The Goodyear Tire(GT) - 2024 Q2 - Quarterly Results

Executive Summary Goodyear achieved significant financial improvement in Q2 2024, with net income and adjusted net income turning profitable, driven by the "Goodyear Forward" plan, favorable price/mix, and insurance recoveries Second Quarter 2024 Financial Highlights Goodyear achieved significant financial improvement in Q2 2024, with net income and adjusted net income turning profitable, driven by the "Goodyear Forward" plan, favorable price/mix, and insurance recoveries | Metric | Q2 2024 | Q2 2023 | Change | | :----------------------- | :------------- | :------------- | :--- | | Net Income (Million USD) | $85 | $(208) | From Loss to Profit | | Net Income Per Share (USD) | $0.30 | $(0.73) | From Loss to Profit | | Adjusted Net Income (Million USD) | $54 | $(97) | From Loss to Profit | | Adjusted EPS (USD) | $0.19 | $(0.34) | From Loss to Profit | | Segment Operating Income (Million USD) | $339 | $124 | +$215 | | Sales (Billion USD) | $4.6 | $4.867 | -5.9% | | Tire Volume (Million Units) | 40.1 | - | - | - The "Goodyear Forward" transformation plan contributed $90 million in benefits[2][5] Year-to-Date Results Goodyear's net income and adjusted net income significantly improved in H1 2024, with substantial segment operating income growth, despite lower tire volumes and higher inflation costs | Metric | H1 2024 | H1 2023 | Change | | :----------------------- | :----------- | :----------- | :--- | | Net Income (Million USD) | $28 | $(309) | From Loss to Profit | | Net Income Per Share (USD) | $0.10 | $(1.08) | From Loss to Profit | | Adjusted Net Income (Million USD) | $83 | $(179) | From Loss to Profit | | Adjusted EPS (USD) | $0.29 | $(0.63) | From Loss to Profit | | Segment Operating Income (Million USD) | $586 | $249 | +$337 | | Sales (Billion USD) | $9.1 | $9.808 | -7.1% | | Tire Volume (Million Units) | 80.5 | - | - | - The "Goodyear Forward" transformation plan contributed $162 million in benefits[7] - Cash outflow from operating activities was $518 million, compared to an outflow of $434 million in the prior year period[7] Business Segment Results This section details the financial performance of Goodyear's Americas, EMEA, and Asia Pacific segments, highlighting key drivers and changes in sales, tire volumes, and operating income AMERICAS Segment The Americas segment achieved significant operating income growth in Q2 2024, driven by the Goodyear Forward plan, favorable price/mix, and insurance recoveries, despite lower sales and replacement tire volumes | Metric | Q2 2024 | Q2 2023 | Change | | :----------------------- | :------------- | :------------- | :--- | | Tire Volume (Million Units) | 19.6 | 20.8 | -5.9% | | Sales (Million USD) | $2,697 | $2,939 | -8.2% | | Segment Operating Income (Million USD) | $241 | $103 | +$138 | | Segment Operating Margin (%) | 8.9% | 3.5% | +5.4pp | - Original equipment tire volume increased by 6.7% year-over-year[10] - Replacement tire volume decreased by 8.6%, impacted by the US industry decline, Latin America distribution changes, and Brazil floods[10] - Segment operating income growth was primarily due to the Goodyear Forward plan, favorable net price/mix versus raw material costs, the negative impact of the 2023 Tupelo storm, and lower transportation costs[11] EMEA Segment The EMEA segment returned to profitability in Q2 2024, with operating income turning positive, attributed to favorable net price/mix, insurance recoveries related to the Poland factory fire, and the Goodyear Forward plan | Metric | Q2 2024 | Q2 2023 | Change | | :----------------------- | :------------- | :------------- | :--- | | Tire Volume (Million Units) | 11.6 | 11.8 | -0.9% | | Sales (Million USD) | $1,279 | $1,341 | -4.6% | | Segment Operating Income (Million USD) | $35 | $(19) | +$54 | | Segment Operating Margin (%) | 2.7% | -1.4% | +4.1pp | - Sales decrease was primarily due to negative foreign exchange rates[12] - Segment operating income included $43 million in insurance recoveries, mainly related to the Debica, Poland factory fire[13] ASIA PACIFIC Segment The Asia Pacific segment experienced growth in sales and operating income in Q2 2024, driven by increased original equipment tire volume, favorable