Goodyear Reports Third Quarter 2020 Results

October 30, 2020

– Volume improved throughout the third quarter; total unit volume down 9% versus 2019

– Third quarter working capital significantly better than expected; source of cash for the quarter

– Cash and liquidity position maintained; $4.2 billion available at quarter end

– Strong net cost savings in the third quarter, including benefit of rationalization savings

– Record consumer replacement volume in China
 

AKRON, Ohio, Oct. 30, 2020 – The Goodyear Tire & Rubber Company today reported results for the third quarter and first nine months of 2020.

“Our results reflect increasing momentum as the global tire industry recovered more quickly than we expected during the quarter, led by the Americas,” said Richard J. Kramer, chairman, chief executive officer and president. “We are taking every opportunity to continue building our business for the long term, while generating significant cost savings and free cash flow,” added Kramer.

Goodyear’s third quarter 2020 sales were $3.5 billion, down 9% from a year ago. The decline was driven by lower volume, unfavorable foreign currency translation and reduced sales from other tire-related businesses. These factors were partially offset by improvements in price/mix.

Tire unit volumes totaled 36.6 million, down 9% from the prior year’s period. Industry demand during the quarter was affected by the continued economic disruption resulting from the COVID-19 pandemic. Replacement tire shipments declined 9%, reflecting the impact of lower consumer demand, temporary third-party retail store closings in the U.S., and actions taken to align European distribution. Original equipment unit volume decreased 9%, driven by reduced vehicle production.

Goodyear’s third quarter 2020 net loss was $2 million (1 cent per share) compared to net income of $88 million (38 cents per share) a year ago. The decrease was driven by a decline in segment operating income. Third quarter 2020 adjusted net income was $24 million (10 cents per share), compared to adjusted net income of $105 million (45 cents per share) in 2019. Per share amounts are diluted.

The company reported segment operating income of $162 million in the third quarter of 2020, down $132 million from a year ago. The decline primarily reflects lower volume, reduced factory utilization and lower earnings from other tire-related businesses. These factors were partially offset by the benefits of cost saving actions, including ongoing rationalization plans, and improved price/mix. 
 

Year-to-Date Results

Goodyear’s sales for the first nine months of 2020 were $8.7 billion, a 21% decline from the 2019 period, driven by lower volume, reduced sales from other tire-related businesses and unfavorable foreign currency translation. These factors were partially offset by improvements in price/mix.

Tire unit volumes totaled 88.3 million, down 24% from 2019. Replacement tire shipments decreased 21%, primarily reflecting lower industry demand. Original equipment volume declined 31%, driven by lower global vehicle production.

Goodyear’s net loss was $1.3 billion for the first nine months of 2020 ($5.62 per share) compared to net income of $81 million (35 cents per share) in the prior year’s period. The first nine months of 2020 included several significant items, including a non-cash charge of $295 million related to a valuation allowance on certain deferred tax assets for foreign tax credits, a non-cash impairment charge of $182 million to reduce the carrying value of goodwill in the EMEA business, a non-cash impairment charge of $148 million to reduce the carrying value of an equity interest in TireHub, and rationalization charges of $133 million, primarily associated with the closure of a manufacturing facility in Gadsden, Alabama. Goodyear’s net income for the comparable period in 2019 included rationalization charges of $128 million, primarily related to a plan to modernize two tire manufacturing facilities in Germany. Goodyear’s adjusted net loss for the first nine months of 2020 was $550 million ($2.35 per share), compared to adjusted net income of $208 million (89 cents per share) in the prior year’s period. Per share amounts are diluted.

The company reported a segment operating loss of $316 million for the first nine months of 2020, down $1.0 billion from a year ago. The decrease was primarily due to lower volume, reduced factory utilization and lower earnings from other tire-related businesses. These factors were partially offset by lower SAG, driven by reduced payroll and advertising expenses, and the benefits of cost saving actions, including ongoing rationalization plans.
 

Reconciliation of Non-GAAP Financial Measures

See the note at the end of this release for further explanation and reconciliation tables for Segment Operating Income (Loss) and Margin; Adjusted Net Income (Loss); and Adjusted Diluted Earnings (Loss) per Share, reflecting the impact of certain significant items on the 2020 and 2019 periods.
 

Business Segment Results

Americas

  Third Quarter Nine Months
(in millions) 2020 2019 2020 2019
Tire Units 16.2 17.9 39.2 51.7
Net Sales $1,823 $2,049 $4,630 $5,896

Segment Operating Income (Loss)

106 175 (181) 398
Segment Operating Margin 5.8% 8.5% (3.9)% 6.8%


Americas’ third quarter 2020 sales of $1.8 billion were 11% lower than in the previous year, driven by lower volume, unfavorable foreign currency translation and reduced sales from other tire-related businesses. These factors were partially offset by improvements in price/mix. Tire unit volume declined 10%. Replacement tire shipments decreased 12%, reflecting weak retail demand and temporary third-party retail store closings in the U.S. Original equipment unit volume was essentially flat, as the impact of weak industry demand in Brazil offset a 7% increase in U.S. consumer OE shipments.

