UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20192021
Commission File Number: 1-1927
THE GOODYEAR TIRE & RUBBER COCOMPANY
MPANY
Ohio | 34-0253240 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
200 Innovation Way, Akron, Ohio | 44316-0001 | |||||
(Address of Principal Executive Offices) | (Zip Code) | |||||
Registrant’s telephone number, including area code: (330) 796-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Common Stock, Without Par Value | GT | The Nasdaq Stock Market LLC | ||
Securities registered pursuant to Section 12(g) of the Act:
None |
In
dicateIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes | ☑ | No | ☐ |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes | ☐ | No | ☑ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes | ☑ | No | ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes | ☑ | No | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer | ☑ | Accelerated Filer | ☐ | Non-accelerated Filer | ☐ | Smaller Reporting Company | ☐ | Emerging Growth Company | ☐ | ||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes | ☐ | No | ☑ |
The aggregate market value of the common stock held by nonaffiliates of the registrant, computed by reference to the last sales price of such common stock as of the closing of trading on June 28, 2019,30, 2021, was approximately $3.5$4.8 billion.
Shares of Common Stock, Without Par Value, outstanding at January 31, 2020:
281,825,033 |
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 6, 202011, 2022 are incorporated by reference in Part III.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 20192021
Table of Contents
Item Number | Page Number | |
Item Number |
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1 | 1 | |
1A | 11 | |
1B | 21 | |
2 | 22 | |
3 | 23 | |
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5 | 24 | |
7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 |
7A | 52 | |
8 | 53 | |
9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 113 |
9A | 113 | |
9B | 113 | |
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10 | 114 | |
11 | 114 | |
12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 114 |
13 | Certain Relationships and Related Transactions, and Director Independence | 114 |
14 | 114 | |
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15 | 115 | |
16 | 115 | |
FS-1 | ||
X-1 | ||
| S-1 | |
PART I.
ITEM 1. BUSINESS.
BUSINESS OF GOODYEAR
The Goodyear Tire & Rubber Company (the “Company”) is an Ohio corporation organized in 1898. Its principal offices are located at 200 Innovation Way, Akron, Ohio 44316-0001. Its telephone number is (330) 796-2121. The terms “Goodyear,” “Company” and “we,” “us” or “our” wherever used herein refer to the Company together with all of its consolidated U.S. and foreign subsidiary companies, unless the context indicates to the contrary.
We are one of the world’s leading manufacturers of tires, engaging in operations in most regions of the world. In 2019,2021, our net sales were $14,745$17,478 million and Goodyear’sGoodyear net lossincome was $311$764 million. We develop, manufacture, marketdistribute and distributesell tires for most applications. We also manufacture and marketsell rubber-related chemicals for various applications. We are one of the world’s largest operators of commercial truck service and tire retreading centers. In addition, weWe operate approximately 1,000 reta1,000retailil outlets where we offer our products for sale to consumer and commercial customers and provide repair and other services. We manufacture our products in 4757 manufacturing facilities in 2123 countries, including the United States, and we have marketing operations in almost every country around the world. We employ approximately 63,00072,000 full-time and temporary associates worldwide.
AVAILABLE INFORMATION
We make available free of charge on our website, http://www.goodyear.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we file or furnish such reports to the Securities and Exchange Commission (the “SEC”). The information on our website is not incorporated by reference in or considered to be a part of this Annual Report on Form 10-K.
DESCRIPTION OF GOODYEAR’S BUSINESS
On June 7, 2021 (the "Closing Date"), we completed our acquisition of Cooper Tire & Rubber Company ("Cooper Tire"). Cooper Tire’s results of operations have been included in our consolidated financial statements since the Closing Date. Cooper Tire stockholders received $41.75 per share in cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock per share of Cooper Tire common stock, which amounted to approximately $3.1 billion. The acquisition will expand Goodyear’s product offering by combining two portfolios of complementary brands.
GENERAL INFORMATION REGARDING OUR SEGMENTS
For the year ended December 31, 2019,2021, we operated our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific.
Our principal business is the development, manufacture, distribution and sale of tires and related products and services worldwide. We manufacture and marketsell numerous lines of rubber tires for:
In each case, our tires are offered for sale to vehicle manufacturers for mounting as original equipment (“OE”) and for replacement worldwide. We manufacture and sell tires under the Goodyear, Cooper, Dunlop, Kelly, Debica, Sava, Fulda, Mastercraft and FuldaRoadmaster brands and various other Goodyear owned “house” brands, and the private-label brands of certain customers. In certain geographic areas we also:
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Our principal products are new tires for most applications. Approximately 85% of our sales in 2019,2021, 84% in 20182020 and 87%85% in 20172019 were for tire units. Sales of chemical products and natural rubber to unaffiliated customers were 3% in 2019, 4% in 2018 and 3% in 2017 of our consolidated sales (5%in each of 2021, 2020 and 2019 (6%, 7%5% and 6%5% of Americas total sales in 2019, 20182021, 2020 and 2017,2019, respectively). The percentages of each segment’s sales attributable to tire units during the periods indicated were:
| Year Ended December 31, | |||||||||
| Tire Unit Sales | 2019 | 2018 | 2017 | ||||||
| Americas | 80 | % | 78 | % | 81 | % | |||
| Europe, Middle East and Africa | 91 | 92 | 94 | ||||||
| Asia Pacific | 91 | 91 | 90 | ||||||
|
| Year Ended December 31, |
| |||||||||
Tire Unit Sales |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Americas |
|
| 82 | % |
|
| 78 | % |
|
| 80 | % |
Europe, Middle East and Africa |
|
| 89 |
|
|
| 90 |
|
|
| 91 |
|
Asia Pacific |
|
| 93 |
|
|
| 91 |
|
|
| 91 |
|
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.
Goodyear does not include motorcycle, aviation race or all-terrain vehiclerace tires in reported tire unit sales.
Tire unit sales for each segment during the periods indicated were:
GOODYEAR’S ANNUAL TIRE UNIT SALES — SEGMENT
| Year Ended December 31, | ||||||||
| (In millions of tires) | 2019 | 2018 | 2017 | |||||
| Americas | 70.4 | 70.9 | 70.9 | |||||
| Europe, Middle East and Africa | 55.1 | 57.8 | 57.1 | |||||
| Asia Pacific | 29.8 | 30.5 | 31.2 | |||||
| Goodyear worldwide tire units | 155.3 | 159.2 | 159.2 | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions of tires) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Americas |
|
| 85.9 |
|
|
| 56.7 |
|
|
| 70.4 |
|
Europe, Middle East and Africa |
|
| 52.7 |
|
|
| 44.5 |
|
|
| 55.1 |
|
Asia Pacific |
|
| 30.7 |
|
|
| 24.8 |
|
|
| 29.8 |
|
Goodyear worldwide tire units |
|
| 169.3 |
|
|
| 126.0 |
|
|
| 155.3 |
|
Our replacement and OE tire unit sales during the periods indicated were:
GOODYEAR’S ANNUAL TIRE UNIT SALES — REPLACEMENT AND OE
| Year Ended December 31, | ||||||||
| (In millions of tires) | 2019 | 2018 | 2017 | |||||
| Replacement tire units | 115.0 | 115.1 | 113.5 | |||||
| OE tire units | 40.3 | 44.1 | 45.7 | |||||
| Goodyear worldwide tire units | 155.3 | 159.2 | 159.2 | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions of tires) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Replacement tire units |
|
| 134.1 |
|
|
| 95.0 |
|
|
| 115.0 |
|
OE tire units |
|
| 35.2 |
|
|
| 31.0 |
|
|
| 40.3 |
|
Goodyear worldwide tire units |
|
| 169.3 |
|
|
| 126.0 |
|
|
| 155.3 |
|
New tires are sold under highly competitive conditions throughout the world. On a worldwide basis, we have two major competitors: Bridgestone (based in Japan) and Michelin (based in France). Other significant competitors include Continental, Cooper, Hankook, Kumho, Nexen, Pirelli, Sumitomo, Toyo, Yokohama and various regional tire manufacturers.
We compete with other tire manufacturers on the basis of product design, performance, price and terms, reputation, warranty terms, customer service and consumer convenience. Goodyear, Cooper and Dunlop branded tires enjoy a high recognition factor and have a reputation for performance and product design. The Kelly, Mastercraft, Roadmaster, Debica, Sava and Fulda brands and various house brand tire lines offered by us, and tires manufactured and sold by us to private brand customers, compete primarily on the basis of value and price.
We do not consider our tire businesses to be seasonal to any significant degree.
AMERICAS
Americas, our largest segment in terms of revenue, develops, manufactures, distributes and sells tires and related products and services in North, Central and South America, and sells tires to various export markets, primarily through intersegment sales. Americas manufactures tires in sixnine plants in the United States, two plants in Canada and fivesix plants in Brazil, Chile, Colombia, Mexico and Peru.
Americas manufactures and sells tires for automobiles, trucks, buses, earthmoving, mining and industrial equipment, aircraft, and various other applications.
Goodyear brand radial passenger tire lines sold throughout Americas include the Assurance family of product lines for the premium and mid-tier passenger and cross-over utility segments; the Direction family of product lines for the mid-tier consumer segment; the Eagle familyand EfficientGrip Performance families of product lines for the high-performance segment; the Wrangler family of product lines for the sport utility vehicle and light truck segments; as well as the WinterCommand and the Ultra Grip and WinterCommand family of winter tires. Cooper brand radial passenger tire lines sold throughout Americas include those sold under the Mastercraft brand. Additionally, we offer Dunlop brand radial tire lines, including Signature HP and SP Sport for the passenger and performance segments; Grandtrek tire linestires for the cross-over and sport
2
utility vehicle and light truck segments; and SP Winter, Winter Maxx and Grandtrek tire linestires for the winter tire segment. Americas also manufactures and sells several lines of Kelly brand radial tires for passenger cars and light trucks including the Kelly Edge A/S, Edge HP and Edge AT. Cooper brand commercial tires sold throughout Americas include those sold under the Roadmaster brand. Our Americas commercial business provides commercial truck tires, retreads, services tools and business solutions to trucking fleets. Americas also:
• sells products and installation services online through our websites, www.goodyear.com for consumer tires and www.goodyeartrucktires.com for commercial tires, • |
In 2019,2021, Americas launched several new consumer tires under the Goodyear brand, including the Goodyear Eagle Exhilarate, the Goodyear WinterCommandAssurance ComfortDrive, Wrangler Workhorse and ElectricDrive GT, and the Goodyear Fortitude HT. AmericasCooper brand, including the Discoverer Rugged Trek, Endeavor and Endeavor Plus. Americas' commercial business launched two new tires under the Goodyear UltraGripFuelMax and the Goodyear MarathonArmorMax lines to service our long haul, regional, mixed service and city service customers.
Markets and Other Information
Tire unit sales to replacement and OE customers served by Americas during the periods indicated were:
AMERICAS UNIT SALES — REPLACEMENT AND OE
| Year Ended December 31, | ||||||||
| (In millions of tires) | 2019 | 2018 | 2017 | |||||
| Replacement tire units | 55.1 | 53.8 | 53.5 | |||||
| OE tire units | 15.3 | 17.1 | 17.4 | |||||
| Total tire units | 70.4 | 70.9 | 70.9 | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions of tires) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Replacement tire units |
|
| 72.6 |
|
|
| 44.4 |
|
|
| 55.1 |
|
OE tire units |
|
| 13.3 |
|
|
| 12.3 |
|
|
| 15.3 |
|
Total tire units |
|
| 85.9 |
|
|
| 56.7 |
|
|
| 70.4 |
|
Americas is a major supplier of tires to most manufacturers of automobiles, trucks, buses, aircraft, and earthmoving, mining and industrial equipment that have production facilities located in the Americas.
Americas' primary competitors are Bridgestone and Michelin. Other significant competitors include Continental, Cooper, Nexen, Pirelli, and imports from other regions, primarily Asia.
The principal channel for the sale of Goodyear and Cooper brand tires in Americas is a large network of independent dealers. Goodyear, Cooper, Dunlop, Kelly and KellyMastercraft brand tires are also sold to numerous national and regional retailers, in Goodyear Company-owned stores in the United States, and through the wholesale channel, including through TireHub, LLC ("TireHub"), our sole national wholesale tire distributor in the United States, and a network of aligned U.S. regional wholesale tire distributors.
Our products sold in the United States are subject to regulationFederal Motor Vehicle Safety Standards (“FMVSS”) promulgated and enforced by the National Highway Traffic Safety Administration (“NHTSA”), which has established various standards and regulations applicable to tires sold in the United States and tires sold in a foreign country that are identical or substantially similar to tires sold in the United States. NHTSA has the authority to order the recall of automotive products, including tires, having a defect related to motor vehicle safety or that do not comply with a motor vehicle safety standard. In addition, the Transportation Recall Enhancement, Accountability, and Documentation Act (the “TREAD Act”) imposes numerous reporting requirements with respect to tires.the early warning reporting of warranty claims, property damage claims, and bodily injury and fatality claims. The TREAD ActFMVSS also requiresrequire tire manufacturers to comply with rigorous tire testing standards.
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EUROPE, MIDDLE EAST AND AFRICA
Europe, Middle East and Africa, our second largest segment in terms of revenue, develops, manufactures, distributes and sells tires for automobiles, trucks, buses, aircraft, motorcycles, and earthmoving, mining and industrial equipment throughout Europe, the Middle East and Africa under the Goodyear, Dunlop, Debica, Sava, Fulda, Cooper and FuldaAvon brands and other house brands, and sells tires to various export markets, primarily through intersegment sales. EMEA manufactures tires in thirteensixteen plants in France, Germany, Luxembourg, Poland, Serbia, Slovenia, South Africa, Turkey and Turkey.the United Kingdom. EMEA also:
In 2019,2021, EMEA launched a number of new consumer tires under the Goodyear, Dunlop, Debica, Sava and Fulda brands, including the Goodyear Eagle F1 Asymmetric 5EfficientGrip 2 SUV and Goodyear Ultra Grip Performance + SUV for the ultra high performancesport utility vehicle segment, the Goodyear UltraGrip 9 and UltraGrip Performance tiresEfficient Grip Cargo 2 for the winterlight truck segment and the Goodyear Eagle F1 SuperSport rangeUltra Grip Arctic 2 for the ultra-ultra high performancewinter studded segment. EMEA also introducedfurther extended its commercial tire portfolio in all product tiers. An all-new Goodyear FuelMax Endurance range was launched bringing better fuel efficiency and lower CO2 emissions in a number ofbroader commercial truckapplication range. New product introductions also included several line extensions with dedicated tires including the KMax Gen-2 and Fuel Max Gen-2.
Markets and Other Information
Tire unit sales to replacement and OE customers served by EMEA during the periods indicated were:
EUROPE, MIDDLE EAST AND AFRICA UNIT SALES — REPLACEMENT AND OE
| Year Ended December 31, | ||||||||
| (In millions of tires) | 2019 | 2018 | 2017 | |||||
| Replacement tire units | 41.5 | 42.9 | 41.4 | |||||
| OE tire units | 13.6 | 14.9 | 15.7 | |||||
| Total tire units | 55.1 | 57.8 | 57.1 | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions of tires) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Replacement tire units |
|
| 41.7 |
|
|
| 34.0 |
|
|
| 41.5 |
|
OE tire units |
|
| 11.0 |
|
|
| 10.5 |
|
|
| 13.6 |
|
Total tire units |
|
| 52.7 |
|
|
| 44.5 |
|
|
| 55.1 |
|
EMEA is a significant supplier of tires to most vehicle manufacturers across the region.
EMEA’s primary competitors are Michelin, Bridgestone, Continental, Pirelli, several regional and local tire producers, and imports from other regions, primarily Asia.
Goodyear and Dunlop brand tires are sold for replacement in EMEA through various channels of distribution, principally independent multi-brand tire dealers. In some areas, Goodyear brand tires, as well as Dunlop, Debica, Sava, Fulda, Cooper and FuldaAvon brand tires, are distributed through independent dealers, regional distributors and retail outlets, of which approximately 6080 are owned by Goodyear.
