compared to net cash provided by financing activities of $774 million in the first nine months of 2023. Financing activities in the first nine months of 2024 included net borrowings of $1,366 million and a decrease of $46 million in debt related costs and other transactions, primarily in our factored accounts receivable liability. Financing activities in the first nine months of 2023 included net borrowings of $787 million.
Credit Sources
In aggregate, we had total credit arrangements of $11,496 million available at September 30, 2024, of which $2,508 million were unused, compared to $11,743 million available at December 31, 2023, of which $4,247 million were unused. At September 30, 2024, we had long term credit arrangements totaling $10,580 million, of which $2,217 million were unused, compared to $10,983 million and $3,867 million, respectively, at December 31, 2023. At September 30, 2024, we had short term committed and uncommitted credit arrangements totaling $916 million, of which $291 million were unused, compared to $760 million and $380 million, respectively, at December 31, 2023. The continued availability of the short term uncommitted arrangements is at the discretion of the relevant lenders and may be terminated at any time.
Outstanding Notes
At September 30, 2024, we had $5,273 million of outstanding notes compared to $5,571 million at December 31, 2023.
On August 7, 2024 (the “Redemption Date”), we redeemed $300 million in aggregate principal amount of our outstanding 9.5% Senior Notes due 2025. The redemption price was equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest thereon to the Redemption Date.
$2.75 billion Amended and Restated First Lien Revolving Credit Facility due 2026
Our amended and restated first lien revolving credit facility matures on June 8, 2026 and 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. 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 SOFR plus 125 basis points. Undrawn amounts under the facility are 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 September 30, 2024, our borrowing base was above the facility's stated amount of $2.75 billion. In addition, if the amount of outstanding borrowings and letters of credit under the facility exceeds the borrowing base, we would be required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess.
At September 30, 2024, we had $1,140 million of borrowings and $1 million of letters of credit issued under the revolving credit facility. At December 31, 2023, we had $385 million of borrowings and $1 million of letters of credit issued under the revolving credit facility.
€800 million Amended and Restated Senior Secured European Revolving Credit Facility due 2028
The European revolving credit facility matures on January 14, 2028 and consists of (i) a €180 million German tranche that is available only to Goodyear Germany GmbH and (ii) a €620 million all-borrower tranche that is available to Goodyear Europe B.V. ("GEBV"), Goodyear Germany and Goodyear 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. Subject to the consent of the lenders whose
39
commitments are to be increased, we may request that the facility be increased by up to €200 million. Amounts drawn under this facility will bear interest at SOFR plus 150 basis points for loans denominated in U.S. dollars, EURIBOR plus 150 basis points for loans denominated in euros, and SONIA 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.
At September 30, 2024, there were $201 million (€180 million) of borrowings outstanding under the German tranche, $336 million (€300 million) of borrowings outstanding under the all-borrower tranche and no letters of credit outstanding under the European revolving credit facility. At December 31, 2023, we had no borrowings and no letters of credit outstanding under the European revolving credit facility.
Both 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 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, 2021 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 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 19, 2023 through October 16, 2024, the designated maximum amount of the facility is €300 million. For the period from October 17, 2024 through October 16 2025, the designated maximum amount of the facility will remain €300 million.
The facility involves an 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) 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 first lien revolving credit 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 16, 2025.
At September 30, 2024, the amounts available and utilized under this program totaled $231 million (€207 million). At December 31, 2023, the amounts available and utilized under this program totaled $244 million (€221 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 September 30, 2024, the gross amount of receivables sold was $631 million, compared to $693 million at December 31, 2023.
Letters of Credit
At September 30, 2024, we had $215 million in letters of credit issued under bilateral letter of credit agreements and other foreign credit facilities. The majority of these letter of credit agreements are in lieu of security deposits.