Third quarter 2020 operating income of $106 million was down $69 million from the prior year’s quarter. The decline was driven by reduced factory utilization and lower volume. These factors were partially offset by the benefits of cost saving actions, lower SAG and improved price/mix.
 

Europe, Middle East and Africa

  Third Quarter Nine Months
(in millions) 2020 2019 2020 2019
Tire Units 13.2
14.5 32.1 42.1
Net Sales $1,156
$1,205
$2,827 $3,567
Segment Operating Income (Loss) 22 66 (141)
164
Segment Operating Margin 1.9%
5.5%
(5.0)%
4.6%


Europe, Middle East and Africa’s third quarter 2020 sales decreased 4% from last year to $1.2 billion due to lower volume, partially offset by improvements in price/mix. Tire unit volume decreased 9%. Replacement tire shipments fell 8%, driven by lower industry demand and the impact of the company’s previously announced initiative to align distribution in Europe. Original equipment unit volume decreased 11%, driven by lower vehicle production.

Third quarter 2020 segment operating income of $22 million was down $44 million from the prior year’s quarter, driven by the impact of lower volume, including reduced factory utilization, partially offset by lower raw material costs and improved price/mix.
 

Asia Pacific

  Third Quarter Nine Months
(in millions) 2020 2019 2020 2019
Tire Units 7.2 7.9 17.0 21.9
Net Sales $486 $548 $1,208 $1,569
Segment Operating Income 34 53 6 141
Segment Operating Margin 7.0% 9.7% 0.5% 9.0%


Asia Pacific’s third quarter 2020 sales decreased 11% to $486 million, driven by lower volume. Tire unit volume declined 9%. Original equipment unit volume declined 16%, driven by China and India. Replacement tire shipments decreased 4%, driven by lower industry demand in Japan.  In China, consumer replacement volume set a new record, increasing 19% over the prior year.  


Third quarter 2020 segment operating income of $34 million was down $19 million from the prior year’s quarter. The decline primarily reflects lower unit volume, unfavorable price/mix and reduced factory utilization. These factors were partially offset by lower raw material costs and lower SAG.
 

Cash Flow and Liquidity

The company delivered strong cash flow during the third quarter, as it benefited from improved working capital and stronger-than-planned industry demand. Cash generated through operating activities totaled $581 million and capital expenditures of $124 million were down from $160 million in 2019. In August, the company repaid its $282 million 8.75% senior notes at maturity.

As of Sept. 30, 2020, the company had total liquidity of $4.2 billion, including $1.1 billion of cash and cash equivalents. In comparison, the company had $3.9 billion and $3.4 billion in total liquidity at June 30, 2020, and Sept. 30, 2019, respectively.
 

Conference Call

Goodyear will hold an investor conference call at 9:15 a.m. EDT today. Prior to the commencement of the call, the company will post the financial and other related information that will be presented on its investor relations website: http://investor.goodyear.com.

Participating in the conference call will be Richard J. Kramer, chairman, chief executive officer and president; Darren R. Wells, executive vice president and chief financial officer; and Christina L. Zamarro, vice president, finance and treasurer.

Investors, members of the media and other interested persons can access the conference call on the website or via telephone by calling either (800) 895-3361 or (785) 424-1062 before 9:05 a.m. EDT and providing the Conference ID “Goodyear.” A taped replay will be available by calling (800) 926-1902 or (402) 220-5398. The replay will also remain available on the website.
 

About Goodyear

Goodyear is one of the world’s largest tire companies. It employs about 62,000 people and manufactures its products in 46 facilities in 21 countries around the world. Its two Innovation Centers in Akron, Ohio, and Colmar-Berg, Luxembourg, strive to develop state-of-the-art products and services that set the technology and performance standard for the industry. For more information about Goodyear and its products, go to www.goodyear.com/corporate.  GT-FN

Certain information contained in this press release constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. There are a variety of factors, many of which are beyond our control, that affect our operations, performance, business strategy and results and could cause our actual results and experience to differ materially from the assumptions, expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to: the impact on us of the COVID-19 pandemic; our ability to implement successfully our strategic initiatives; actions and initiatives taken by both current and potential competitors; increases in the prices paid for raw materials and energy; a labor strike, work stoppage or other similar event; foreign currency translation and transaction risks; deteriorating economic conditions or an inability to access capital markets; work stoppages, financial difficulties or supply disruptions at our suppliers or customers; the adequacy of our capital expenditures; our failure to comply with a material covenant in our debt obligations; potential adverse consequences of litigation involving the company; as well as the effects of more general factors such as changes in general market, economic or political conditions or in legislation, regulation or public policy. Additional factors are discussed in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

Download the Financial Statements

 

Third Quarter Nine Months
(in millions) 2020 2019 2020 2019
Tire Units 16.2 17.9 39.2 51.7
Net Sales $1,823 $2,049 $4,630 $5,896

Segment Operating Income (Loss)

106 175 (181) 398
Segment Operating Margin 5.8% 8.5% (3.9)% 6.8%