Our European operations are subject to regulation by the European Union. The Tire Safety Regulation sets performance standards that tires for passenger cars and light and commercial trucks need to meet for rolling resistance, wet grip braking (passenger car tires only) and noise in order to be sold in the European Union. The Tire Labeling Regulation applies to all passenger car, light truck and commercial truck tires and requires that consumers be informed about the tire's fuel efficiency, wet grip and noise characteristics.
Our Asia Pacific segment develops, manufactures, distributes and sells tires for automobiles, trucks, buses, aircraft, farm, and earthmoving, mining and industrial equipment throughout the Asia Pacific region, and sells tires to various export markets, primarily through intersegment sales. Asia Pacific manufactures tires in sevennine plants in China, India, Indonesia, Japan, Malaysia and Thailand. Asia Pacific also:
In 2019,2021, Asia Pacific released new consumer tires under the Goodyear brand for the fast-growing sport utility vehicle market, including the Goodyear Assurance DuraPlus 2 and the Goodyear Wrangler AT SilentTrac for all markets, and introduced new sizes of the Goodyear Optilife 2 for the Australian market.MaxGuard Mid-SUV tire. In addition, Asia Pacific began importingreleased the Goodyear Eagle F1 Asymmetric 5Ice Navi 8 premium winter line and Goodyear Eagle F1 SuperSport. Asia Pacific also launched two new commercial tires, the Goodyear premium drive tire, KMax G667+, for logistics fleets and a low rolling resistance tire,EfficientGrip RVF02 line in Japan, dedicated to the Goodyear S206 FuelMaxII.
Markets and Other Information
Tire unit sales to replacement and OE customers served by Asia Pacific during the periods indicated were:
ASIA PACIFIC UNIT SALES — REPLACEMENT AND OE
| Year Ended December 31, | ||||||||
| (In millions of tires) | 2019 | 2018 | 2017 | |||||
| Replacement tire units | 18.4 | 18.4 | 18.6 | |||||
| OE tire units | 11.4 | 12.1 | 12.6 | |||||
| Total tire units | 29.8 | 30.5 | 31.2 | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions of tires) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Replacement tire units |
|
| 19.8 |
|
|
| 16.6 |
|
|
| 18.4 |
|
OE tire units |
|
| 10.9 |
|
|
| 8.2 |
|
|
| 11.4 |
|
Total tire units |
|
| 30.7 |
|
|
| 24.8 |
|
|
| 29.8 |
|
Asia Pacific’s major competitors are Bridgestone and Michelin along with many other global brands present in different parts of the region, including Continental, Dunlop, Hankook and a large number of regional and local tire producers.
Asia Pacific sells primarily Goodyear and Cooper brand tires throughout the region and also sells the Dunlop brand in Australia and New Zealand. Other brands of tires, such as Blue Streak, Remington, Kelly, Diamondback, Mastercraft, Starfire and Diamondback,Dean, are sold in smaller quantities. Tires are sold through a network of licensed and franchised retail stores and multi-brand retailers through a network of wholesale dealers.dealers as well as through an increasing number of on-line outlets. In Australia, we also operate a network of approximately 200140 retail stores, primarily under the Beaurepaires brand.
GENERAL BUSINESS INFORMATION
Sources and Availability of Raw Materials
The principal raw materials used by Goodyear are synthetic and natural rubber. Synthetic rubber accounts for approximately 55%51% of all rubber consumed by us on an annual basis. Our plants located in Beaumont and Houston, Texas supply a major portion of our global synthetic rubber requirements. We purchase all of our requirements for natural rubber in the world market.
Other important raw materials and components we use are carbon black, steel cord, fabrics and petrochemical-based commodities. Substantially all of these raw materials and components are purchased from independent suppliers, except for certain chemicals we manufacture. We purchase most raw materials and components in significant quantities from several suppliers, except in those instances where only one or a few qualified sources are available. WeIncreased demand for consumer products and supply chain disruptions as a result of the COVID-19 pandemic and other global events, including port congestion and container shortages, has led to inflationary cost pressures, including higher costs for certain raw materials, higher transportation costs and higher energy costs. We anticipate the continued availability of all raw materials and components we will require during 2020,2022, subject to spot shortages and unexpected disruptions caused by the ongoing COVID-19 pandemic, natural disasters, such as hurricanes, andor other events.
Substantial quantities of fuel and other petrochemical-based commodities are used in the production of tires, synthetic rubber and other products. Supplies of such fuels and commodities have been and are expected to continue to be available to us in quantities sufficient to satisfy our anticipated requirements, subject to spot shortages.
Human Capital Management
At December 31, 2021, we employed approximately 72,000 full-time and temporary associates throughout the world, including approximately 42,000 associates covered under collective bargaining agreements. During 2021, our employment of full-time
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and temporary associates increased by approximately 10,000 people, primarily related to the acquisition of Cooper Tire. Approximately 5,900 of our associates in the United States are covered by a master collective bargaining agreement between Goodyear and the United Steelworkers ("USW"), which expires in July 2022, and approximately 2,200 of our associates in the United States are covered by separate collective bargaining agreements between Cooper Tire and the USW, which expire in June 2024. In addition, approximately 900 of our associates in the United States are covered by other contracts with the USW and various other unions. Approximately 23,000 of our associates outside of the United States are covered by union contracts that currently have expired or that will expire in 2022, primarily in Luxembourg, Brazil, Poland, South Africa, France, China, Slovenia and Turkey. Unions represent a major portion of our associates in the United States and Europe.
We are experiencing shortages of qualified and reliable workers, particularly in the U.S. Absenteeism, a tight labor supply and elevated turnover are resulting in manufacturing inefficiencies, increased training costs and higher wages. To address this issue, we have accelerated hiring, increased training capacity and started to adjust future investment plans to consider not just the cost, but also the availability of qualified workers.
Engaging and enabling our associates to realize their full potential is one of our core strategies. This starts with attracting top diverse talent and is followed by fostering inclusion, promoting equity through global bias training, offering opportunities for skill and career development, supporting health and wellness, providing a safe and healthy workplace, making a positive impact in our communities, and expecting our associates to know and comply with our compliance and ethics policies.
Talent Management— Our associates are the driving force behind our success. They underpin every aspect of our strategy and help us deliver value to our customers, shareholders and communities. We provide integrated talent management and learning solutions aimed at enabling our associates to reach their full personal and professional potential at Goodyear. We are guided by our talent strategy which focuses on talent attraction, talent development and talent engagement and retention. An example of how we attract talent is through campus recruiting into our intern and job rotational programs utilized by several of our functional teams. To overcome the recruiting challenges that arose due to the COVID-19 pandemic, we transitioned to virtual interviews and developed a virtual approach to onboarding new associates. We offer a number of tools for talent development including the Goodyear Learning Center, which is our in-house collection of online courses available to all associates. In our manufacturing plants, one of the pillars of our plant optimization efforts is Continuous Skills Development, which focuses on developing problem-solving and decision-making skills.
Diversity and Inclusion— A diverse workforce is critical to our long-term success. Embracing and valuing differences allows us to attract top talent, improve associate satisfaction and engagement, foster innovation, and meld varying experiences and perspectives to drive enhanced customer service, business creativity and decision-making. Our goal is to create a work environment where people have a real sense of belonging and are able to thrive. Our commitment is reflected in the policies that govern our workforce, such as our Business Conduct Manual and Global Zero Tolerance policy and is evidenced in our recruiting strategies, succession planning, diversity and inclusion training and Employee Resource Groups (“ERGs”), which are key to our inclusion efforts. Our ERGs provide associates access to coaching, mentoring and professional development, and include ADAPT (Abled and Disabled Associates Partnering Together), Goodyear Asia India Middle East (AIM), Goodyear Black Network, Goodyear Veterans Association, Goodyear Women’s Network, Goodyear Pride Network, HOLA (Hispanic/Latino) and Next Generation Leaders.
Health and Wellness— Our wellness initiatives take a holistic view of associate health, including physical, emotional, financial and social health, to enable our associates to thrive and bring their best selves to work each day. Goodyear strives to be at the forefront of corporate wellness, and that goal is the driver behind our “GoodLife” wellness program, which is led by our Chief Health Officer, in order to foster a culture of wellness for all Goodyear associates and their families. To meet the needs of our diverse workforce and their dependents, we offer varying robust benefits packages for our full-time and part-time associates globally.
Workforce Safety and Wellness— Our vision is to have the safest operations in the world. We have established a goal of eliminating all serious injuries and fatalities in our workplace. To reduce the risk of serious injuries we invest in systems that enable us to receive reliable and structured data to enable decision making. We also work to improve our industrial hygiene to prevent work-related illness from noise and the substances used in the manufacturing process and we focus on ergonomics using a six-step problem-solving process to reduce injuries and maximize workplace performance. In 2020, we introduced motion capture technology to our ergonomic teams, which is a technologically enhanced way to assess jobs for musculoskeletal risks.
Community Engagement— Collaborating with community organizations energizes our associates and helps us build a better future. Our global strategy and efforts are an extension of our business and are aimed at safe mobility, inspiring students to reach their full potential and reducing our environmental impacts. We encourage our associates to participate in our Global Week of Volunteering.
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Compliance and Ethics— To “Act with Integrity” is a core component of our global strategy. Each associate is responsible for acting with honesty, integrity and respect every day and everywhere we do business. Our Business Conduct Manual guides our Board of Directors, executive team and all associates globally. We require our global salaried associates to complete training annually on our Business Conduct Manual and periodically on subjects such as workplace respect (including discrimination and harassment), financial integrity, privacy and data protection, competition law, anti-corruption and anti-bribery, and being a compliance leader.
Refer to “Overview – Results of Operations” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information on additional human capital management actions we have taken in response to the COVID-19 pandemic and other recent events.
Patents and Trademarks
We own approximately 1,800 product, process and equipment patents issued by the United States Patent Office and approximately 3,4005,000 patents issued or granted in other countries around the world. We have approximately 400500 applications for United States patents pending and approximately 1,000900 patent applications on file in other countries around the world. While such patents and patent applications as a group are important, we do not consider any patent or patent application to be of such importance that the loss or expiration thereof would materially affect Goodyear or any business segment.
We own, control or use approximately 1,5001,600 different trademarks, including several using the word “Goodyear”“Goodyear,” the word “Dunlop” or the word “Dunlop.“Cooper.” Approximately 8,3009,300 registrations and 400300 pending applications worldwide protect these trademarks. While such trademarks as a group are important, the only trademarks we consider material to our business, or to the business of any of our segments, are those using the word “Goodyear,“Goodyear” or the word “Cooper,” and with respect to certain of our international business segments, those using the word “Dunlop.” We believe our trademarks are valid and most are of unlimited duration as long as they are adequately protected and appropriately used.
Compliance with EnvironmentalGovernment Regulations
We are subject to extensive regulation under environmental and occupational healthsafety and safetyhealth laws and regulations.regulations worldwide. These laws and regulations relate to, among other things, air emissions, discharges to surface and underground waters, and the generation, handling, storage, transportation and disposal of waste materials and hazardous substances.substances, and workplace safety and health. We have several continuing programs designed to ensure compliance with foreign, federal, state and local environmental and occupational safety and health laws and regulations. We expect capital expenditures for pollution control facilities and occupational safety and health projects to be approximately $50$66 million and $55$78 million in 20202022 and 2021,2023, respectively.
We also incur ongoing expenses to maintain and operate our pollution control facilities and conduct our other environmental activities, including the control and disposal of hazardous substances. These expenditures are expected to be sufficient to comply with existing environmental laws and regulations and are not expected to have a material adverse effect on our competitive position.
In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include import and export laws, anti-competition laws, anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other local laws prohibiting corrupt payments to governmental officials, data privacy laws such as the European Union's General Data Protection Regulation ("GDPR"), tax laws, and accounting, internal control and disclosure requirements.
Refer to “Description of Goodyear’s Business – Americas” and “Description of Goodyear’s Business – Europe, Middle East and Africa” included in this Item 1, “Business” for information regarding compliance with government regulations in each of those segments.
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Climate Change and Sustainability
Climate considerations are driving change in the transportation sector. Advanced forms of mobility, such as electric vehicles, ride sharing and fleets, autonomous vehicles and connected vehicles, have the potential to reduce vehicle emissions and energy use. Companies in the transportation sector are setting ambitious climate goals that require the support of the entire supply chain to achieve.
The move to a low carbon economy creates growth opportunities within the tire industry that Goodyear is well positioned to leverage through its continued innovation. Goodyear has a proven track record of producing tires for electric and autonomous vehicles, developing tires and rubber compounds that contribute to reduced emissions by lowering rolling resistance and reducing tire weight, and providing fleet solution services that promote fuel efficiency.
Climate change poses risks that could adversely impact Goodyear’s operations, including risks related to our plans to continue to develop and supply the types of products, services and technologies demanded by consumers. Such risks could also include an increase in severe weather events that could temporarily disrupt Goodyear’s operations or supply chain or the operations of Goodyear’s customers, and the cost of compliance associated with increased climate-related regulations globally. Refer to Item 1A. “Risk Factors” for a discussion of these and the Company’s other risk factors.
On December 17, 2021, we announced our climate ambition, which includes our goal to reach net-zero scope 1, 2 and certain scope 3 greenhouse gas emissions by 2050, aligned with the Science-Based Targets initiative (SBTi) and its new Net-Zero Standard. We also announced our commitment to achieve near-term science-based targets by 2030, including reducing scope 1 and 2 emissions by 46% and targeted scope 3 emissions by 28%, as compared to 2019.
Federal, state, local and foreign governments and regulatory agencies continue to consider various options and measures to control greenhouse gas emissions in response to climate change. Goodyear strives to comply with all applicable laws and regulations, carefully monitors its energy usage and greenhouse gas emissions, and sets company-wide and facility-specific goals to reduce its operational impacts. As part of our commitment to reduce our operational impact, we continue to focus on reducing energy consumption and emissions in our factories and utilizing renewable energy sources, including our recently announced multi-phase plan to procure 100% renewable energy across most of our facilities in Europe and Turkey by the end of 2022.
We continue to focus on the resiliency of our supply chain by developing alternative, more sustainable material sources and increasing our use of more sustainable materials that deliver the same or enhanced product quality and performance. We also select suppliers that uphold fair working conditions, use sustainable harvesting practices, and share our values. Goodyear’s technology teams work to incorporate new innovations and to use and investigate alternative and sustainable raw materials, such as soybean oil, an alternative to petroleum oil.
On January 5, 2022, we announced the release of a demonstration tire with 70% sustainable-material content, including industry-leading innovations. The development of this tire signals great progress toward our goal of developing a 100% sustainable-material tire by 2030.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Set forth below are: (1) the names and ages of all executive officers of the Company at February 11, 2020,14, 2022, (2) all positions with the Company presently held by each such person, and (3) the positions held by, and principal areas of responsibility of, each such person during the last five years.