Supplier Financing
We have entered into supplier finance programs with several financial institutions. Under these programs, the financial institutions act as our paying agents with respect to accounts payable due to our suppliers. We agree to pay the financial institutions the stated amount of the confirmed invoices from the designated suppliers on the original due dates of the invoices. Invoice payment terms can be up to 120 days based on industry norms for the specific item purchased. We do not pay any fees to the financial institutions and we do not pledge any assets as security or provide other forms of guarantees for these programs. These programs allow our suppliers to sell their receivables to the financial institutions at the sole discretion of the suppliers and the financial institutions on terms that are negotiated among 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 these programs. The amounts available under these programs were $852 million and $892 million at September 30, 2024 and December 31, 2023, respectively. The amounts confirmed to the financial institutions were $606 million and $580 million at September 30, 2024 and December 31, 2023, respectively, and are included in Accounts Payable — Trade in our Consolidated Balance Sheets. All activity related to these obligations is presented within operating activities on the Consolidated Statements of Cash Flows.
40
Further Information
For a further description of the terms of our outstanding notes, first lien revolving credit facility, European revolving credit facility and pan-European accounts receivable securitization facility, refer to Note to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments, in our 2023 Form 10‑K and Note to the Consolidated Financial Statements No. 8, Financing Arrangements and Derivative Financial Instruments, in this Form 10-Q.
Covenant Compliance
Our first lien revolving credit facility 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 lien revolving credit facility 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 covenant in our first lien revolving credit facility that is currently not applicable. We become subject to that financial covenant when the aggregate amount of our Parent Company (The Goodyear Tire & Rubber Company) and guarantor subsidiaries cash and cash equivalents (“Available Cash”) plus our availability under our first lien revolving credit facility is less than $275 million. If this were to occur, our ratio of EBITDA to Consolidated Interest Expense may not be less than 2.0 to 1.0 for the most recent period of four consecutive fiscal quarters. As of September 30, 2024, our unused availability under this facility of $1,609 million, plus our Available Cash of $238 million, totaled $1,847 million, which is in excess of $275 million.
In addition, our European revolving credit facility contains non-financial covenants similar to the non-financial covenants in our first lien revolving credit facility that are described above, similar non-financial covenants specifically applicable to GEBV and its subsidiaries, 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 September 30, 2024, 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 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 September 30, 2024, we were in compliance with the currently applicable material covenants imposed by our principal credit facilities and indentures.
The terms “Available Cash,” “EBITDA,” “Consolidated Interest Expense,” “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 may 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
41
assets as security for additional secured indebtedness. In addition, no assurance can be given as to our ability to raise additional unsecured debt.
On July 22, 2024, we entered into a commitment letter (the “Commitment Letter”) to provide us a 364-day senior unsecured committed credit facility in an aggregate principal amount not to exceed $500 million (the “Committed Credit Facility”). If drawn, borrowings under the Committed Credit Facility would be required to be used solely to redeem our remaining outstanding 9.5% Senior Notes Due 2025 (the “9.5% Notes”).
Prior to any funding under the Committed Credit Facility, the aggregate commitments under the Commitment Letter for the Committed Credit Facility would be reduced by the amount of any proceeds received by us in respect of certain asset sales and by the amount of any 9.5% Notes redeemed, repurchased or otherwise repaid by us after the date of the Commitment Letter (other than the partial redemption of $300 million of the 9.5% Notes that occurred on August 7, 2024). The commitments of the lenders under the Commitment Letter are subject to the execution and delivery of definitive documentation with respect to the Committed Credit Facility and other customary conditions. The Commitment Letter will terminate on the earliest of (i) the redemption, repurchase or other repayment of all of the 9.5% Notes without the funding of the Committed Credit Facility, (ii) the execution and delivery of the Committed Credit Facility, (iii) our election to terminate the Commitment Letter, or (iv) June 2, 2025 (the final payment date for the 9.5% Notes).
Dividends and Common Stock Repurchases
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.
We do not currently pay a quarterly dividend on our common stock.
