The Goodyear Tire(GT) - 2025 Q1 - Quarterly Results

Q1 2025 Financial and Operational Overview Goodyear reported a significant Q1 2025 net income turnaround driven by asset sales, despite an adjusted net loss due to higher raw material costs Q1 2025 Financial Highlights Goodyear reported Q1 2025 net sales of $4.3 billion and a net income of $115 million, a significant turnaround from a $57 million net loss in Q1 2024, heavily influenced by a $260 million pre-tax gain from the sale of its OTR tire business, though adjusted net loss was $11 million primarily due to higher raw material costs, with the Goodyear Forward plan contributing $200 million in benefits Q1 2025 Key Financial Metrics | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $4.3 billion | $4.5 billion | -4.4% | | Tire Unit Volumes | 38.5 million | 40.4 million (derived) | -4.7% | | Goodyear Net Income (Loss) | $115 million | $(57) million | N/A | | Goodyear EPS (Diluted) | $0.40 | $(0.20) | N/A | | Adjusted Net Income (Loss) | $(11) million | $29 million | N/A | | Adjusted EPS (Diluted) | $(0.04) | $0.10 | N/A | | Segment Operating Income | $195 million | $247 million | -21.1% | - Q1 2025 net income included a significant pre-tax gain of $260 million from the sale of the Off-the-Road (OTR) tire business, alongside $81 million in rationalization charges and $7 million in Goodyear Forward costs[4] - The decline in segment operating income was driven by higher raw material costs, inflation ($56 million), lower tire volume ($33 million), and unabsorbed fixed costs ($19 million), partially offset by benefits from the Goodyear Forward plan[6] - The company completed the sale of the Dunlop brand to Sumitomo Rubber Industries, Ltd., further optimizing its portfolio and strengthening the balance sheet[4][17] Business Segment Results This section details the Q1 2025 performance of Goodyear's Americas, EMEA, and Asia Pacific segments, highlighting sales, volume, and operating income trends Americas The Americas segment reported a 3.3% decrease in net sales to $2.5 billion, driven by a 3.1% decline in tire unit volume and negative foreign exchange impacts, with replacement volume falling in line with USTMA member trends, while the company gained market share in the original equipment (O.E.) segment despite a volume decrease, leading to segment operating income falling by $24 million to $155 million due to higher costs, mostly offset by Goodyear Forward benefits and favorable price/mix Americas Segment Q1 Performance | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Tire Units (millions) | 18.4 | 19.0 | | Net Sales (millions) | $2,502 | $2,588 | | Segment Operating Income (millions) | $155 | $179 | | Segment Operating Margin | 6.2% | 6.9% | - Replacement tire volume decreased by 3.1%, reflecting declines for USTMA members, while non-USTMA members (low-cost imports) grew 10% in the U.S[9] - Original equipment (O.E.) volume decreased by 3.2%, but the company outperformed competitors, indicating significant market share gains in the U.S. O.E. market[9] Europe, Middle East and Africa (EMEA) The EMEA segment saw net sales decrease by 5.2% to $1.3 billion, primarily due to negative foreign exchange rates and a 2.0% drop in tire volume, with replacement volumes down 3.9% due to increased competition, but original equipment volumes grew 3.0% from market share gains, resulting in an operating loss of $5 million, a $13 million decline from the prior year, as higher raw material and other costs outweighed benefits from Goodyear Forward and price/mix EMEA Segment Q1 Performance | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Tire Units (millions) | 12.3 | 12.5 | | Net Sales (millions) | $1,277 | $1,347 | | Segment Operating Income (Loss) (millions) | $(5) | $8 | | Segment Operating Margin | (0.4)% | 0.6% | - Replacement unit volumes fell 3.9% due to heightened competition, while original equipment volumes rose 3.0%, indicating significant market share gains in that channel[11] Asia Pacific Asia Pacific's net sales fell sharply by 21.3% to $474 million, driven by a 12.4% decrease in tire volume, primarily from lower replacement sales and the divestiture of the OTR tire business, with replacement volume dropping 21.3% due to strategic actions to exit low-margin business and channel destocking, yet despite the sales decline, the segment's operating margin grew by 190 basis points after adjusting for the OTR business sale Asia Pacific Segment Q1 Performance | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Tire Units (millions) | 7.8 | 8.9 | | Net Sales (millions) | $474 | $602 | | Segment Operating Income (millions) | $45 | $60 | | Segment Operating Margin | 9.5% | 10.0% | - The decrease in segment operating income was primarily driven by the divestiture of the OTR tire business[15] - Excluding the impact of the OTR business sale, Asia Pacific's segment operating margin expanded by 190 basis points[15] Goodyear Forward Transformation Plan The Goodyear Forward plan delivered $200 million in Q1 benefits, with significant progress on portfolio optimization through key asset sales Goodyear Forward Progress The Goodyear Forward transformation plan delivered $200 million in