Name | Position(s) Held | Age | ||||
Richard J. Kramer | Chairman, and President | 58 | ||||
Mr. Kramer was elected Chief Executive Officer and President in April 2010 and Chairman in October 2010. He is the principal executive officer of the Company. Mr. Kramer joined Goodyear in 2000 and has served as Executive Vice President and Chief Financial Officer (June 2004 to August 2007), President, North America (March 2007 to February 2010) and Chief Operating Officer (June 2009 to April 2010). | ||||||
Darren R. Wells | Executive Vice President and Chief Financial Officer | 56 | ||||
Mr. Wells was named Executive Vice President and Chief Financial Officer in September 2018. He is Goodyear’s principal financial officer. Mr. Wells previously served as Goodyear’s Executive Vice President and Chief Financial Officer from October 2008 to November 2013. He first joined Goodyear in 2002 and has also served as President, Europe, Middle East and Africa (December 2013 to December 2015). Prior to rejoining Goodyear, Mr. Wells was an Executive in Residence and MBA Coach at the University of South Florida’s Muma College of Business from January 2018 to September 2018. | ||||||
Stephen R. McClellan | President, Americas | 56 | ||||
Mr. McClellan was named President, Americas in January 2016. He is the executive officer responsible for Goodyear's operations in North, Central and South America. Mr. McClellan joined Goodyear in | ||||||
Christopher R. Delaney | President, Europe, Middle East and Africa | 60 | ||||
Mr. Delaney was named President, Europe, Middle East and Africa in September 2017. He is the executive officer responsible for Goodyear’s operations in Europe, the Middle East and Africa. Mr. Delaney joined Goodyear as President-Elect, Asia Pacific in August 2015, and has served as President, Asia Pacific (January 2016 to September 2017). | ||||||
Nathaniel Madarang | President, Asia Pacific | 51 | ||||
Mr. | ||||||
Laura P. Duda | Senior Vice President | 52 | ||||
Ms. Duda was named Senior Vice President | ||||||
Christopher P. Helsel | Senior Vice President, | |||||
56 | ||||||
Mr. Helsel was named Senior Vice President, Global Operations and Chief Technology Officer in | ||||||
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Name | Position(s) Held | Age | |||||||||
Ryan G. Patterson | Senior Vice President and Chief Operating and Integration Officer, Americas | 48 | |||||||||
Mr. Patterson was named Senior Vice President and Chief Operating and Integration Officer, Americas, in October 2021. He is the executive officer responsible for the North American consumer and commercial businesses and for Goodyear's integration with Cooper Tire. Mr. Patterson joined Goodyear in 2002 and has served as President, North America Consumer (September 2014 to September 2017), President, Asia Pacific (September 2017 to February 2021) and Senior Vice President, Business Integration (March 2021 to September 2021). | |||||||||||
David E. Phillips | Senior Vice President and General Counsel | 46 | |||||||||
Mr. Phillips was named Senior Vice President and General Counsel | |||||||||||
Gary S. VanderLind | Senior Vice President | 59 | |||||||||
Mr. VanderLind was named Senior Vice President | |||||||||||
Evan M. Scocos | Vice President and Controller | 50 | |||||||||
Mr. Scocos was named Vice President and Controller in June 2016. He is Goodyear's principal accounting officer. Mr. Scocos joined Goodyear in | |||||||||||
No family relationship exists between any of the above executive officers or between the executive officers and any director of the Company.
Each executive officer is elected by the Board of Directors of the Company at its annual meeting to a term of one year or until his or her successor is duly elected. In those instances where the person is elected at other than an annual meeting, such person’s term will expire at the next annual meeting.
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ITEM 1A.RISK FACTORS.
You should carefully consider the risks described below and other information contained in this Annual Report on Form 10-K when considering an investment decision with respect to our securities. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations. Any of the events discussed in the risk factors below may occur. If they do, our business, results of operations, financial condition or liquidity could be materially adversely affected. In such an instance, the trading price of our securities could decline, and you might lose all or part of your investment.
Risks Related to the Cooper Tire Acquisition
We may not achieve the intended benefits of the acquisition of Cooper Tire and our integration efforts may disrupt our current plans or operations.
There can be no assurance that we will be able to successfully integrate Cooper Tire’s operations and assets or otherwise realize the expected benefits of the acquisition (including operating and other cost synergies). Difficulties in integrating Cooper Tire and Goodyear may result in Goodyear performing differently than expected, in operational challenges, in the failure to realize anticipated run-rate cost synergies and efficiencies in the expected timeframe or at all, or in the difficulty or failure of utilizing our available U.S. tax attributes, in which case the Cooper Tire acquisition may not be accretive to earnings per share, may not improve our balance sheet position, may not enhance our ability to delever and may not generate additional free cash flow due to reduced cash tax payments. The integration of the two companies may result in material challenges, including the diversion of management’s attention from ongoing business concerns; retaining key management and other employees; retaining or attracting business and operational relationships; the possibility of faulty assumptions underlying expectations regarding the integration process and associated expenses; consolidating corporate and administrative infrastructures and eliminating duplicative operations; coordinating geographically separate organizations; unanticipated issues in integrating information technology, communications and other systems; as well as potential unknown liabilities or unforeseen expenses or delays relating to integration.
Risks Related to Operations
Our future results of operations, financial condition and liquidity may be adversely impacted by the ongoing COVID-19 pandemic, or similar public health crises, and that impact may be material.
The COVID-19 pandemic has resulted in significant volatility in the global economy. International, federal, state and local public health and governmental authorities have taken extraordinary actions to contain and combat the outbreak and spread of COVID-19 throughout most regions of the world, including travel bans, quarantines, “stay-at-home” orders and similar mandates that caused many individuals to substantially restrict their daily activities and many businesses to curtail or cease normal operations.
The tire industry has been negatively impacted by this evolving situation, particularly earlier in 2020, which was characterized by a sudden and sharp decline in replacement tire demand and original equipment manufacturers suspending or severely limiting automobile production globally.
The ongoing COVID-19 pandemic, or similar public health crises, may result in decisions to change future production levels based on an evaluation of market demand signals, inventory and supply levels, as well as our ability to continue to safeguard the health of our associates. We may experience unexpected delays or obstacles, such as disruptions in our and our customers' supply chains or government mandates, that may hamper our ability to achieve planned production levels. Further, we may not be able to operate at optimal levels of efficiency given new work rules and procedures that were or will be implemented to protect our associates, as well as potential increased absenteeism as a result of community spread of COVID-19. Any suspension of production at our manufacturing facilities, or difficulties or inefficiencies in resuming or increasing production, is likely to adversely impact our future results of operations, financial condition and liquidity, and that impact may be material. In addition, our ability to continue implementing important strategic initiatives and capital expenditures may be reduced as we devote time and other resources to responding to the impacts of the COVID-19 pandemic or similar public health crises.
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. If the COVID-19 pandemic worsens, our liquidity position may deteriorate. While we actively monitor our liquidity and took a number of actions aimed at mitigating the negative consequences of the initial impact of the COVID-19 pandemic on our cash flows and liquidity, our cash flows may decline if global economic activity declines or we are unable to have sufficient access to credit or other capital. For example, the borrowing base under our first lien revolving credit facility is dependent, in significant part, on our eligible
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accounts receivable and inventory, which would decline if our sales and production levels declined. Additionally, our European revolving credit facility contains a leverage ratio covenant applicable to Goodyear Europe B.V. and its subsidiaries. While we are currently in compliance with this covenant, if we were unable to satisfy this covenant in the future or obtain a waiver from our lenders, we would no longer be able to access our €800 million European revolving credit facility or our pan-European accounts receivable securitization facility.
The situation surrounding the COVID-19 pandemic remains fluid. The ultimate impact of the COVID-19 pandemic on our results of operations, financial condition and liquidity will depend on future developments, such as the duration and scope of the pandemic, travel restrictions, government mandated restrictions and regulations, business and workforce disruptions, the impact on demand for our products, the effectiveness of actions taken to contain and treat the disease, including the efficacy of and ability to widely distribute vaccinations and therapeutics, and whether the pandemic leads to recessionary conditions in any of our key markets. Government-sponsored liquidity or stimulus programs in response to the COVID-19 pandemic may not be available to us or our customers or suppliers, and if available, may be insufficient to address the full impact of the COVID-19 pandemic. Accordingly, the ultimate impact on our results of operations, financial condition and liquidity cannot be determined at this time.
The COVID-19 pandemic has also exacerbated several of the risks disclosed below, including, but not limited to, the following (which are identified by their caption):
If We are pursuing important strategic initiatives, such as our We believe that our manufacturing footprint is less cost-competitive than that of our principal competitors. To begin to address this competitive disadvantage, we are curtailing production of tires for declining, less profitable segments of the tire market and undertaking significant capital investments in building, expanding and modernizing manufacturing facilities around the world to strengthen the competitiveness of our manufacturing footprint and increase production of premium, large-rim diameter consumer tires. The failure to implement successfully this or our other important strategic initiatives may materially adversely affect our operating results, financial condition and liquidity. We 12 significant progress has been made, the remaining changes we Our performance is also dependent on our ability to improve the volume and mix of higher margin tires we sell in our targeted market segments. In order to do so, we must be successful in developing, producing, marketing and selling products that consumers desire and that offer higher margins to us. Shifts in consumer demand away from higher margin tires could materially adversely affect our business. We have been capacity constrained from time to time with respect to the production of certain higher margin tires, particularly in the United States. When faced with these constraints, we try to alleviate them by utilizing our global manufacturing footprint to meet the demand for our tires and by adding manufacturing capacity. However, in spite of these initiatives, we may not be able to meet all of the demand for certain of our higher margin tires, which could harm our competitive position and limit our growth. We cannot assure you that our strategic initiatives will be successful. If not, we may not be able to achieve or sustain future profitability, which would impair our ability to meet our debt and other obligations and would otherwise negatively affect our operating results, financial condition and liquidity. We face significant global competition and our market share could decline. New tires are sold under highly competitive conditions throughout the world. We compete with other tire manufacturers on the basis of product design, performance, price and terms, reputation, warranty terms, customer service and consumer convenience. On a worldwide basis, we have two major competitors, Bridgestone (based in Japan) and Michelin (based in France), that have large shares of the markets of the countries in which they are based and are aggressively seeking to maintain or improve their worldwide market share. Other significant competitors include Continental, Our ability to compete successfully will depend, in significant part, on our ability to continue to innovate and manufacture the types of tires demanded by consumers, and to reduce costs by such means as reducing excess and high-cost capacity, leveraging global purchasing, improving productivity, eliminating redundancies and increasing production at low-cost supply sources. If we are unable to compete successfully, our market share may decline, materially adversely affecting our results of operations and financial condition. In addition, the automotive industry may experience significant changes due to the introduction of new technologies, such as electric and autonomous vehicles, or new services, business models or methods of travel, such as ride sharing. As the automotive industry evolves, we may need to provide a wider range of products and services to remain competitive, including products that we do not currently have the capability to manufacture or services that we do not currently offer. The demand for our products may also decline if automotive production declines and/or total vehicle miles traveled Our capital expenditures may not be adequate to maintain our competitive position and may not be implemented in a timely or cost-effective manner. Our capital expenditures are limited by our liquidity and capital resources and the amount we have available for capital spending is limited by the need to pay our other expenses and to maintain adequate cash reserves and borrowing capacity to meet unexpected demands that may arise. We believe that our ratio of capital expenditures to sales is lower than the comparable ratio for our principal competitors. Productivity improvements and manufacturing cost improvements may be required to offset potential increases in labor and raw material costs, including inflationary increases, and competitive price pressures. In addition, as part of our strategy to reduce high-cost and excess manufacturing capacity and to increase our capacity to produce higher margin tires, we may need to modernize or expand our facilities. We are currently undertaking significant construction, expansion and modernization projects globally. 13 We may not have sufficient resources to implement planned capital expenditures with minimal disruption to our existing manufacturing operations, or within desired time frames and budgets. Any disruption to our operations, delay in implementing capital improvements or unexpected costs may materially adversely affect our business and results of operations. If we are unable to make sufficient capital expenditures, or to maximize the efficiency of the capital expenditures we do make, we may be unable to achieve productivity improvements, which may harm our competitive position, or to manufacture the products necessary to compete successfully in our targeted market segments. In addition, plant construction and modernization may temporarily disrupt our manufacturing operations and lead to temporary increases in our costs. Raw material, energy and Raw material costs have historically been If we fail to extend or renegotiate significant collective bargaining contracts with our labor unions as they expire from time to time, or if our unionized employees were to engage in a strike or other work stoppage or interruption, our business, results of operations, financial condition and liquidity could be materially adversely affected. We are a party to collective bargaining contracts with our labor unions, which represent a significant number of our Our international operations have certain risks that may materially adversely affect our operating results, financial condition and liquidity. We have manufacturing and distribution facilities throughout the world. Our international operations are subject to certain inherent risks, including:these overall trends continue or worsen, thenwe do not successfully implement our operational andstrategic initiatives, our operating results, financial condition couldand liquidity may be materially adversely affected.In order to reduce the impact of these trends, weoperationalinnovation excellence, sales and marketing excellence and operational excellence initiatives. Our innovation excellence initiatives. For example, in 2018, we formed TireHub, a new national tire distributor ininitiatives are designed to create leading technologies, products and services that anticipate the United States, which is expected to provide a superior, fully integrated distribution, warehousing,mobility and sustainability needs of consumers and fleets. Our sales and delivery solution formarketing excellence initiatives are intended to capture the value of our dealers.manufacturingsafety, quality and efficiency and creating an advantaged supply chain focused on reducing our total delivered costs, optimizing working capital levels and delivering best in industry customer service. Our sales and marketing excellence initiatives are intended to buildthat delivers the value of our brand, help our customers win in their markets, and become consumers' preferred choice. Our innovation excellence initiatives are designed to develop great products and services that anticipate and respondright tire, to the needs of consumers.right place, at the right time, at the right cost. If we fail to execute these initiatives successfully or if the assumptions used in developing the initiatives vary significantly from actual conditions, we may fail to achieve our financial goals.are also facingcontinue to face distribution challenges in Europe which have adversely impacted our consumer replacement tire business in that region. We planIn 2021, we continued to address these challenges by taking actions to better align our European distribution network in order to capture the full value of our products and brands in the marketplace. TheThis initiative is ongoing and althoughexpect to pursueare pursuing to our distribution network in Europe could lead to acontinued disruption in our consumer replacement sales in 2020. However, if2022. If we fail to address the distribution challenges that we face, or our plans to align our distribution network in Europe do not achieve the desired result, our competitive position may deteriorate and our operating results, financial condition and liquidity could be adversely affected.Cooper, Hankook, Kumho, Nexen, Pirelli, Sumitomo, Toyo, Yokohama and various regional tire manufacturers. Our competitors produce significant numbers of tires in low-costthose countries as well asaround the United States.globe. Increasingly, our competitors are making decisions on where to produce tires based not only on production cost, but in combination with total delivery cost and supply chain reliability. These increases in production capacity may result in even greater competition in the United States and elsewhere.declines.declines, including as a result of increasing fuel costs. If we do not accurately predict, prepare for and respond to market developments, technological innovations and changing customer and consumer needs and preferences, our results of operations and financial condition could be materially adversely affected.energytransportation costs may materially adversely affect our operating results and financial condition.volatile, and wevolatile. Inflationary cost pressures, among other factors, may experiencecause increases in the prices of natural and synthetic rubber, carbon black and petrochemical-based commodities. Market conditions, including actions by competitors, or contractual obligations may prevent us from passing any such increased costs on to our customers through timely price increases. Additionally, higherincreased demand for consumer products and supply chain disruptions as a result of the pandemic and other global events, including port congestion and container shortages, has led to inflationary cost pressures on transportation. Higher raw material, energy and energytransportation costs around the world may offset our efforts to reduce our cost structure. As a result, higherHigh demand for and/or limited availability of raw materialmaterials and other energy costssources could result in declining margins and operating results and adversely affect our financial condition. The volatility of raw material costs may cause our margins, operating results and liquidity to fluctuate. In addition, lower raw material costs may put downward pressure on the price of tires, which could ultimately reduce our margins and adversely affect our results of operations.employees. Our masteremployees, including our collective bargaining agreements with the USW. The Goodyear agreement with the USW covers approximately 6,000 employees5,900 of our associates in the United States at December 31, 2019,2021, and expires in July 2022.2022, and the Cooper Tire agreements with the USW cover approximately 2,200 of our associates in the United States at December 31, 2021, and expire in June 2024. In addition, approximately 18,00023,000 of our employeesassociates outside of the United States are covered by union contracts that have expired or are expiring in 2020,2022, primarily in Germany,Luxembourg, Brazil, Poland, South Africa, France, China, Slovenia Turkey and Mexico.Turkey. Although we believe that our relations with our employeesassociates are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire from time to time. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if our unionized workers engage in a strike or other work stoppage or interruption, we could experience a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material adverse effect on our business, results of operations, financial condition and liquidity.We could be negatively impacted by the imposition of tariffs on imported tires and other goods.The imposition of tariffs on certain tires imported from China or other countries may reduce our flexibility to utilize our global manufacturing footprint to meet demand for our tires around the world. In addition, the imposition of tariffs in the United States may result in the tires subject to such tariffs being diverted to other regions of the world, such as Europe, Latin America or Asia, or in retaliatory tariffs or other actions by affected countries. Broad-based tariffs and other trade restrictions could also increase costs for our suppliers who may increase prices to us. Finally, tariffs and other trade restrictions may weaken the economies of key markets for us, such as China, resulting in lower economic growth rates and weakened demand for our products and services. These factors, individually or together, could materially adversely affect our results of operations, financial condition and liquidity.