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 nine months of 2024, we did not repurchase any shares 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
Historically, 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. We may undertake additional asset sales and sale and leaseback transactions in the future. The restrictions imposed by our material indebtedness may require us to seek waivers or amendments of covenants or alternative sources of financing to proceed with future transactions. We cannot assure you that such waivers, amendments or alternative financing could be obtained, or if obtained, would be on terms acceptable to us.
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 $500 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 our first lien revolving credit facility (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 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.
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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.
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:
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.
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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.
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 |
|
|||||
(In millions) |
|
September 30, |
|
|
December 31, |
|
||
Total Current Assets(1) |
|
$ |
6,027 |
|
|
$ |
6,276 |
|
Total Non-Current Assets |
|
|
8,615 |
|
|
|
8,669 |
|
|
|
|
|
|
|
|
||
Total Current Liabilities |
|
$ |
3,460 |
|
|
$ |
3,615 |
|
Total Non-Current Liabilities |
|
|
8,476 |
|
|
|
8,675 |
|
|
|
Summarized Statements of Operations |
|
|||||
(In millions) |
|
Nine Months Ended |
|
|
Year Ended |
|
||
Net Sales |
|
$ |
7,616 |
|
|
$ |
11,166 |
|
Cost of Goods Sold |
|
|
6,236 |
|
|
|
9,355 |
|
Selling, Administrative and General Expense |
|
|
1,121 |
|
|
|
1,524 |
|
Intangible Asset Impairment |
|
|
125 |
|
|
|
— |
|
Rationalizations |
|
|
21 |
|
|
|
67 |
|
Interest Expense |
|
|
362 |
|
|
|
418 |
|
Other (Income) Expense |
|
|
(126 |
) |
|
|
(106 |
) |
Income (Loss) before Income Taxes(2) |
|
$ |
(123 |
) |
|
$ |
(92 |
) |
|
|
|
|
|
|
|
||
Net Income (Loss) |
|
$ |
(103 |
) |
|
$ |
(31 |
) |
Goodyear Net Income (Loss) |
|
$ |
(103 |
) |
|
$ |
(31 |
) |
CRITICAL ACCOUNTING POLICIES
Goodwill and Intangible Assets. Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if an indicator of impairment is present. Intangible assets with finite lives are amortized over their useful lives and are reviewed for impairment whenever events or circumstances warrant such review. Goodwill and intangible assets are written down to fair value if considered impaired. Goodwill and Intangible Assets totaled $759 million and $814 million, respectively, at September 30, 2024, compared to $781 million and $969 million, respectively, at December 31, 2023. The goodwill associated with reporting units in our Americas and Asia Pacific segments was $715 million and $44 million, respectively, at September 30, 2024, and $724 million and $57 million, respectively, at December 31, 2023.
Goodwill and intangible assets with indefinite useful lives are not amortized but are assessed for impairment annually on October 31st with the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of the reporting unit or indefinite-lived intangible asset to its carrying value. In addition to the annual assessment, impairment evaluation is considered during interim periods when events occur or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. During our annual impairment assessment and in subsequent interim periods, we review events that occur or circumstances that change, including the macroeconomic environment, our business performance and our market capitalization, to determine if a quantitative impairment assessment is necessary. We review our business performance and the macroeconomic environment against our recent expectations and evaluate book value compared to market capitalization, including fluctuations in our stock price, to determine if this could be an indicator of potential impairment. Consideration is given as to whether a fluctuation in our stock
44
price is a result of current market conditions, due to a transitory event or an event that is expected to continue to affect us, or is consistent with our historical stock price volatility. We also consider these factors compared to the results of our most recent quantitative goodwill impairment assessment.