price/mix, and the Goodyear Forward plan | Metric | Q2 2024 | Q2 2023 | Change | | :----------------------- | :------------- | :------------- | :--- | | Tire Volume (Million Units) | 8.9 | 8.2 | +7.8% | | Sales (Million USD) | $594 | $587 | +1.2% | | Segment Operating Income (Million USD) | $63 | $40 | +$23 | | Segment Operating Margin (%) | 10.6% | 6.8% | +3.8pp | - Original equipment tire volume increased by 32.2%, primarily driven by China EV fitments[14] - Replacement tire volume decreased by 8.9%, reflecting the impact of Australia transformation and a weaker China industry[14] Company Overview & Outlook This section provides an overview of Goodyear's global operations, management's commentary on recent performance and future expectations, and details regarding the upcoming investor conference call About Goodyear Goodyear is one of the world's largest tire companies, with 54 plants in 21 countries and approximately 71,000 employees, dedicated to developing industry-leading products and services - One of the world's largest tire companies, with approximately 71,000 employees and 54 plants in 21 countries[17] - Innovation centers in Akron, Ohio, and Colmar-Berg, Luxembourg, are dedicated to developing state-of-the-art products and services[17] Management Commentary & Outlook CEO Mark Stewart highlighted significant progress on the Goodyear Forward plan in Q2, including margin expansion and the off-the-road tire business sale agreement, expressing confidence in achieving the 10% segment operating margin target - CEO Mark Stewart noted significant progress on the Goodyear Forward plan in Q2, achieving substantial margin expansion and reaching a definitive agreement to sell the off-the-road tire business[3] - The second half of the year is expected to be impacted by potentially weaker industry trends[3] - Management is confident in achieving the 10% segment operating margin target by the end of next year[3] Conference Call Information Goodyear will host an investor conference call on Thursday, August 1, 2024, at 8:00 AM ET, led by CEO Mark W. Stewart and CFO Christina L. Zamarro, to discuss Q2 results and the Goodyear Forward plan - The conference call will be held on Thursday, August 1, 2024, at 8:00 AM ET[16] - Speakers include CEO and President Mark W. Stewart and Executive Vice President and CFO Christina L. Zamarro[16] - Investors can access the conference via the company's investor relations website or by phone[16] Non-GAAP Financial Measures This section provides explanations and cautionary statements regarding Goodyear's use of non-GAAP financial measures and forward-looking statements Explanation of Non-GAAP Financial Measures This section explains non-GAAP financial measures, including total segment operating income and margin, adjusted net income (loss), and adjusted diluted EPS, providing additional insight by excluding non-core or non-recurring items - Non-GAAP financial measures include total segment operating income and margin, adjusted net income (loss), and adjusted diluted earnings per share[19] - Total segment operating income and margin represent the aggregate earnings value created by the company's strategic business units (SBUs) and exclude items not directly related to SBU performance assessment[20] - Adjusted net income (loss) and adjusted diluted earnings per share exclude the impact of restructuring, asset write-offs, accelerated depreciation, asset sales, and other significant items[22] - Investors are cautioned that other companies may calculate similarly titled non-GAAP financial measures differently, making them potentially non-comparable[23] Forward-Looking Statements This section contains cautionary statements regarding forward-looking statements, noting that actual results may differ materially due to factors such as the Goodyear Forward plan implementation, off-the-road tire business sale risks, raw material costs, inflation, supply chain disruptions, and economic downturns - Certain information in the press release constitutes forward-looking statements, protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[18] - Factors affecting the company's operations, performance, business strategy, and results include, but are not limited to: successful