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The likelihood of such occurrences and their potential effect on us vary from country to country and are unpredictable. Certain regions, including Latin America, Asia, Eastern Europe, the Middle East and Africa, are inherently more economically and politically volatile and, as a result, our business units that operate in these regions could be subject to significant fluctuations in sales and operating income from quarter to quarter. Because a significant percentage of our operating income in recent years has come from these regions, adverse fluctuations in the operating results in these regions could have a significant impact on our results of operations in future periods.
In addition, compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include import and export laws, anti-competition laws, anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, and the U.K. Bribery Act and other local laws prohibiting corrupt payments to governmental officials, data privacy laws such as the European Union's General Data Protection Regulation,GDPR, labor laws, tax laws, and accounting, internal control and disclosure requirements. Violations of these laws and regulations could result in civil and criminal fines, penalties and sanctions against us, our officers or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our reputation, business and results of operations. In certain foreign jurisdictions, there is a higher risk of fraud or corruption and greater difficulty in maintaining effective internal controls and compliance programs. Although we have implemented policies and procedures designed to promote compliance with applicable laws and regulations, there can be no assurance that our employees, contractors or agents will not violate our policies or applicable laws and regulations.
Financial difficulties, work stoppages, supply disruptions or economic conditions affecting our major customers, dealers or suppliers could harm our business.
The tire industry has been negatively impacted by the COVID-19 pandemic, particularly earlier in 2020, which was characterized by a sudden and sharp decline in replacement tire demand and original equipment manufacturers suspending or severely limiting automobile production globally. In addition, supply chain issues impacted new vehicle production throughout 2021. As a result of these factors, automotive vehicle production and global tire industry demand continues to be difficult to predict.
Although sales to our OE customers accounted for approximately 14% of our net sales in 2021, demand for our products by OE customers and production levels at our facilities are impacted by automotive vehicle production. We may experience future declines in sales volume due to declines in new vehicle production and sales, the performance, discontinuation or sale of certain OE brands, platforms or programs, increased competition, or weakness in the demand for replacement tires, which could result in us incurring under-absorbed fixed costs at our production facilities or slowing the rate at which we are able to recover those costs.
Automotive production can also be affected by the ongoing pandemic, labor relation issues or shortages, financial difficulties or supply disruptions. Our OE customers could experience production disruptions resulting from their own or supplier labor, financial or supply difficulties, or from government actions to contain and combat the outbreak and spread of COVID-19. Such events may cause an OE customer to reduce or suspend vehicle production. Other customers, such as dealers, retailers or distributors, may experience similar disruptions to their operations. As a result, a customer could halt or significantly reduce purchases of our products, which would harm our results of operations, financial condition and liquidity.
Our suppliers could also experience production disruptions due to the ongoing pandemic or labor, financial, supply or transportation difficulties, or new environmental laws or stricter enforcement of existing environmental laws. Any such production disruptions may result in the unexpected closure of our suppliers' facilities or increases in the cost of our raw materials, which would adversely affect our results of operations and financial condition.
In addition, the bankruptcy, restructuring or consolidation of one or more of our major customers, dealers or suppliers could result in the write-off of accounts receivable, a reduction in purchases of our products or a supply disruption to our facilities, which could negatively affect our results of operations, financial condition and liquidity.
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If we are unable to attract and retain key personnel our business could be materially adversely affected.
Our business substantially depends on the continued service of key members of our management. The loss of the services of a significant number of members of our management could have a material adverse effect on our business. Our future success will also depend on our ability to attract and retain highly skilled personnel, such as engineering, marketing and senior management professionals. Competition for these employees is intense, and we could experience difficulty from time to time in hiring and retaining the personnel necessary to support our business. Our ability to attract and retain employees may also be hampered by downturns in the automotive and tire industries, which could result in reduced payments under our incentive compensation plans, as well as by greater competition due to the increase in use of remote working environments. If we do not succeed in retaining our current employees and attracting new high quality employees, our business could be materially adversely affected.
We have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales.
We operate with significant operating and financial leverage. Significant portions of our manufacturing, selling, administrative and general expenses are fixed costs that neither increase nor decrease proportionately with sales. In addition, a significant portion of our interest expense is fixed. There can be no assurance that we would be able to reduce our fixed costs proportionately in response to a decline in our net sales and therefore our competitiveness could be significantly impacted. As a result, a decline in our net sales could result in a higher percentage decline in our income from operations and net income.
Environmental issues, including climate change, or legal, regulatory or market measures to address environmental issues, may negatively affect our business and operations and cause us to incur significant costs.
Our manufacturing and distribution facilities are subject to numerous federal, state, local and foreign currency translationlaws and transaction risksregulations designed to protect the environment, including increased government regulations to limit carbon dioxide and other greenhouse gas emissions as a result of concern over climate change, and we expect that additional requirements with respect to environmental matters will be imposed on us in the future.
There is also growing concern that carbon dioxide and other greenhouse gases in the atmosphere may materially adversely affecthave an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. In the event that issues related to such climate change have a negative effect on our business, we may be subjected to decreased availability or less favorable pricing for certain raw materials, including natural rubber. Natural disasters and extreme weather conditions may also disrupt the productivity of our facilities, our supply chain or the operations of our customers. If the frequency or severity of extreme weather and natural disasters increases over time, we may experience a greater number of losses at certain of our facilities. Such losses could lead to an increase in the deductibles or cost of insurance for those facilities, or to the unavailability of insurance on terms that are acceptable to us.
Our manufacturing facilities may become subject to further limitations on the emission of greenhouse gases due to public policy concerns regarding climate change issues or other environmental or health and safety concerns. While the form of any additional regulations cannot be predicted, a “cap-and-trade” system similar to the one adopted in the European Union could be adopted in the United States. Any such “cap-and-trade” system (including the system currently in place in the European Union) or other limitations imposed on the emission of greenhouse gases could require us to increase our capital expenditures, use our cash to acquire emission credits or restructure our manufacturing operations, which could have a material adverse effect on our operating results, financial condition and liquidity.
In addition, we have contractual indemnification obligations for environmental remediation costs and liabilities that may arise relating to certain divested operations. Material future expenditures may be necessary if compliance standards change, if material unknown conditions that require remediation are discovered, or if required remediation of known conditions becomes more extensive than expected. If we fail to comply with present and future environmental laws and regulations, we could be subject to future liabilities or the suspension of production, which could harm our business or results of operations. Environmental laws could also restrict our ability to expand our facilities or could require us to acquire costly equipment or to incur other significant expenses in connection with our manufacturing processes.
Increasing competition for highly skilled and talented workers, as well as labor shortages, could adversely affect our business.
A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, federal unemployment subsidies, including unemployment benefits offered in response to the ongoing COVID-19 pandemic, and other government regulations. Although we have not experienced any material labor shortages to date, we have observed an increasingly competitive labor market. The financial positionincreasing competition for highly skilled and talented employees could result in higher compensation costs and difficulties in maintaining a capable workforce. If we are unable to hire and retain
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employees capable of performing at a high-level, or if mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, have unintended negative effects, our business could be adversely affected. A sustained labor shortage, lack of skilled labor, increased turnover or labor cost inflation, caused by the ongoing COVID-19 pandemic or as a result of general macroeconomic factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, which could negatively affect our ability to efficiently operate our manufacturing and distribution facilities and overall business and have other adverse effects on our results of operations of many of our international subsidiaries are initially recorded in various foreign currencies and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. The strengthening of the U.S. dollar against these foreign currencies ordinarily has a negative impact on our reported sales and operating margin (and conversely, the weakening of the U.S. dollar against these foreign currencies has a positive impact). For the year ended December 31, 2019, foreign currency translation unfavorably affected sales by $451 million and unfavorably affected segment operating income by $38 million comparedcondition.
Risks Related to the year ended December 31, 2018. The volatility of currency exchange rates may materially adversely affect our operating results.
Our long-term ability to meet our obligations, to repay maturing indebtedness or to implement strategic initiatives may be dependent on our ability to access capital markets in the future and to improve our operating results.
The adequacy of our liquidity depends on our ability to achieve an appropriate combination of operating improvements, financing from third parties and access to capital markets. We may need to undertake additional financing actions in the capital markets in order to ensure that our future liquidity requirements are addressed or to implement strategic initiatives. These actions may include the issuance of additional debt or equity, or the factoring of our accounts receivable.
Our access to the capital markets cannot be assured and is dependent on, among other things, the ability and willingness of financial institutions to extend credit on terms that are acceptable to us or our suppliers, or to honor future draws on our existing lines of credit, and the degree of success we have in implementing our strategic initiatives. We have continued our use of supplier financing programs and the factoring of our accounts receivable in order to improve our working capital efficiency and reduce our costs. If these programs become unavailable or less attractive to us or our suppliers, our liquidity could be adversely affected.
Future liquidity requirements, or our inability to access cash deposits or make draws on our lines of credit, also may make it necessary for us to incur additional debt. A substantial portion of our assets is subject to liens securing our indebtedness. As a result, we are limited in our ability to pledge our remaining assets as security for additional secured indebtedness.
Our inability to access the capital markets or incur additional debt in the future could have a material adverse effect on our liquidity and operations, and could require us to consider further measures, including deferring planned capital expenditures, reducing discretionary spending, selling additional assets and restructuring existing debt.
We have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise materially adversely affect our financial health.
We have a substantial amount of debt. As of December 31, 2019,2021, our debt (including finance leases) on a consolidated basis was approximately $5.7$7.4 billion. Our substantial amount of debt and other obligations could have important consequences. For example, it could:
The agreements governing our debt, including our credit agreements, limit, but do not prohibit, us from incurring additional debt and we may incur a significant amount of additional debt in the future, including additional secured debt. If new debt is added to our current debt levels, our ability to satisfy our debt obligations may become more limited.
Our ability to make scheduled payments on, or to refinance, our debt and other obligations will depend on our financial and operating performance, which, in turn, is subject to our ability to implement our strategic initiatives, prevailing economic conditions and certain financial, business and other factors beyond our control. If our cash flow and capital resources are insufficient to fund our debt service and other obligations, we may be forced to reduce or eliminate the dividend on our common stock, reduce or delay expansion plans and capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. We cannot assure you that our operating performance, cash flow and capital resources will be sufficient to pay our debt obligations when they become due.
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We cannot assure you that we would be able to dispose of material assets or operations, obtain additional capital or restructure our debt or other obligations if necessary or, even if we were able to take such actions, that we could do so on terms that are acceptable to us.
Any failure to be in compliance with any material provision or covenant of our debt instruments, or a material reduction in the borrowing base under our revolving credit facility, could have a material adverse effect on our liquidity and operations.
The agreements governing our secured credit facilities, senior unsecured notes and our other outstanding indebtedness impose significant operating and financial restrictions on us. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. These restrictions limit our ability to, among other things:
Availability under our first lien revolving credit facility is subject to a borrowing base, which is based on eligible accounts receivable and inventory, the value of our principal trademarks, the value of eligible machinery and equipment, and certain cash in an amount not to exceed $200$275 million. To the extent that our eligible accounts receivable and inventory and other components of the borrowing base decline in value, our borrowing base will decrease and the availability under that facility may decrease below its stated amount. In addition, if at any time the amount of outstanding borrowings and letters of credit under that facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess.
Our ability to comply with these covenants or to maintain our borrowing base may be affected by events beyond our control, including deteriorating economic conditions, and these events could require us to seek waivers or amendments of covenants or
A breach of any of the covenants or restrictions contained in any of our existing or future financing agreements, including the financial covenants in our secured credit facilities, could result in an event of default under those agreements. Such a default could allow the lenders under our financing agreements, if the agreements so provide, to discontinue lending, to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies, and/or to declare all borrowings outstanding thereunder to be due and payable. In addition, the lenders could terminate any commitments they have to provide us with further funds. If any of these events occur, we cannot assure you that we will have sufficient funds available to pay in full the total amount of obligations that become due as a result of any such acceleration, or that we will be able to find additional or alternative financing to refinance any such accelerated obligations. Even if we obtain additional or alternative financing, we cannot assure you that it would be on terms that would be acceptable to us.
We cannot assure you that we will be able to remain in compliance with the covenants to which we are subject in the future and, if we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Certain of our borrowings are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, which would require us to use more of our available cash to service our indebtedness. There can also be no assurance that we will be able to enter into swap agreements or other hedging arrangements in the future if we desire to do so, or that any existing or future hedging arrangements will offset increases in interest rates. As of December 31, 2019,2021, we had $1,837 millionapproximately $1.1 billion of variable rate debt outstanding.
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Risks Related to Information Technology and Intellectual Property
We may be adversely affected by any disruption in, or failure of, our information technology systems.
We rely upon the capacity, reliability and security of our information technology ("IT") systems across all of our major business functions, including our research and development, manufacturing, retail, financial and administrative functions. We also face the challenge of supporting our older systems and implementing upgrades when necessary, as well as the integration of Cooper Tire’s IT systems with Goodyear’s IT systems. Our security measures are focused on the prevention, detection and remediation of damage from computer viruses, unauthorized access, cyber-attack, natural disasters and other similar disruptions. We may incur significant costs in order to implement the security measures that we feel are necessary to protect our IT systems. However, our IT systems may remain vulnerable to damage despite our implementation of security measures that we deem to be appropriate. In addition, we are also dependent on third parties to provide important IT services relating to, among other things, human resources, electronic communications and certain finance functions.
Additionally, we collect and store sensitive data, including intellectual property, proprietary business information and the proprietary business information of our customers and suppliers, as well as personally identifiable information of our customers and associates, in data centers and on information technology networks.
In addition, the GDPR, which came into effect in May 2018, creates a range of new compliance obligations for companies that process personal data of European Union residents, and increases financial penalties for non-compliance. As a company that processes personal data of European Union residents, we bear the costs of compliance with the GDPR and are subject to the potential for fines and penalties in the event of a breach of the GDPR.
Aside from the European Union, other jurisdictions have substantial fixed costsenacted, or are considering, regulations regarding data privacy. The California Consumer Privacy Act ("CCPA"), which became effective in January 2020, and asothers that may be passed, introduce requirements with respect to personal information, and non-compliance with the CCPA may result in liability through private actions and enforcement. Failure to comply with these current and future laws could result in significant penalties and could have a material adverse effect on us and our results of our operations.
Any system failure, accident or security breach involving our or our third party's IT systems could result in disruptions to our operating income fluctuates disproportionately with changesoperations. A breach in the security of our net sales.
We may not be able to protect our intellectual property rights adequately.
Our success depends in part upon our ability to use and protect our proprietary technology and other intellectual property, which generally covers various aspects of the design and manufacture of our products and processes. We own and use tradenames and trademarks worldwide. We rely upon a combination of trade secrets, confidentiality policies, nondisclosure and other contractual arrangements and patent, copyright and trademark laws to protect our intellectual property rights. The steps we take in this regard may not be adequate to protect our intellectual property or to prevent or deter challenges or infringement or other violations of our intellectual property, and we may not be able to detect unauthorized use or take appropriate and timely steps to enforce our intellectual property rights.
In addition, the laws of some countries may not protect and enforce our intellectual property rights to the same extent as the laws of the U.S. Further, while we believe we have rights to use all of the intellectual property we use, if we are found to infringe on the rights of others, we could be adversely impacted.