Under the qualitative assessment, we assess whether it is more likely than not (defined as a likelihood of more than 50%) that the fair value of our goodwill or indefinite-lived intangible assets is less than the respective carrying values. If it is more likely than not that an impairment exists, then a quantitative impairment assessment is performed. If under the quantitative assessment the fair value is less than the carrying value, an impairment loss will be recorded for the difference between the carrying value and the fair value. Under the quantitative assessment, we estimate the fair value of goodwill using the discounted cash flows of a reporting unit. For indefinite-lived intangible assets we estimate the fair value using discounted cash flows following a relief-from-royalty method utilizing a market-based royalty rate. Forecasts of future cash flows are based on our best estimate of projected revenue and projected operating margin, based primarily on sales and production volume, pricing, raw material costs, market share, industry outlook, general economic conditions, and certain strategic actions we plan to implement. Cash flows are discounted using our weighted average cost of capital.
In the third quarter, we experienced a decline in our market capitalization as a result of a decrease in our stock price. Our stock price has a history of volatility, however, given the decrease was sustained throughout the quarter, we viewed this event as a triggering event and performed a quantitative analysis of the fair value of the North America reporting unit in our Americas segment. We determined the estimated fair value of our North America reporting unit based on discounted cash flow projections. The most critical assumptions used in the calculation of the fair value of our North America reporting unit are the projected revenue, projected operating margin and discount rate. Our forecast of future cash flows is based on our best estimate of projected revenue and projected operating margin, based primarily on pricing, raw material costs, market share, industry outlook, general economic conditions and strategic actions to improve Americas' operating margin. Based on our interim impairment test, the North America reporting unit had an estimated fair value that exceeded its carrying value, including goodwill, by approximately 14%.
The following table highlights the sensitivities of the North America reporting unit’s goodwill as of September 30, 2024:
|
|
|
|
|
North America |
Assumption: |
|
|
Approximate percentage by which the fair value exceeds the carrying value based on the interim |
|
14% |
Approximate percentage by which the fair value exceeds the carrying value if the discount rate were |
|
9% |
Approximate percentage by which the fair value exceeds the carrying value if the projected operating margin |
|
6% |
Approximate percentage by which the fair value exceeds the carrying value if the projected revenue |
|
13% |
The fair value of the North America reporting unit’s goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected operating margin and discount rate used to evaluate the fair value of these assets. Although we believe our estimate of fair value is reasonable, the reporting unit’s future financial performance is dependent on our ability to execute our business plan and to successfully implement strategic actions which we expect will improve our long-term operating margin. If a reporting unit’s future financial performance falls below our expectations, there are adverse revisions to significant assumptions, or our market capitalization declines further or does not improve from the strategic actions we are implementing, this could be indicative that the fair values of each of our reporting units has declined below their carrying values, and therefore we may need to record a material, non-cash goodwill impairment charge in a future period.
During the third quarter, we experienced a decline in volumes primarily in our lower tier indefinite-lived intangible assets related to the acquisition of Cooper Tire as a result of increased competition from lower tier imports in the market. We viewed this event as a triggering event and performed a quantitative analysis of the fair value of our indefinite-lived intangible assets related to the acquisition of Cooper Tire as of September 30, 2024. Based on the results of the quantitative impairment assessments, the fair value of the intangibles was less than the carrying value, resulting in a non-cash impairment charge of $125 million during the third quarter of 2024. We determined the fair value of the indefinite-lived intangible assets using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the assets. The most critical assumptions used in the calculation of the fair value are projected revenue, discount rate and royalty rate. The fair value of the indefinite-lived intangible assets is sensitive to differences between estimated and actual revenue, including changes in the discount rate and royalty rate used to evaluate the fair value of these assets.
45
After the non-cash impairment charge, we identified $425 million of indefinite-lived intangibles assets related to the Cooper Tire acquisition for which the estimated fair values of our indefinite-lived intangible assets approximated their respective carrying values. Although we believe our estimate of fair value is reasonable, the indefinite-lived intangible asset performance is dependent on our ability to execute our business plan. If our future financial performance falls below our expectations, there are adverse revisions to significant assumptions, including projected revenues, discount rates or royalty rates, this could be indicative that the fair values of these indefinite-lived intangible assets has declined below their carrying values, and therefore we may need to record a material, non-cash impairment charge in a future period.