benefits in Q1 2025, with the company making significant progress on its portfolio optimization goals, closing the sale of its OTR tire business for $905 million and its Dunlop brand for $735 million, and reaffirming its targets to achieve a 10% segment operating margin and a net leverage ratio of 2.0x-2.5x by the end of 2025 - The Goodyear Forward plan delivered $200 million in benefits to segment operating income in Q1 2025[6][17] - The company remains committed to its targets of a 10% segment operating margin and a net leverage ratio of 2.0x-2.5x by Q4 2025[4][16] Portfolio Optimization Progress | Asset Sale | Buyer | Closing Date | Gross Proceeds | | :--- | :--- | :--- | :--- | | OTR Tire Business | The Yokohama Rubber Company | Feb 3, 2025 | $905 million | | Dunlop Brand | Sumitomo Rubber Industries, Ltd. | May 7, 2025 | $735 million | Financial Statements and Reconciliations This section provides detailed GAAP financial statements and reconciliations to non-GAAP measures for Q1 2025 Non-GAAP Financial Measures This section explains the non-GAAP financial measures used by Goodyear, including Total Segment Operating Income, Adjusted Net Income (Loss), and Adjusted Diluted EPS, which management uses to evaluate the performance of its strategic business units and to review operating results excluding certain significant items like rationalizations and asset sales - Total Segment Operating Income is the sum of individual business units' operating income and is used to evaluate SBU performance[25] - Adjusted Net Income (Loss) and Adjusted Diluted EPS exclude the impact of rationalizations, asset write-offs, asset sales, and other significant items to reflect how management reviews operating results[26] Consolidated Statement of Operations For the three months ended March 31, 2025, Goodyear reported net sales of $4.25 billion and a net income of $115 million, or $0.40 per diluted share, compared to net sales of $4.54 billion and a net loss of $57 million, or ($0.20) per share, in the same period of 2024, with the positive income largely due to a $262 million net gain on asset sales Q1 Statement of Operations Summary (in millions) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $4,253 | $4,537 | | Cost of Goods Sold | $3,513 | $3,715 | | Net (Gains) Losses on Asset Sales | $(262) | $2 | | Income (Loss) before Income Taxes | $131 | $(52) | | Goodyear Net Income (Loss) | $115 | $(57) | Consolidated Balance Sheets As of March 31, 2025, Goodyear's total assets were $21.7 billion, up from $21.0 billion at year-end 2024, with total liabilities increasing to $16.6 billion from $16.1 billion, and key changes including an increase in accounts receivable and inventories, reflecting seasonal working capital trends, and a shift in debt from short-term to long-term Balance Sheet Summary (in millions) | Account | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $902 | $810 | | Total Current Assets | $8,369 | $7,632 | | Total Assets | $21,711 | $20,964 | | Total Current Liabilities | $6,856 | $7,337 | | Long Term Debt and Finance Leases | $7,302 | $6,392 | | Total Liabilities | $16,625 | $16,058 | | Total Shareholders' Equity | $5,086 | $4,906 | Consolidated Statements of Cash Flows For Q1 2025, Goodyear experienced a cash outflow from operating activities of $538 million, consistent with seasonal working capital increases, while investing activities provided a net cash inflow of $432 million, driven by $720 million in asset dispositions, and financing activities resulted in a net cash inflow of $211 million, leading to a net increase in cash of $114 million for the quarter Q1 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | From Operating Activities | $(538) | $(451) | | From Investing Activities | $432 | $(231) | | From Financing Activities | $211 | $661 | | Net Change in Cash | $114 | $(31) | - The negative operating cash flow was primarily due to increases in Accounts Receivable ($431 million) and Inventories ($365 million)[33] - Positive investing cash flow was driven by $720 million from asset dispositions, partially offset by $259 million in capital expenditures[33] Reconciliation of Non-GAAP Measures These tables provide detailed reconciliations from GAAP to non-GAAP measures, showing that for Q1 2025, Goodyear's Net Income of $115 million was adjusted for items such as a $262 million gain on asset sales and $127 million in rationalization and write-off charges, resulting in an Adjusted Net Loss of $11 million, contrasting with Q1 2024, where a Net Loss of $57 million was adjusted to an Adjusted Net Income of $29 million - To reconcile from Goodyear Net Income to Total Segment Operating Income for Q1 2025, significant adjustments included adding back interest expense ($115 million) and rationalizations ($81 million), and subtracting net gains on asset sales ($262 million)[35] Q1 2025 Reconciliation of Net Income to Adjusted Net Income (in millions) | Description | Amount | | :--- | :--- | | Goodyear Net Income (Reported) | $115 | | Rationalizations, Asset Write-offs, etc. | $103 | | Goodyear Forward Costs | $5 | | Pension Settlement Charges | $3 | | Net Gain on Asset Sales | $(237) | | Adjusted Net Income (Loss) | $(11) |