Risks Related to Litigation, Laws and Regulations
We could be negatively impacted by changes in tariffs, trade agreements or other trade restrictions on imported tires, raw materials and other goods or equipment.
The imposition of new tariffs, changes in existing tariff rates, changes in or the repeal of trade agreements or other trade restrictions may reduce our fixed costs proportionatelyflexibility to utilize our global manufacturing footprint to meet demand for our tires around the world. In addition, the imposition of tariffs in response to a decline in our net sales and therefore our competitiveness could be significantly impacted. As a result, a decline in our net sales couldthe United States may result in a higher percentage declinethe tires subject to such tariffs being diverted to other regions of the world, such as Europe, Latin America or Asia, or in retaliatory tariffs or other actions by affected countries.
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Broad-based tariffs and other trade restrictions could also increase costs for our income fromsuppliers who may increase prices to us. Finally, tariffs and other trade restrictions may weaken the economies of key markets for us, such as China, resulting in lower economic growth rates and weakened demand for our products and services. These factors, individually or together, could materially adversely affect our results of operations, financial condition and net income.
We may incur significant costs in connection with our contingent liabilities and tax matters.
We have significant reserves for contingent liabilities and tax matters. The major categories of our contingent liabilities include workers' compensation and other employment-related claims, product liability and other tort claims, including asbestos claims, and environmental matters. Our recorded liabilities and estimates of reasonably possible losses for our contingent liabilities 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 that 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.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including with respect to transfer pricing. While we apply consistent transfer pricing policies and practices globally, support transfer prices through economic studies, seek advance pricing agreements and joint audits to the extent possible and believe our 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.
If we wish to appeal any future adverse judgment in any of these proceedings, we may be required to post an appeal bond with the relevant court. If we were subject to a significant adverse judgment or experienced an interruption or reduction in the availability of bonding capacity, we may be required to provide letters of credit or post cash collateral, which may have a material adverse effect on our liquidity.
We have significant deferred tax assets, including foreign tax credits. We must generate sufficient earnings of the appropriate character in order to utilize our deferred tax assets prior to any applicable expiration dates. If our earnings remain flat or decline over an extended period of time, we may not be able to utilize certain of our deferred tax assets prior to their expiration and we
For further information regarding our contingent liabilities and tax matters, refer to Notes to the Consolidated Financial Statements No. 19,20, Commitments and Contingent Liabilities, and No. 6,7, Income Taxes. For further information regarding our accounting policies with respect to certain of our contingent liabilities and uncertain income tax positions, refer to “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies.”
We are subject to extensive government regulations that may materially adversely affect our operating results.
We are subject to regulation by the Department of Transportation through the National Highway Traffic Safety Administration, or NHTSA, which has established various standards and regulations applicable to tires sold in the United States and tires sold in a foreign country that are identical or substantially similar to tires sold in the United States. NHTSA has the authority to order the recall of automotive products, including tires, having safety-related defects or that do not comply with a motor vehicle safety standard.
The TREAD Act imposes numerous requirements with respect to the early warning reporting of warranty claims, property damage claims, and bodily injury and fatality claims and also requires tire manufacturers, among other things, to comply with revised and more rigorous tire testing standards. Compliance with the TREAD Act regulations has increased the cost of producing and distributing tires in the United States. We have been subject to recalls in the past and it is possible that a recall of our tires, including under the TREAD Act or in other countries under similar regulations, could occur in the future. A substantial recall or related penalties could have a material adverse effect on our reputation, operating results and financial condition.
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In addition, as required bypursuant to the Energy Independence and Security Act of 2007, NHTSA willmay establish a national tire fuel efficiency consumer information program. When theIf a related rule-making process is completed, certain tires sold in the United States willwould be required to be rated for rolling resistance, traction and tread wear. While the federal law preempts state tire fuel efficiency laws adopted after January 1, 2006, we may become subject to additional tire fuel efficiency legislation, either in the United States or other countries.
Our European operations are subject to regulation by the European Union. In 2009, twoTwo regulations, the Tire Safety Regulation and the Tire Labeling Regulation, applicable to tires sold in the European Union werehave been adopted. The Tire Safety Regulation sets performance standards that tires for cars and light and commercial trucks need to meet for rolling resistance, wet grip braking (passenger car tires only) and noise in order to be sold in the European Union, and became effective beginning in 2012, with continuing phases that will become effective through 2020.Union. The Tire Labeling Regulation applies to all passenger car, light truck and commercial truck tires and requires that consumers be informed about the tire's fuel efficiency, wet grip and noise characteristics. Other countries, such as Brazil, have also adopted tire labeling regulations, and additional countries may also introduce similar regulations in the future.
Tires produced or sold in Europe also have to comply with various other standards, including environmental laws such as REACH (Registration, Evaluation, Authorisation and Restriction of Chemical Substances), which regulates the use of chemicals in the European Union. For example, REACH prohibits the use of highly aromatic oils in tires, which were used as compounding components to improve certain performance characteristics.
These U.S. and European regulations, rules adopted to implement these regulations, or other similar regulations that may be adopted in the United States, Europe or elsewhere in the future may require us to alter or increase our capital spending and research and development plans or cease the production of certain tires, which could have a material adverse effect on our operating results.
Laws and regulations governing environmental and occupational safety and health are complicated, change frequently and have tended to become stricter over time. As a manufacturing company, we are subject to these laws and regulations both inside and outside the United States. We may not be in complete compliance with such laws and regulations at all times. Our costs or liabilities relating to them may be more than the amount we have reserved, and that difference may be material.
Compliance with the laws and regulations described above or any of the myriad of applicable foreign, federal, state and local laws and regulations currently in effect or that may be adopted in the future could materially adversely affect our competitive position, operating results, financial condition and liquidity.
General Risk Factors
We have foreign currency translation and transaction risks that may bematerially adversely affected by any disruption in, or failureaffect our operating results, financial condition and liquidity.
The financial position and results of operations of many of our information technology systems.
We may be impacted by economic and supply disruptions associated with events beyond our control, such as war, acts of terror, political unrest, public health concerns, labor disputes or natural disasters.
We manage businesses and facilities worldwide. Our facilities and operations, and the facilities and operations of our suppliers and customers, could be disrupted by events beyond our control, such as war, acts of terror, political unrest, public health concerns, labor disputes or natural disasters. Any such disruption could cause delays in the production and distribution of our products and the loss of sales and customers. We may not be insured against all such potential losses and, if insured, the insurance proceeds that we receive may not adequately compensate us for all of our losses. If the frequency or severity of natural disasters increases over time, we may experience a greater number of losses at certain of our facilities. Such losses could lead to an increase in the deductibles or cost of insurance for those facilities, or to the unavailability of insurance on terms that are acceptable to us.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
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ITEM 2.PROPERTIES.
We manufacture our products in 4757 manufacturing facilities located around the world including 1418 plants in the United States.
AMERICAS MANUFACTURING FACILITIES.AMERICAS MANUFACTURING FACILITIES. Americas owns or leases and operates 2429 manufacturing facilities in 7 countries, including:
EUROPE, MIDDLE EAST AND AFRICA MANUFACTURING FACILITIES.EUROPE, MIDDLE EAST AND AFRICA MANUFACTURING FACILITIES. EMEA owns or leases and operates 1518 manufacturing facilities in 810 countries, including:
ASIA PACIFIC MANUFACTURING FACILITIES.ASIA PACIFIC MANUFACTURING FACILITIES. Asia Pacific owns and operates 810 manufacturing facilities in 6 countries, including 79 tire plants and 1 aviation retread plant.
LANT UTILIZATION.PLANT UTILIZATION. Our worldwide tire capacity utilization rate was approximately 85%87% during 20192021 compared to approximately 87%68% in 20182020 and 84%85% in 2017.2019. The increased utilization rate in 2021 was driven by our continued recovery from the pandemic-related factory shutdowns in 2020. The reported capacity utilization is an overall average for the Company. Our utilization rate can vary significantly between product lines, depending on the complexity of the tires, and between consumer and commercial tires, and can also vary between business segments.
THER FACILITIES.OTHER FACILITIES. We also own and operate twofive research and development facilities and technical centers, three development centers, one innovation lab, and seveneight tire proving grounds. We lease our Corporate and Americas headquarters and our research and development facility and technical center in Akron, Ohio. We operate approximately 1,000 retail outlets for the sale of our tires to consumer and commercial customers, approximately 50 tire retreading facilities and approximately 190300 warehouse distribution facilities. Substantially all of these facilities are leased. We do not consider any one of these leased properties to be material to our operations. For additional information regarding leased properties, refer to the Notes to the Consolidated Financial Statements No. 13,14, Property, Plant and Equipment, and No. 14, Leases, in this Form 10-K.15, Leases. Certain of our manufacturing facilities are mortgaged as collateral for our secured credit facilities. Refer to the Note to the Consolidated Financial Statements No. 15,16, Financing Arrangements and Derivative Financial Instruments, in this Form 10-K.Instruments.
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ITEM 3. LEGAL PROCEEDINGS.
Asbestos Litigation
We are currently one of numerous defendants in legal proceedings in certain state and federal courts involving approximately 39,60038,200 claimants at December 31, 20192021 relating to their alleged exposure to materials containing asbestos in products allegedly manufactured by us or asbestos materials present at our facilities. We manufactured, among other things, rubber coated asbestos sheet gasket materials from 1914 through 1973 and aircraft brake assemblies containing asbestos materials prior to 1987. Some of the claimants are independent contractors or their employees who allege exposure to asbestos while working at certain of our facilities. It is expected that in a substantial portion of these cases there will be no evidence of exposure to a Goodyear manufactured product containing asbestos or asbestos in our facilities. The amount expended by us and our insurers on defense and claim resolution was approximately $22$15 million during 2019.2021. The plaintiffs in the pending cases allege that they were exposed to asbestos and, as a result of such exposure, suffer from various respiratory diseases, including in some cases mesothelioma and lung cancer. The plaintiffs are seeking unspecified actual and punitive damages and other relief. For additional information on asbestos litigation, refer to the Note to the Consolidated Financial Statements No. 19,20, Commitments and Contingent Liabilities, in this Form 10-K.
Shareholder Derivative Litigation
On October 24, 2018, a purported shareholder of the Company filed a derivative action on behalf of the Company in the Court of Common Pleas for Summit County, Ohio against certain of our directors, our chief executive officer, and certain former officers and directors. The complaint also names the Company as a nominal defendant. The lawsuit alleges, among other things, breach of fiduciary duties, waste of corporate assets and fraudulent concealment in connection with certain G159 tires manufactured by us from 1996 until 2003. The lawsuit seeks unspecified monetary damages, an award of attorney’s fees and expenses, and other legal and equitable relief.
Other Matters
In addition to the legal proceedings described above, various other legal actions, indirect tax assessments, claims and governmental investigations and proceedings covering a wide range of matters are pending against us, including claims and proceedings relating to several waste disposal sites that have been identified by the United States Environmental Protection Agency and similar agencies of various states for remedial investigation and cleanup, which sites were allegedly used by us in the past for the disposal of industrial waste materials. Based on available information, we do not consider any such action, assessment, claim, investigation or proceeding to be material, within the meaning of that term as used in Item 103 of Regulation S-K and the instructions thereto. For additional information regarding our legal proceedings, refer to the Note to the Consolidated Financial Statements No. 19,20, Commitments and Contingent Liabilities, in this Form 10-K.
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The principal market for our common stock is the Nasdaq Global Select Market (Stock Exchange Symbol: GT). At December 31, 2019,2021, there were 12,32112,295 holders of record of the 232,650,318281,793,223 shares of our common stock then outstanding.
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| Plan Category | Number of Shares to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in Column (a)) | ||||||||
| (a) | |||||||||||
| Equity compensation plans approved by shareholders | 4,998,021 | $ | 20.61 | 12,305,582 | (1) | ||||||
| Equity compensation plans not approved by shareholders | — | — | — | ||||||||
| Total | 4,998,021 | $ | 20.61 | 12,305,582 | |||||||
Year Ended December 31,(1) | |||||||||||||||||||
| (In millions, except per share amounts) | 2019(2) | 2018(2) | 2017(2) | 2016(2) | 2015(2) | ||||||||||||||
| Net Sales | $ | 14,745 | $ | 15,475 | $ | 15,377 | $ | 15,158 | $ | 16,443 | |||||||||
| Net Income (Loss) | (297 | ) | 708 | 365 | 1,284 | 376 | |||||||||||||
| Less: Minority Shareholders’ Net Income | 14 | 15 | 19 | 20 | 69 | ||||||||||||||
| Goodyear Net Income (Loss) | $ | (311 | ) | $ | 693 | $ | 346 | $ | 1,264 | $ | 307 | ||||||||
Goodyear Net Income (Loss) — Per Share of Common Stock: | |||||||||||||||||||
| Basic | $ | (1.33 | ) | $ | 2.92 | $ | 1.39 | $ | 4.81 | $ | 1.14 | ||||||||
| Diluted | $ | (1.33 | ) | $ | 2.89 | $ | 1.37 | $ | 4.74 | $ | 1.12 | ||||||||
| Cash Dividends Declared per Common Share | $ | 0.64 | $ | 0.58 | $ | 0.44 | $ | 0.31 | $ | 0.25 | |||||||||
| Total Assets | $ | 17,185 | $ | 16,872 | $ | 17,064 | $ | 16,511 | $ | 16,391 | |||||||||
| Long Term Debt and Finance Leases Due Within One Year | 562 | 243 | 391 | 436 | 585 | ||||||||||||||
| Long Term Debt and Finance Leases | 4,753 | 5,110 | 5,076 | 4,798 | 5,074 | ||||||||||||||
| Goodyear Shareholders’ Equity | 4,351 | 4,864 | 4,603 | 4,507 | 3,920 | ||||||||||||||
| Total Shareholders’ Equity | 4,545 | 5,070 | 4,850 | 4,725 | 4,142 | ||||||||||||||
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
The Goodyear Tire & Rubber Company is one of the world’s leading manufacturers of tires, with one of the most recognizable brand names in the world and operations in most regions of the world. We have a broad global footprint with 4757 manufacturing facilities in 2123 countries, including the United States. We operate our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa; and Asia Pacific.
This management's discussion and analysis provides comparisons of material changes in the consolidated financial statements for the years ended December 31, 20192021 and 2018.2020. For a comparison of the years ended December 31, 20182020 and 2017,2019, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2018.
Cooper Tire Acquisition
On June 7, 2021, we completed our acquisition of Cooper Tire pursuant to the terms of the Agreement and Plan of Merger, dated February 22, 2021 (the “Merger Agreement”), by and among Goodyear, Vulcan Merger Sub Inc., a direct, wholly owned subsidiary of Goodyear (“Merger Sub”), and Cooper Tire. Goodyear acquired Cooper Tire by way of the merger of Merger Sub with and into Cooper Tire (the “Merger”), with Cooper Tire surviving the Merger as a wholly owned subsidiary of Goodyear. In accordance with the terms of the Merger Agreement, upon closing of the transaction, Cooper Tire stockholders received $41.75 per share in cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock per share of Cooper Tire common stock (the "Merger Consideration"). The cash component of the Merger Consideration totaled $2,155 million and the stockholders of Cooper Tire received 46.1 million shares of Goodyear common stock valued at $942 million, based on the closing market price of Goodyear common stock on the last trading day prior to the Closing Date. For further information, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition.
The descriptions of, and references to, the Merger Agreement included in this Annual Report on Form 10-K are qualified in their entirety by the full text of the Merger Agreement, which is attached as Exhibit 2.1 to our Current Report on Form 8-K filed on February 25, 2021.
On May 18, 2021, we issued $850 million in aggregate principal amount of 5% senior notes due 2029 and $600 million in aggregate principal amount of 5.25% senior notes due July 2031. The net proceeds from these notes, together with cash and cash equivalents and borrowings under our first lien revolving credit facility, were used to fund the cash component of the Merger Consideration and related transaction costs.
On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026 and increasing the amount of the facility to $2.75 billion. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points.