implementation of the Goodyear Forward plan, risks related to the off-the-road tire business sale, rising raw material and energy costs, inflationary cost pressures, supply chain disruptions, economic downturns or uncertainties, labor strikes, financial difficulties of suppliers or customers, changes in tariffs and trade agreements, foreign exchange risks, defaults on debt obligations, litigation, and general market, economic, or political condition changes[18] - The company expressly disclaims any obligation to update forward-looking statements in the future[18] Financial Tables This section presents Goodyear's consolidated financial statements, including statements of operations, balance sheets, cash flows, and reconciliations of non-GAAP measures, for the specified periods Table 1: Consolidated Statement of Operations This table presents the consolidated statement of operations for Goodyear and its subsidiaries, covering key financial data including revenue, costs, expenses, and net income (loss) for the three and six months ended June 30, 2024 and 2023 | (Million USD, except per share amounts) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net Sales | $4,570 | $4,867 | $9,107 | $9,808 | | Cost of Goods Sold | 3,622 | 4,123 | 7,337 | 8,316 | | Selling, Administrative and General Expenses | 731 | 708 | 1,427 | 1,372 | | Restructuring Charges | 19 | 72 | 41 | 104 | | Interest Expense | 130 | 138 | 256 | 265 | | Other (Income) Expense | (72) | 36 | (42) | 61 | | Income (Loss) Before Income Taxes | 140 | (210) | 88 | (310) | | Income Tax Expense (Benefit) | 60 | (2) | 66 | (3) | | Net Income (Loss) | 80 | (208) | 22 | (307) | | Less: Net Income (Loss) Attributable to Noncontrolling Interests | (5) | — | (6) | 2 | | Net Income (Loss) Attributable to Goodyear | $85 | $(208) | $28 | $(309) | | Net Income (Loss) Attributable to Goodyear—Per Common Share | | | | | | Basic | $0.30 | $(0.73) | $0.10 | $(1.08) | | Diluted | $0.30 | $(0.73) | $0.10 | $(1.08) | Table 2: Consolidated Balance Sheets This table provides the consolidated balance sheets for Goodyear and its subsidiaries as of June 30, 2024, and December 31, 2023, detailing the composition of assets, liabilities, and shareholders' equity | (Million USD, except share data) | June 30, 2024 | December 31, 2023 | | :------------------------------- | :------------ | :---------------- | | Assets: | | | | Cash and Cash Equivalents | $789 | $902 | | Accounts Receivable, Net | 3,043 | 2,731 | | Inventories | 4,048 | 3,698 | | Total Current Assets | 8,204 | 7,650 | | Goodwill | 779 | 781 | | Intangible Assets | 947 | 969 | | Deferred Income Taxes | 1,634 | 1,630 | | Property, Plant and Equipment, Net | 8,375 | 8,492 | | Total Assets | $22,025 | $21,582 | | Liabilities: | | | | Accounts Payable—Trade | $4,181 | $4,326 | | Short-Term Debt and Overdrafts | 462 | 344 | | Long-Term Debt and Finance Leases Due Within One Year | 1,182 | 449 | | Total Current Liabilities | 7,709 | 7,147 | | Long-Term Debt and Finance Leases | 6,832 | 6,831 | | Total Liabilities | 17,170 | 16,745 | | Shareholders' Equity: | | | | Goodyear Shareholders' Equity | 4,703 | 4,668 | | Noncontrolling Interests | 152 | 169 | | Total Shareholders' Equity | 4,855 | 4,837 | | Total Liabilities and Shareholders' Equity | $22,025 | $21,582 | Table 3: Consolidated Statements of Cash Flows This table presents the consolidated statements of cash flows for Goodyear and its subsidiaries for the six months ended June 30, 2024 and 2023, detailing cash flows from operating, investing, and financing activities | (Million USD) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------- | :------------------------------- | :------------------------------- | | Net Cash Provided by (Used in) Operating Activities | $(518) | $(434) | | Net Cash Provided by (Used in) Investing Activities | $(488) | $(645) | | Net Cash Provided by (Used in) Financing Activities | $896 | $876 | | Effect of Exchange Rate Changes | $(23) | $4 | | Net Change in Cash, Cash Equivalents and Restricted Cash | $(133) | $(199) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $852 | $1,112 | Table 4: Reconciliation of Segment Operating Income & Margin This table provides a reconciliation of Goodyear's total