At September 30, 2024, after evaluating macroeconomic conditions and our current and future results of operations, we concluded that there were no triggering events and it was not more likely than not that the fair values of our reporting unit within our Asia Pacific segment or remaining indefinite-lived intangible assets were less than their respective carrying values and, therefore, did not have any impairment. Future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill, including discount rates and cash flow projections, could result in significantly different estimates of the fair values. A significant reduction in the estimated fair values could result in impairment charges that could adversely affect our results of operations.
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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:
47
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.
48
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 September 30, 2024, approximately 33% of our debt was at variable interest rates averaging 6.71%.
The following table presents information about long term fixed rate debt, excluding finance leases, at September 30, 2024:
(In millions) |
|
|
|
|
Carrying amount — liability |
|
$ |
5,438 |
|
Fair value — liability |
|
|
5,165 |
|
Pro forma fair value — liability |
|
|
5,330 |
|
The pro forma information assumes a 100 basis point decrease in market interest rates at September 30, 2024, 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 September 30, 2024:
(In millions) |
|
|
|
|
Fair value — asset (liability) |
|
$ |
(16 |
) |
Pro forma decrease in fair value |
|
|
(173 |
) |
Contract maturities |
|
10/24 - 9/25 |
|
|
The pro forma decrease in fair value assumes a 10% adverse change in underlying foreign exchange rates at September 30, 2024, 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 September 30, 2024 as follows:
(In millions) |
|
|
|
|
Current asset (liability): |
|
|
|
|
Accounts receivable |
|
$ |
4 |
|
Other current liabilities |
|
|
(20 |
) |
For further information on foreign currency contracts, refer to Note to the Consolidated Financial Statements No. 8, 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.
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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 September 30, 2024 (the end of the period covered by this Quarterly Report on Form 10-Q).
Changes in Internal Control Over Financial 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.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Asbestos Litigation
As reported in our Form 10-K for the year ended December 31, 2023, we were one of numerous defendants in legal proceedings in certain state and federal courts involving approximately 35,800 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 nine months of 2024, approximately 650 claims were filed against us and approximately 950 were settled or dismissed. The amounts expended on asbestos defense and claim resolution by us and our insurers during the first nine months of 2024 was $9 million. At September 30, 2024, there were approximately 35,500 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. 12, Commitments and Contingent Liabilities, for additional information on asbestos litigation.
Reference is made to Item 3 of Part I of our 2023 Form 10-K and to Item I of Part II of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 for additional discussion of legal proceedings.
ITEM 1A. RISK FACTORS.
Refer to “Item 1A. Risk Factors” in our 2023 Form 10-K and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 for a discussion of our risk factors.
ITEM 5. OTHER INFORMATION.
During the quarterly period ended September 30, 2024, none of our directors or officers informed us of the
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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Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2024
INDEX OF EXHIBITS
Exhibit Table Item No. |
|
Description of Exhibit |
|
Exhibit Number |
|
|
|
|
|
2 |
|
Plan of Acquisition, Reorganization, Arrangement, Liquidation, or Succession |
|
|
|
|
|
|
|
(a) |
|
|
2.1 |
|
|
|
|
|
|
10 |
|
Material Contracts |
|
|
|
|
|
|
|
(a) |
|
|
10.1 |
|
|
|
|
|
|
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 |
|
|
|
|
|
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 |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File |
|
|
|
|
|
|
|
|
|
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (included as Exhibit 101). |
|
|
* Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.
The representations, warranties and covenants contained in any agreement filed as an exhibit to this Quarterly Report on Form 10-Q were made solely for purposes of the agreement and as of specific dates, were solely for the benefit of the parties to the agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to security holders. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
52
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: |
November 5, 2024 |
By |
/s/ MARGARET V. SNYDER |
|
|
Margaret V. Snyder, 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.) |
|
53