The results of Cooper Tire’s operations have been included in our consolidated financial statements since the Closing Date.
Transaction and other costs related to the acquisition of Cooper Tire totaled $56 million during the year ended December 31, 2021, of which $50 million ($42 million after-tax and minority) of these costs were included in Other (Income) Expense and $6 million ($4 million after-tax and minority) were included in Cost of Goods Sold ("CGS") and Selling, General and Administrative Expense ("SAG").
The Merger Consideration was allocated on a provisional basis to the estimated fair value of the assets acquired and liabilities assumed from Cooper Tire as of the Closing Date. Certain of these fair value estimates, including those related to Property, Plant and Equipment, certain liabilities and Goodwill, are preliminary and subject to change as management completes further analyses and studies. For further information, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition, and "Critical Accounting Policies".
Results of Operations
During 2021, our operating results significantly improved compared to 2020, as the overall negative impacts of the COVID-19 pandemic on tire industry conditions persisteddemand, auto production, miles driven and our tire volume moderated and continued to improve, compared to the severe global economic disruption experienced throughout much of 2020, particularly in the year,first half of the year.
Nonetheless, our 2021 results continued to be negatively influenced by the direct and indirect macroeconomic effects of the ongoing pandemic. Our global businesses are experiencing varying stages of recovery, as national and local efforts in many countries to contain the spread of COVID-19, including renewed stay-at-home orders, continue to impact economic conditions. Increased demand for consumer products and supply chain disruptions as a result of the pandemic and other global events,
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including port congestion and container shortages, has led to inflationary cost pressures, including higher costs for certain raw materialmaterials, higher transportation costs foreign currency headwinds dueand higher energy costs, as well as shortages of certain automobile parts, such as semiconductors, which have affected OE manufacturers’ ability to a strong U.S. dollar, lower OE industry volumes, softeningproduce consumer and commercial vehicles consistently.
Most of our global tire manufacturing facilities are operating at or near full capacity to meet current demand, as well as to increase the level of our finished goods inventory as we continue to restock in Europe, weak market conditions in China,order to fulfill anticipated near-term demand. However, like many companies, we are experiencing shortages of qualified and economic volatility in Latin America,reliable workers, particularly in Brazil. These headwinds were partially offset by continued strengththe U.S. Absenteeism, a tight labor supply and elevated turnover are resulting in U.S. consumer replacement sales.
We continue to monitor the pandemic on a local basis, taking actions to protect the health and wellbeing of our associates, customers and communities, which remain our top priority. We also continue to follow guidance from the Centers for Disease Control and Prevention, which include preventative measures at our facilities as appropriate, including limiting visitor access and business travel, remote and hybrid working, masking and social distancing practices, and frequent disinfection.
In addition, during the first quarter of 2021, a severe winter storm in the U.S. caused temporary shutdowns of three of our businesschemical facilities, limited production at three tire manufacturing facilities, and addressimpacted more than 170 consumer and commercial retail locations. We estimate that the challenging economic environment, we remain focusednegative impact on our key strategies by:
Our 2019 results reflectfor 2021 include a 2.4% decrease34.3% increase in tire unit shipments compared to 2018. In 2019, we realized approximately $199 million2020, reflecting the addition of Cooper Tire's operations, as well as the pandemic-related recovery noted above. Year-over-year cost savings, including raw material cost saving measures of approximately $93 million, which exceeded the impact of general inflation. Our raw material costs, includingtemporary fixed cost saving measures, increased by approximately 4%reductions in 20192020, were $49 million, compared to 2018.
Net sales were $14,745$17,478 million in 2019,2021, compared to $15,475$12,321 million in 2018.2020. Net sales decreasedincreased in 20192021 primarily due to unfavorablethe addition of Cooper Tire's net sales of $2,126 million, higher global tire volume, improvements in price and product mix, higher sales in other tire-related businesses, driven by increased third-party chemical, retail and retread sales in Americas and increased Fleet Solutions sales in EMEA, and favorable foreign currency translation, primarily in EMEA lower volume, primarily in EMEA, and lower sales in other tire-related businesses, primarily due to a decrease in third-party sales of chemical products in Americas, partially offset by improvements in price and product mix, primarily in EMEA and Americas.
Goodyear net income of $693in 2021 was $764 million, or $2.89 per dilutedshare, compared to a net loss of $1,254 million, or $5.35 per share, in 2018.2020. The decreasefavorable change in Goodyear net income in 2019(loss) was primarily driven by lowerdue to higher segment operating income, the net gain recognized on the TireHub transaction in 2018, higherlower income tax expense, a decrease in goodwill and other asset impairment charges and lower rationalization expense, partially offset by higher rationalizationinterest expense.
Our total segment operating income for 20192021 was $945$1,288 million, compared to $1,274an operating loss of $14 million in 2018.2020. The $329$1,302 million or 25.8%, decrease in segment operating incomefavorable change was primarily due to the impact of higher raw material costs of $185 million, primarily in Americas and EMEA, lower volume of $81 million, primarily in EMEA, higher selling, administrative and general expense ("SAG") of $47 million, primarily due to higher wages and benefits driven by higher incentive compensation, lower income in other tire-related businesses of $38 million, driven by lower third-party chemical sales in Americas, the impact of unfavorable foreign currency translation of $38 million, and higher conversion costs of $36 million, primarily in EMEA and Asia Pacific. These decreases more than offsetglobal improvements in price and product mix of $120$1,010 million, higher global tire volume of $367 million, lower conversion costs of $320 million, primarily due to favorable overhead absorption as a result of higher global factory utilization, and the addition of Cooper Tire's operating income of $181 million. These improvements in Americassegment operating income were partially offset by higher raw material costs of $484 million and EMEA.higher SAG of $172 million. Refer to "Results of Operations — Segment Information”Information" for additional information.
Liquidity
At December 31, 2019, 2021, we had $908$1,088 million inof Cash and cash equivalentsCash Equivalents as well as $3,578$4,345 million of unused availability under our various credit agreements, compared to $801$1,539 million and $3,151$3,881 million, respectively, at December 31, 2018. Cash2020. The decrease in cash and cash equivalents of $451 million was primarily due to payment of the $1,856 million cash component of the Merger Consideration, net of cash and restricted cash acquired, and capital expenditures of $981 million, partially offset by net borrowings of $1,406 million, which includes $1,450 million of new senior notes used to fund the Cooper Tire acquisition and repayment of our $400 million second lien term loan facility due 2025, and cash flows fromprovided by operating activities of $1,207$1,062 million. Cash provided by operating activities reflects net income for the year of $780 million, which are drivenincludes a non-cash tax benefit of $325 million related to the reduction of valuation allowances on certain U.S. deferred tax assets for foreign tax credits, non-cash charges for depreciation and amortization of $883 million, an inventory fair value step-up adjustment of $110 million related to the Cooper Tire acquisition and rationalization charges of $93 million, partially offset by the profitability of our strategic business units ("SBUs") and changes incash used for working capital were used to fund capital expenditures of $770 million, dividends paid on our common stock of $148$359 million and net debt repaymentsrationalization payments of $119$197 million. Refer to "Liquidity and Capital Resources" for additional information.
While the global economy continues to recover from the COVID-19 pandemic, we face uncertainty in several countries as governmental measures to slow the pandemic have the potential to reduce economic activity and mobility. OE manufacturers also continue to experience challengingbe affected by shortages of components and materials, which are limiting vehicle production. Additionally, our ability to ship products, including to locations where we do not have manufacturing as well as from certain Cooper Tire consumer and commercial manufacturing locations, may continue to be impacted by ongoing disruptions in global industry conditionslogistics. In spite of these challenges, we expect our volume in 2020,the first quarter of 2022 to be above the prior year’s level, including lower global OE industry demand, particularly in Europe and Asia, foreign currency headwinds, weak consumer replacement demand in Europe, and volatility in emerging markets. We anticipate our consumer OE tire unit volume to decline by about 2.0the impact of Cooper Tire which sold 8.7 million units in 2020, primarily in
For the full yearfirst half of 2020,2022, we expect our raw material costs will be essentially flat compared to 2019, excluding transactional foreign currency andincrease $700 million to $800 million, including the benefit of raw material cost saving measures. This expectation excludes raw material cost increases related to Cooper Tire. Natural and synthetic rubber prices and other commodity prices historically have been volatile, and this estimate could change significantly based on future cost fluctuations and changes in foreign exchange rates. In addition, our raw material costs reflect the costimpacts of thesewage, energy and other key raw materials.transportation inflation impacting our suppliers. We are continuingcontinue to focus on opportunities to further improve 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.
In addition to the impact of higher raw material costs, we expect to experience continued inflationary pressures from incremental transportation, labor and energy costs in 2022, as well as increased manufacturing costs related to elevated associate turnover in 2021 resulting in the need to train newly hired staff. As a result, we anticipate the need to find additional opportunities to improve price and product mix to manage the impact of these additional cost pressures. The recent coronavirus outbreakcombined impact of these higher costs is expected to negatively impact our first quarter 2022 when compared to the fourth quarter 2021.
During 2022, we expect to reinvest approximately $300 million in China has causedworking capital as we continue to build our inventory levels to meet customer demand and support service levels. We expect our capital expenditures to be between $1.3 billion and $1.4 billion. Beyond expenditures required to sustain our facilities, capital expenditures in 2022 will increase capacity to address supply constraints and address growing demand, including for more complex tire designs. We expect our cash flows from operating activities less capital expenditures to be breakeven in 2022.
Our results in 2022 will also be impacted by approximately $40 million of amortization of intangible assets related to the temporary closure of many businesses in China, including our Pulandian manufacturing facility, which has limited business activity and automotive production. Given the dynamic nature of this situation, our outlook does not currently include any impact from the coronavirus since that impact cannot be reasonably estimated at this time.
Refer to “Item 1A. Risk Factors” 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” for a discussion of our use of forward-looking statements.
All per share amounts are diluted and refer to Goodyear net income (loss).
Goodyear net income of $693in 2021 was $764 million, or $2.89 per share, compared to a net loss of $1,254 million, or $5.35 per share, in 2018.2020. The decreasefavorable change in Goodyear net income in 2019(loss) was driven by lowerprimarily due to higher segment operating income, the net gain recognized on the TireHub transaction in 2018, higherlower income tax expense, a decrease in goodwill and other asset impairment charges and lower rationalization expense, partially offset by higher rationalizationinterest expense.
Net Sales
Net sales in 20192021 of $14,745$17,478 million decreased $730increased $5,157 million, or 4.7%41.9%, compared to $15,475$12,321 million in 2018,2020, primarily due to unfavorable foreign currency translationthe addition of $451Cooper Tire's net sales of $2,126 million, primarily in EMEA, lowerhigher global tire volume of $307$1,699 million, primarily in EMEA, and lower sales in other tire-related businesses of $168 million, primarily due to a decrease in third-party sales of chemical products in Americas, partially offset by improvements in price and product mix of $196$715 million, higher sales in other tire-related businesses of $486 million, driven by increased third-party chemical, retail and retread sales in Americas and increased Fleet Solutions sales in EMEA, and favorable foreign currency translation of $164 million, primarily in EMEA and Americas.Asia Pacific. Goodyear worldwide tire unit net sales were $12,524$14,917 million and $13,060$10,339 million in 20192021 and 2018,2020, respectively. Consumer and commercial net sales were $8,835$11,118 million and $2,953$3,702 million respectively, in 2019.2021, respectively. Consumer and commercial net sales were $9,167$7,190 million and $3,002$2,636 million respectively, in 2018.
The following table presents our tire unit sales for the periods indicated:
| Year Ended December 31, | ||||||||
| (In millions of tires) | 2019 | 2018 | % Change | |||||
| Replacement Units | ||||||||
| United States | 40.3 | 38.9 | 3.6 | % | ||||
| International | 74.7 | 76.2 | (2.0 | ) | ||||
| Total | 115.0 | 115.1 | (0.1 | ) | ||||
| OE Units | ||||||||
| United States | 11.2 | 13.2 | (15.2 | ) | ||||
| International | 29.1 | 30.9 | (5.8 | ) | ||||
| Total | 40.3 | 44.1 | (8.5 | ) | ||||
| Goodyear worldwide tire units | 155.3 | 159.2 | (2.4 | ) | ||||
|
| Year Ended December 31, |
| |||||||||
(In millions of tires) |
| 2021 |
|
| 2020 |
|
| % Change |
| |||
Replacement Units |
|
|
|
|
|
|
|
|
| |||
United States |
|
| 55.3 |
|
|
| 31.4 |
|
|
| 76.1 | % |
International |
|
| 78.8 |
|
|
| 63.6 |
|
|
| 23.9 | % |
Total |
|
| 134.1 |
|
|
| 95.0 |
|
|
| 41.2 | % |
OE Units |
|
|
|
|
|
|
|
|
| |||
United States |
|
| 9.6 |
|
|
| 9.3 |
|
|
| 3.2 | % |
International |
|
| 25.6 |
|
|
| 21.7 |
|
|
| 18.0 | % |
Total |
|
| 35.2 |
|
|
| 31.0 |
|
|
| 13.2 | % |
Goodyear worldwide tire units |
|
| 169.3 |
|
|
| 126.0 |
|
|
| 34.3 | % |
The decreaseincrease in worldwide tire unit sales of 3.943.3 million units, or 2.4%34.3%, compared to 2018,2020, included a decreasean increase of 0.139.1 million replacement tire units, or 0.1%, comprised primarily of a decrease in EMEA partially offset by an increase in Americas. OE tire units decreased by 3.8 million units, or 8.5%41.2%, primarily due to lowerthe addition of Cooper Tire's units and continued recovery from the macroeconomic impacts of the COVID-19 pandemic. OE tire units increased by 4.2 million units, or 13.2%, primarily due to the addition of Cooper Tire's units and higher vehicle production globally. compared to 2020, despite more recent supply chain disruptions and shortages that negatively impacted vehicle production in 2021. Consumer and commercial unit sales in 20192021 were 141.9154.2 million and 11.713.1 million, respectively. Consumer and commercial unit sales in 20182020 were 145.5113.8 million and 11.810.6 million, respectively.
Cost of Goods Sold
CGS was $11,602$13,692 million in 2019, decreasing $3592021, increasing $3,355 million, or 3.0%32.5%, from $11,961$10,337 million in 2018.2020. CGS was 78.7%78.3% of sales in 20192021 compared to 77.3%83.9% of sales in 2018.2020. CGS in 2019 decreased2021 increased primarily due to foreign currency translationthe addition of $345Cooper Tire's CGS of $1,732 million, primarily in EMEAwhich includes $110 million ($82 million after-tax and Americas, lowerminority) of amortization related to a fair value step-up adjustment to the Closing Date inventory that was acquired by Goodyear, higher global tire volume of $226$1,332 million, primarily in EMEA, lowerhigher raw material costs of $484 million, higher costs in other tire-related businesses of $130$367 million, driven by lowerhigher third-party chemical sales in Americas, and lower start-up costsforeign currency translation of $36 million associated with our new plant in San Luis Potosi, Mexico. These decreases were partially offset by higher raw material costs of $185 million, primarily in Americas and EMEA, higher costs related to product mix of $76$119 million, primarily in EMEA and Asia Pacific, the year-over-year impactand higher transportation costs of $62 million, primarily in Americas and EMEA. These increases were partially offset by lower conversion costs of $320 million, primarily due to favorable overhead absorption as a result of higher global factory utilization and savings from rationalization plans, lower costs related to product mix of $295 million, primarily in Americas, a favorable indirect tax settlementsruling in Brazil of $42$69 million, of which $66 million ($43 million after-tax and minority) related to prior years, and $26 million of pandemic-related work in process inventory write-offs in 2020, primarily in Americas and EMEA.