segment operating income to income (loss) before income taxes and net income (loss) attributable to Goodyear, along with total segment operating margin and return on net sales | (Million USD) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :----------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total Segment Operating Income | $339 | $124 | $586 | $249 | | Net Sales | $4,570 | $4,867 | $9,107 | $9,808 | | Return on Net Sales | 1.9% | -4.3% | 0.3% | -3.2% | | Total Segment Operating Margin | 7.4% | 2.5% | 6.4% | 2.5% | Table 5: Reconciliation of Adjusted Net Income (Loss) and Adjusted Diluted Earnings Per Share This table details the reconciliation from GAAP net income (loss) to adjusted net income (loss) and adjusted diluted EPS for Goodyear during Q2 and H1 2024 and 2023, breaking down the impact of various adjustments Second Quarter 2024 | (Million USD, except per share amounts) | Reported | Restructuring, Asset Write-offs, Accelerated Depreciation and Leases | Goodyear Forward Costs | South Africa Flood Impact | Americas Storm Insurance Recoveries | Debica Fire Impact and Insurance Recoveries | Asset and Other Sales | Adjusted | | :------------------------------------ | :----- | :------------------------------------------------- | :------------------- | :---------------- | :-------------------------- | :---------------------------------------- | :-------------------- | :----- | | Net Income (Loss) Attributable to Goodyear | $85 | $49 | $30 | $3 | $(15) | $(30) | $(68) | $54 | | Earnings Per Share | $0.30 | $0.17 | $0.10 | $0.01 | $(0.06) | $(0.10) | $(0.23) | $0.19 | Second Quarter 2023 | (Million USD, except per share amounts) | Reported | Restructuring, Asset Write-offs and Accelerated Depreciation | Tupelo Storm Impact | Asset and Other Sales | Pension Settlement Charges | Environmental Remediation Adjustments | Legal Claims | Indirect Tax and Tax Settlements | Adjusted | | :------------------------------------ | :----- | :------------------------------------------------- | :------------------ | :-------------------- | :------------------------- | :------------------------------------ | :----------- | :------------------------------- | :----- | | Net Income (Loss) Attributable to Goodyear | $(208) | $68 | $52 | $(37) | $28 | $(4) | $2 | $2 | $(97) | | Earnings Per Share | $(0.73) | $0.24 | $0.18 | $(0.13) | $0.10 | $(0.02) | $0.01 | $0.01 | $(0.34) | First Half 2024 | (Million USD, except per share amounts) | Reported | Restructuring, Asset Write-offs, Accelerated Depreciation and Leases | Goodyear Forward Costs | South Africa Flood Impact | Pension Settlement Charges (Credit) | Indirect Tax and Tax Settlements | Americas Storm Insurance Recoveries | Debica Fire Impact and Insurance Recoveries | Other | Asset and Other Sales | Adjusted | | :------------------------------------ | :----- | :------------------------------------------------- | :------------------- | :---------------- | :---------------------------------- | :------------------------------- | :-------------------------- | :---------------------------------------- | :---- | :-------------------- | :----- | | Net Income (Loss) Attributable to Goodyear | $28 | $107 | $51 | $3 | $(4) | $(8) | $(15) | $(19) | $(60) | $83 | $83 | | Earnings Per Share | $0.10 | $0.37 | $0.18 | $0.01 | $(0.01) | $(0.03) | $(0.06) | $(0.06) | $(0.21) | $0.29 | $0.29 | First Half 2023 | (Million USD, except per share amounts) | Reported | Restructuring, Asset Write-offs and Accelerated Depreciation | Tupelo Storm Impact | Asset and Other Sales | Pension Settlement Charges | Foreign Currency Translation Adjustment Reversal | Environmental Remediation Adjustments | Indirect Tax and Tax Settlements | Adjusted | | :------------------------------------ | :----- | :------------------------------------------------- | :------------------ | :-------------------- | :------------------------- | :--------------------------------------------- | :------------------------------------ | :------------------------------- | :----- | | Net Income (Loss) Attributable to Goodyear | $(309) | $94 | $52 | $(37) | $28 | $(5) | $(4) | $2 | $(179) | | Earnings Per Share | $(1.08) | $0.33 | $0.18 | $(0.13) | $0.10 | $(0.02) | $(0.02) | $0.01 | $(0.63) |