CGS in 2021 included pension expense of $21 million compared to $16 million in 2020. CGS in 2021 also included a favorable adjustment of $20 million ($15 million after-tax and minority) due to a reduction in certain U.S. duty rates on various commercial tires from China imported into the U.S. during 2019. CGS in 2020 included accelerated depreciation of $105 million ($81 million after-tax and minority), primarily related to the permanent closure of our Gadsden, Alabama tire manufacturing facility ("Gadsden"). CGS in 2020 also included an unfavorable indirect tax settlement in Mexico of $6 million
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($5 million after-tax and minority). CGS in 2021 included incremental savings from rationalization plans of $63 million compared to $107 million in 2020.
Selling, Administrative and General Expense
SAG was $2,699 million in 2021, increasing $507 million, or 23.1%, from $2,192 million in 2020. SAG was 15.4% of sales in 2021 compared to 17.8% of sales in 2020. SAG increased primarily due to the addition of Cooper Tire's SAG of $239 million, higher wages and benefits of $132 million, including higher incentive compensation, and higher conversion costsadvertising expense of $36$22 million, both reflecting pandemic-related actions taken in 2020, and foreign currency translation of $43 million, primarily in EMEA and Asia Pacific. CGSThe remainder of the increase in 20192021 was driven by inflationary cost pressures. SAG in 2021 and 2020 included pension expense of $14$18 million compared to $15 millionfor each period. SAG in 2018. CGS in 20192021 and 20182020 also included incremental savings from rationalization plans of $20$9 million and $41$6 million, respectively.
Goodwill and asset write-offsOther Asset Impairments
Our annual impairment analysis for 2021, including the acquisition of $15Cooper Tire, indicated no impairment of goodwill or intangible assets with indefinite lives. In 2020, we recorded non-cash impairment charges of $182 million ($12 million after-tax and minority) and favorable indirect tax settlements in Brazil of $11 million ($7 million after-tax and minority) and in the U.S. of $6 million ($5 million after-tax and minority). CGS in 2018 included accelerated depreciation and asset write-offs of $4 million ($3 million after-tax and minority) and favorable indirect tax settlements in Brazil of $53 million, of which $51 million ($39178 million after-tax and minority) related to years prior to 2018,goodwill of our EMEA reporting unit and in the U.S. of $4$148 million ($3113 million after-tax and minority).
Rationalizations
We recorded net rationalization charges of $205$93 million ($16582 million after-tax and minority) in 2019.2021. Net rationalization charges include $115$38 million in EMEA,Americas, primarily related to the permanent closure of Gadsden, $29 million related to a plan to reduce SAG headcount in EMEA and $26 million related to the plan to modernize two of our manufacturing facilities in Germany,Germany.
We recorded net rationalization charges of $159 million ($127 million after-tax and $90minority) in 2020. Net rationalization charges include $94 million in Americas, primarily related to a plan to curtail productionthe permanent closure of tires for declining, less profitable segments of the tire market at our Gadsden, Alabama manufacturing facility.
Upon completion of the 2019new plans initiated in 2021, we estimate that annual segment operating income (primarily SAG) will benefit from an improvement in CGS ofimprove by approximately $140$12 million. The savings realized in 20192021 from rationalization plans totaled $37$72 million ($2063 million CGS and $17$9 million SAG).
For further information, refer to the Note to the Consolidated Financial Statements No. 3,4, Costs Associated with Rationalization Programs, in this Form 10-K.
Interest Expense
Interest expense was $340$387 million in 2019,2021, increasing $19$63 million from $321$324 million in 2018.2020. The increase was primarily due to higher average debt balances of $6,408 million in 2019 compared to $6,218 million in 2018 and a higher average interest rate of 5.31%5.33% in 20192021 compared to 5.16%4.99% in 2018.
Other (Income) Expense
Other (Income) Expense was $94 million and $119 million of expense in 2021 and 2020, respectively. The $25 million decrease was primarily driven by the gain, netdue to interest income of transaction costs, of $272$48 million ($207 million after-tax and minority) recognized on the TireHub transaction in 2018, a decrease in interest income on favorable indirect tax settlements in Brazil of $30 million, and charges of $25 million ($2544 million after-tax and minority) related to flooding at our Beaumont, Texas chemical facilitya favorable indirect tax ruling in 2019. These increases in expense were partially offset by an increase inBrazil, net gains on asset and other sales in 2021 of $15 million, $12 million ($128 million after-tax and minority), primarily related to the sale of land in Hanau, Germany, compared to a $2 million ($2 million after-tax and minority) loss on asset sales in 2020, and a favorable insurance settlement of $10 million ($8 million after-tax and minority) in expenses2021. These decreases were partially offset by charges of $50 million for transaction and other costs related to hurricanes Harvey and Irma in 2018, and a net gain on insurance recoveriesthe acquisition of $4 million ($3 million after-tax and minority) in 2019.
Non-service related pension and other postretirement benefits expense of $118$92 million in 20192021 includes pension settlement charges of $5$43 million ($432 million after-tax and minority). Non-service related pension and other postretirement benefits expense of $121$110 million in 20182020 includes net pension settlement and curtailment charges of $22$18 million ($1714 million after-tax and minority) and a one-time charge.
Other (Income) Expense in 2021 also includes an out of $9period adjustment of $7 million ($7 million after-tax and minority) of expense related to the adoptionforeign currency exchange in Americas. Other (Income) Expense in 2020 also includes a charge of the new accounting standards update which no longer allows non-service related pension and other postretirement benefits cost to be capitalized in inventory.
For further information, refer to the Note to the Consolidated Financial Statements No. 5,6, Other (Income) Expense, in this Form 10-K.
Income tax expensebenefit in 20192021 was $474$267 million on income before income taxes of $177$513 million. In 2019,2021, income tax benefit includes net discrete benefits totaling $409 million ($409 million after minority interest), including a reduction in our valuation allowances of $340 million for certain U.S. deferred tax assets for foreign tax credits and state tax loss carryforwards, a $39 million benefit to adjust our deferred tax assets in England for a second quarter enacted change in the tax rate, a $21 million benefit to reflect an increase in our estimated state tax rate used in calculating our U.S. net deferred tax assets as a result of a change in the overall mix of our earnings by state after including the impact of the acquisition of Cooper Tire, an $8 million benefit related to a favorable court ruling in Brazil, and a net benefit of $1 million for various other items.
Income tax expense in 2020 was $110 million on a loss before income taxes of $1,140 million. In 2020, income tax expense was unfavorably impacted by net discrete adjustmentstax expense totaling $386$305 million ($386305 million after minority interest). Discrete adjustments were due to non-cash charges, including the establishment of $334a $295 million related to an acceleration of royalty income in the U.S. from the sale of certain European royalty payments to Luxembourg and $150 million related to an increase in our valuation allowance on certain deferred tax losses in Luxembourg, which were partially offset byassets for foreign tax credits during the first quarter of 2020. Discrete tax expense also includes a non-cash tax benefitnet charge of $98$10 million, including a $15 million charge related to a reduction of our U.S. valuation allowance for foreignstate tax credits.
At both December 31, 2019, our valuation allowance on certain2021 and 2020, we had approximately $1.2 billion of our U.S. federal, state and local net deferred tax assets, was $13net of valuation allowances totaling $26 million in 2021, primarily related tofor state tax loss carryforwards with limited lives, and credit carryforwards, and$368 million in 2020, primarily for foreign tax credits with limited lives. The increase in our valuation allowance on our foreignU.S. net deferred tax assets as a result of the reduction in valuation allowances during 2021 was $969largely offset by the establishment of deferred tax liabilities related to the Cooper Tire acquisition. In the U.S., we have a cumulative loss for the three-year period ending December 31, 2021. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only include the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including recent favorable recovery trends in the tire industry and our tire volume as well as expected continued improvement. In addition, the Cooper Tire acquisition has generated significant incremental domestic earnings since the Closing Date and provides opportunities for cost and other operating synergies to further improve our U.S. profitability.
At December 31, 2021, our U.S. net deferred tax assets include approximately $339 million of foreign tax credits with limited lives, net of valuation allowances of $3 million. At December 31, 2018,2020, our valuation allowance on certain U.S. federal, state and localnet deferred tax assets was $113include $133 million of foreign tax credits with limited lives, net of valuation allowances of $328 million. Our earnings and our valuation allowance onforecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income provide us sufficient positive evidence that we will be able to utilize our foreign deferred tax assets was $204 million.
During the fourth quarter of 20192021, we completed an intercompany sale of certain intellectual property. As a result of this transaction, U.S. taxable income for 2021 includes approximately $1.5 billion of accelerated royalty income in the U.S. of $2.1 billion received from Luxembourg as payment for the purchase of the right to receive technology royalties from our European operations for a period of 12 years.income. External specialists assisted management with this transaction. The royalty sale transaction resulted in a U.S.federal tax charge of $334$315 million and a deferred tax asset and offsetting valuation allowance of $576 million in Luxembourg.
Tax loss carryforwards must be utilized prior to foreign tax credits and other tax assets for tax purposes. Considering the magnitude of $98 million.
We consideredconsider our current forecasts of future profitability in assessing our ability to realize our remaining netdeferred tax assets, including our foreign tax credits of $403 million. Thesecredits. As noted above, these forecasts include the impact of recent trends, including various macroeconomic factors such as raw material prices,the impact of the COVID-19 pandemic, on our profitability, as well as the impact of tax planning strategies. Macroeconomic factors, including raw material prices,the impact of the COVID-19 pandemic, possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future foreign source incomeearnings will not be sufficient to fully utilize theseour U.S. net deferred tax assets, including our foreign tax credits. However, we believe our forecasts of future profitability along with the three significant sources of foreign income as described in "Critical Accounting Policies"above provide us sufficient positive, objectively verifiable evidence
30
to conclude that it is more likely than not that, at December 31, 2021, our U.S. net deferred tax assets, including our foreign tax credits, net of remaining valuation allowances, will be fully utilized prior to their various expiration dates.
At both December 31, 2021 and 2020, we also had approximately $1.3 billion of $1,011 million. In 2018, income tax expense was unfavorably impacted byforeign net discrete adjustments of $65 million ($65 million after minority interest). Discrete adjustments were primarily due to charges totaling $135 million related to deferred tax assets, for foreign tax credits, including the establishmentand valuation allowances of a valuation allowance on foreign tax credits of $98 million, partially offset by a tax benefit of $88 million related to a worthless stock deduction created by permanently ceasing operations of our Venezuelan subsidiary during the fourth quarter of 2018. Income tax expense in 2018 also included net charges of $18 million for various other discrete tax adjustments, including those related to finalizing our accounting for certain provisional items related to the Tax Cuts$1.0 billion and Jobs Act that was enacted on December 22, 2017 (the "Tax Act").
For further information regarding income taxes and the realizability of our deferred tax assets, including our foreign tax credits, refer to "Critical Accounting Policies" and Note to the Consolidated Financial Statements No. 6,7, Income Taxes, in this Form 10-K.
Minority Shareholders’ Net Income
Minority shareholders’ net income was $14$16 million in 2019,2021, compared to $15$4 million in 2018.2020. The increase in 2021 was primarily related to minority shareholders' interests in EMEA, driven by the recovery from the COVID-19 pandemic, as well as the addition of Cooper Tire's minority shareholders' interest in Asia. Minority shareholders' net income in 20192021 includes $7$3 million ($73 million after-tax and minority) of expenseafter-tax) related to an indirect taxa settlement with a minority interest in Turkey.
Segment information reflects our SBUs,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, goodwill and other asset impairment charges and certain other items.
Total segment operating income in 2021 was $945$1,288 million, compared to total segment operating loss of $14 million in 2019, and $1,274 million in 2018.2020. Total segment operating margin (segment operating income (loss) divided by segment sales) in 20192021 was 6.4%,7.4% compared to 8.2%(0.1)% in 2018.
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 the Note to the Consolidated Financial Statements No. 8,9, Business Segments, for further information and for a reconciliation of total segment operating income to Income (Loss) before Income Taxes.
Americas
| Year Ended December 31, | |||||||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Tire Units | 70.4 | 70.9 | 70.9 | ||||||||
| Net Sales | $ | 7,922 | $ | 8,168 | $ | 8,212 | |||||
| Operating Income | 550 | 654 | 847 | ||||||||
| Operating Margin | 6.9 | % | 8.0 | % | 10.3 | % | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Tire Units |
|
| 85.9 |
|
|
| 56.7 |
|
|
| 70.4 |
|
Net Sales |
| $ | 10,051 |
|
| $ | 6,556 |
|
| $ | 7,922 |
|
Operating Income |
|
| 914 |
|
|
| 9 |
|
|
| 550 |
|
Operating Margin |
|
| 9.1 | % |
|
| 0.1 | % |
|
| 6.9 | % |
Americas unit sales in 2019 decreased 0.52021 increased 29.2 million units, or 0.7%51.3%, to 70.485.9 million units. Replacement tire volume increased 1.328.2 million units, or 2.5%63.4%, primarily due to the addition of Cooper Tire's units and an increase in our consumer business in the United States and Brazil, driven by growth in 17-inch and above rim size tires.continued recovery from the macroeconomic impacts of the COVID-19 pandemic. OE tire volume decreased 1.8increased 1.0 million units, or 10.6%7.7%, primarily due to an increase in our consumer business in Brazil and the United States,addition of Cooper Tire's units. Consumer OE tire volume continued to be negatively affected by impacts to vehicle production driven by lower vehicle production,global supply chain disruptions, including the impact resulting from a strike at a major OE customer, and our OE selectivity strategy.
Net sales in 20192021 were $7,922$10,051 million, decreasing $246increasing $3,495 million, or 3.0%53.3%, compared to $8,168$6,556 million in 2018.2020. The decreaseincrease in net sales was driven by a decreasethe addition of Cooper Tire’s net sales of $1,862 million, higher tire volume of $918 million, higher sales in other tire-related businesses of $160$388 million, primarily due to a decreasean increase in third-party sales of chemical products unfavorable foreign currency translationand higher retail, retread and aviation sales, and favorable price and product mix of $105$356 million, primarily related to the Argentine peso and the Brazilian real, and a decrease in volume of $41 million.driven by price increases. These decreasesincreases were partially offset by $34 million ($26 million after-tax and minority) for a favorable one-time legal settlement in 2020. We estimate that the severe winter storm in the U.S. negatively impacted Americas net sales in 2021 by approximately $35 million.
Operating income in 2021 was $914 million, increasing $905 million from $9 million in 2020. The increase in operating income was due to improvements in price and product mix of $58 million, driven by an increase in pricing.
32
2021 compared to a loss of $36 million in 2020. We estimate that the severe winter storm in the U.S. and the national strike in Colombia that occurred in the first half of 2021 negatively impacted Americas operating income in 2021 by approximately $42 million and $9 million ($9 million after-tax and minority), respectively.
Operating income in 20192021 excluded rationalization charges of $90$38 million, primarily related to the permanent closure of Gadsden, and a net gain on asset sales of $1 million. Operating income in 2020 excluded the TireHub non-cash impairment charge of $148 million, accelerated depreciation and asset write-offs of $13 million. Operating income in 2018 excluded the net gain recognized on the TireHub transaction of $272$103 million and rationalization charges of $3$94 million, and net gains on asset salesprimarily related to the permanent closure of $3 million.Gadsden.
Americas' results are highly dependent upon the United States, which accounted for 81%84% and 82% of Americas' net sales in both 20192021 and 2018.2020, respectively. Results of operations in the United States are expected to continue to have a significant impact on Americas' future performance.
Europe, Middle East and Africa
| Year Ended December 31, | |||||||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Tire Units | 55.1 | 57.8 | 57.1 | ||||||||
| Net Sales | $ | 4,708 | $ | 5,090 | $ | 4,928 | |||||
| Operating Income | 202 | 363 | 367 | ||||||||
| Operating Margin | 4.3 | % | 7.1 | % | 7.4 | % | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Tire Units |
|
| 52.7 |
|
|
| 44.5 |
|
|
| 55.1 |
|
Net Sales |
| $ | 5,243 |
|
| $ | 4,020 |
|
| $ | 4,708 |
|
Operating Income (Loss) |
|
| 239 |
|
|
| (72 | ) |
|
| 202 |
|
Operating Margin |
|
| 4.6 | % |
|
| (1.8 | )% |
|
| 4.3 | % |
Europe, Middle East and Africa unit sales in 2019 decreased 2.72021 increased 8.2 million units, or 4.6%18.4%, to 55.152.7 million units. Replacement tire volume decreased 1.4increased 7.7 million units, or 3.3%22.8%, primarily in our consumer business, driven byreflecting increased competitionindustry demand due to continued recovery from the macroeconomic impacts of the COVID-19 pandemic and decreased industry demand.the partial recovery of volume lost in 2020 as a result of our ongoing initiative to align distribution in Europe. OE tire volume decreased 1.3increased 0.5 million units, or 8.5%4.2%, primarily in our consumer business,reflecting share gains driven by lowernew consumer fitments, partially offset by the negative impact on vehicle production and our exit of declining, less profitable market segments.
Net sales in 2019 were $4,7082021 were $5,243 million, decreasing $382increasing $1,223 million, or 7.5%30.4%, comparedcompared to $5,090$4,020 million in 2018.2020. Net sales decreasedincreased primarily due to unfavorable foreign currency translation of $287 million, driven by the weakening of the euro, Turkish lira, South African rand and Polish zloty, and lowerhigher tire volume of $217 million. These decreases were partially offset by$571 million, improvements in price and product mix of $117$316 million, driven by our continued focus on 17-inch and above rim size consumer tires and price increases on commercial replacement tire sales.
Operating income in 2021 was $239 million, a change of $15$311 million, from an operating loss of $72 million in 2020. The increase in operating income was primarily due to inflation, higher research and development costs of $6 million, $5 million of start-up costs, primarily at our new plant in Luxembourg, and higher transportation costs of $5 million. These decreases in operating income were partially offset by improvements in price and product mix of $64 million. SAG and$289 million, which more than offset higher raw material costs of $148 million, higher tire volume of $153 million, lower conversion costs includedof $108 million, primarily due to favorable overhead absorption as a result of higher factory utilization, higher earnings in other tire-related businesses of $16 million, primarily due to increases in aviation, racing and retread sales, and $12 million of pandemic-related work in process inventory write-offs in 2020. These increases were partially offset by higher SAG of $72 million, primarily related to higher wages and benefits and higher advertising expenses, both reflecting pandemic-related actions taken in 2020 as well as inflation, higher transportation costs of $21 million, and higher plant industrialization costs of $15 million. Conversion costs and SAG include incremental savings from rationalization plans of $15$6 million and $6$3 million, respectively.
Operating income in 20192021 excluded net rationalization charges of $115$49 million, a net gainsgain on asset sales of $16$13 million, and accelerated depreciation and asset write-offs of $1 million. Operating loss in 2020 excluded a non-cash goodwill impairment charge of $182 million, net rationalization charges of $59 million, net losses on asset sales of $2 million, and accelerated depreciation and asset write-offs of $2 million. Operating income in 2018 excluded net rationalization charges of $36 million, accelerated depreciation and asset write-offs of $4 million, and net losses on asset sales of $2 million.
EMEA’s results are highly dependent upon Germany, which accounted for 21%15% and 33%18% of EMEA’s net sales in 20192021 and 2018,2020, respectively. The decline in sales reported in Germany is primarily related to a business reorganization that centralized our OE sales for EMEA in Luxembourg. Results of operations in Germany are expected to continue to have a significant impact on EMEA’s future performance.
| Year Ended December 31, | |||||||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Tire Units | 29.8 | 30.5 | 31.2 | ||||||||
| Net Sales | $ | 2,115 | $ | 2,217 | $ | 2,237 | |||||
| Operating Income | 193 | 257 | 342 | ||||||||
| Operating Margin | 9.1 | % | 11.6 | % | 15.3 | % | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Tire Units |
|
| 30.7 |
|
|
| 24.8 |
|
|
| 29.8 |
|
Net Sales |
| $ | 2,184 |
|
| $ | 1,745 |
|
| $ | 2,115 |
|
Operating Income |
|
| 135 |
|
|
| 49 |
|
|
| 193 |
|
Operating Margin |
|
| 6.2 | % |
|
| 2.8 | % |
|
| 9.1 | % |
Asia Pacific unit salessales in 2019 decreased 0.72021 increased 5.9 million units, or 2.3%24.0%, to 29.830.7 million units. Replacement tire volume increased 3.2 million units, or 19.7%. OE tire volume decreased 0.7increased 2.7 million units, or 5.5%32.8%. These increases were primarily due to continued recovery from the macroeconomic impacts of the COVID-19 pandemic and the addition of Cooper Tire’s units, partially offset by the impact on vehicle production of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors.
Net sales in 2021 were $2,184 million, increasing $439 million, or 25.2%, from $1,745 million in 2020. Net sales increased due to higher tire volume of $210 million, the addition of Cooper Tire’s net sales of $122 million, favorable foreign currency translation of $66 million, primarily related to a stronger Chinese yuan and Australian dollar, and favorable price and product mix of $43 million.
Operating income in our consumer business2021 was $135 million, increasing $86 million, or 175.5%, from $49 million in India2020. The increase in operating income was primarily due to favorable price and Chinaproduct mix of $81 million, which more than offset higher raw material costs of $78 million, higher tire volume of $52 million, lower conversion costs of $41 million, primarily due to favorable overhead absorption as a result of lower vehicle production. Replacement tire volume remained consistent.
Operating income in 2019 was $193 million, decreasing $64 million, or 24.9%, from $257 million in 2018. Operating income decreased due to higher conversion costs of $22 million, primarily due to the impact of lower tire production on overhead absorption, higher raw material costs of $20 million, lower volume of $14 million, and unfavorable price and product mix of $14 million.
Asia Pacific’s results are highly dependent upon China and Australia. China accounted for 26%29% and 27%25% of Asia Pacific's net sales in 20192021 and 2018,2020, respectively. Australia accounted for 24% and 27% of Asia Pacific’s net sales in both 20192021 and 2018.2020, respectively. Results of operations in China and Australia are expected to continue to have a significant impact on Asia Pacific's future performance.
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LIQUIDITY AND CAPITAL RESOURCES
Overview
Our primary sources of liquidity are cash generated from our operating and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements and our cash flows from financing activities are dependent upon our ability to access credit or other capital.
In 2021, we completed several financing actions to provide funding for the acquisition of Cooper Tire and to improve our debt maturity profile.
On April 6, 2021, we issued $550 million of 5.25% senior notes due April 2031 and $450 million of 5.625% senior notes due 2033. The net proceeds from these notes, together with cash and cash equivalents, were used to redeem our $1.0 billion 5.125% senior notes due 2023 on May 6, 2021 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest to the redemption date.
On May 18, 2021, we issued $850 million of 5% senior notes due 2029 and $600 million of 5.25% senior notes due July 2031. The net proceeds from these notes, together with cash and cash equivalents and borrowings under our first lien revolving credit facility, were used to fund the cash portion of the Merger Consideration and related transaction costs.
On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026, increasing the amount of the facility to $2.75 billion, and including Cooper Tire's accounts receivable and inventory in the borrowing base for the facility. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points.
Following the Cooper Tire acquisition and at December 31, 2021, $117 million aggregate principal amount of Cooper Tire's 7.625% senior notes due 2027 were outstanding. These notes also included a $19 million fair value step-up, which is being amortized against interest expense over the remaining life of the notes. Amortization since the Closing Date was approximately $1 million.
On September 28, 2021, we issued €400 million in aggregate principal amount of Goodyear Europe B.V. (“GEBV”) 2.75% senior notes due 2028. A portion of the net proceeds from these notes were used to redeem GEBV's €250 million 3.75% senior notes due 2023 on October 28, 2021.
On December 15, 2021, we repaid in full our $400 million second lien term loan facility due 2025.
At December 31, 2021, we had $1,088 million of Cash and Cash Equivalents, compared to $1,539 million at December 31, 2020. The decrease in cash and cash equivalents of $451 million was primarily due to payment of the $1,856 million cash component of the Merger Consideration, net of cash and restricted cash acquired, and capital expenditures of $981 million, partially offset by net borrowings of $1,406 million, which includes $1,450 million of new senior notes used to fund the Cooper Tire acquisition and repayment of our $400 million second lien term loan facility due 2025, and cash flows provided by operating activities of $1,062 million. Cash provided by operating activities reflects net income for the year of $780 million, which includes a non-cash tax benefit of $325 million related to the reduction of valuation allowances on certain U.S. deferred tax assets for foreign tax credits, non-cash charges for depreciation and amortization of $883 million, an inventory fair value step-up adjustment of $110 million related to the Cooper Tire acquisition and rationalization charges of $93 million, partially offset by cash used for working capital of $359 million and rationalization payments of $197 million.
At December 31, 2021 and 2020, we had $4,345 million and $3,881 million, respectively, of unused availability under our various credit agreements. The table below provides unused availability by our significant credit facilities as of December 31:
(In millions) |
| 2021 |
|
| 2020 |
| ||
First lien revolving credit facility |
| $ | 2,314 |
|
| $ | 1,535 |
|
European revolving credit facility |
|
| 908 |
|
|
| 982 |
|
Chinese credit facilities |
|
| 374 |
|
|
| 297 |
|
Mexican credit facility |
|
| 42 |
|
|
| 48 |
|
Other foreign and domestic debt |
|
| 147 |
|
|
| 380 |
|
Short term credit arrangements |
|
| 560 |
|
|
| 639 |
|
|
| $ | 4,345 |
|
| $ | 3,881 |
|
We expect our 2022 cash flow needs to include capital expenditures of $1.3 billion to $1.4 billion. We also expect interest expense to be $450 million to $475 million; rationalization payments to be approximately $100 million; income tax payments to be $150 million to $200 million, excluding one-time items; and contributions to our funded pension plans to be $25 million to $50 million. We expect working capital to be a use of cash for the full year of 2022 of approximately $300 million. We expect our cash flows from operating activities less capital expenditures to be breakeven in 2022.
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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 December 31, 2021, approximately $1,006 million of net assets, including approximately $179 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.
Cash Position
At December 31, 2021, significant concentrations of cash and cash equivalents held by our international subsidiaries included the following amounts:
We have deposited our cash and cash equivalents and entered into various credit agreements and derivative contracts with financial institutions that we considered to be substantial and creditworthy at the time of such transactions. We seek to control our exposure to these financial institutions by diversifying our deposits, credit agreements and derivative contracts across multiple financial institutions, by setting deposit and counterparty credit limits based on long term credit ratings and other indicators of credit risk such as credit default swap spreads, and by monitoring the financial strength of these financial institutions on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to financial institutions in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a financial institution. However, we cannot provide assurance that we will not experience losses or delays in accessing our deposits or lines of credit due to the nonperformance of a financial institution. Our inability to access our cash deposits or make draws on our lines of credit, or the inability of a counterparty to fulfill its contractual obligations to us, could have a material adverse effect on our liquidity, financial condition or results of operations in the period in which it occurs.
Operating Activities
Net cash provided by operating activities was $1,062 million in 2021, decreasing $53 million compared to net cash provided by operating activities of $1,115 million in 2020.
The decrease in net cash provided by operating activities was driven by (i) a net increase in cash used for working capital of $1,230 million, (ii) an increase in cash income tax payments of $156 million, primarily as a result of higher earnings in 2021 and the receipt of certain tax refunds in 2020, (iii) cash paid for transaction and other costs related to the Cooper Tire acquisition of $42 million, and (iv) higher pension contributions and direct payments of $35 million. These uses of cash were partially offset by higher segment operating income of $1,302 million, which includes a non-cash charge of $110 million for an inventory fair value step-up adjustment related to the Cooper Tire acquisition.
The net increase in cash used for working capital reflects increases in cash used for Inventory of $1,695 million and Accounts Receivable of $432 million, partially offset by an increase in cash provided by Accounts Payable - Trade of $897 million. These changes were driven by our continued recovery from the impacts of the COVID-19 pandemic, which include higher sales volume and an increase in finished goods inventory as we continue to restock in order to meet anticipated near-term demand, as well as the impact of current year inflationary cost pressures on our manufacturing operations and our pricing.
36
Investing Activities
Net cash used for investing activities was $2,793 million in 2021, compared to $667 million in 2020. The increase in cash used for investing activities primarily relates to the $1,856 million cash component of the Merger Consideration, net of cash and restricted cash acquired. Capital expenditures were $981 million in 2021, increasing $334 million, compared to $647 million in 2020, primarily due to prior year actions to preserve cash in response to the COVID-19 pandemic and the addition of Cooper Tire's capital expenditures. Beyond expenditures required to sustain our facilities, capital expenditures in 2021 and 2020 primarily related to investments in high value-added capacity and capability around the world.
Financing Activities
Net cash provided by financing activities was $1,309 million in 2021, compared to net cash provided by financing activities of $203 million in 2020. The $1,106 million year-over-year change reflects an increase in net borrowings of $1,156 million, primarily used to fund a portion of the Cooper Tire acquisition. Debt related costs and other transactions increased $93 million during 2021 due to the various financing actions described above. No cash dividends were paid in 2021, compared to $37 million of dividend payments in 2020, as a result of the suspension of the quarterly dividend on our common stock on April 16, 2020.
Credit Sources
In aggregate, we had total credit arrangements of $11,628 million available at December 31, 2021, of which $4,345 million were unused, compared to $9,707 million available at December 31, 2020, of which $3,881 million were unused. At December 31, 2021, we had long term credit arrangements totaling $10,624 million, of which $3,785 million were unused, compared to $8,632 million and $3,242 million, respectively, at December 31, 2020. At December 31, 2021, we had short term committed and uncommitted credit arrangements totaling $1,004 million, of which $560 million were unused, compared to $1,075 million and $639 million, respectively, at December 31, 2020. The continued availability of the short term uncommitted arrangements is at the discretion of the relevant lender and may be terminated at any time.
Outstanding Notes
At December 31, 2021, we had $5,591 million of outstanding notes, compared to $3,860 million at December 31, 2020. The increase from December 31, 2020 was primarily due to the issuance of $1.45 billion of senior notes to fund a portion of the acquisition of Cooper Tire, the issuance of €400 million of GEBV senior notes, an increase of €150 million over the prior €250 million of senior notes, and $135 million of Cooper Tire senior notes.
$2.75 Billion Amended and Restated First Lien Revolving Credit Facility due 2026
On June 7, 2021, we amended and restated our $2.0 billion first lien revolving credit facility. Changes to the facility include extending the maturity to June 8, 2026, increasing the amount of the facility to $2.75 billion, and including Cooper Tire's accounts receivable and inventory in the borrowing base of the facility. The interest rate for loans under the facility decreased by 50 basis points to LIBOR plus 125 basis points, based on our current liquidity described below.
Our amended and restated first lien revolving credit facility is available in the form of loans or letters of credit. Up to $800 million in letters of credit and $50 million of swingline loans are available for issuance under the facility. 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, after adjusting for customary factors that are subject to modification from time to time by the administrative agent or the majority lenders at their discretion (not to be exercised unreasonably), (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. Modifications are based on the results of periodic collateral and borrowing base evaluations and appraisals. 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. In addition, if the amount of outstanding borrowings and letters of credit under the facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess. As of December 31, 2021, our borrowing base, and therefore our availability, under this facility was $417 million below the facility's stated amount of $2.75 billion.
At December 31, 2021, we had no borrowings and $19 million of letters of credit issued under the revolving credit facility. At December 31, 2020, we had no borrowings and $11 million of letters of credit issued under the revolving credit facility.
At December 31, 2021, we had $257 million in letters of credit issued under bilateral credit agreements.
Amended and Restated Second Lien Term Loan Facility due 2025
On December 15, 2021, we repaid in full our $400 million second lien term loan facility due 2025.
37
€800 Million Amended and Restated Senior Secured European Revolving Credit Facility due 2024
Our amended and restated European revolving credit facility consists of (i) a €180 million German tranche that is available only to Goodyear Germany GmbH and (ii) a €620 million all-borrower tranche that is available to 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. Amounts drawn under this facility will bear interest at LIBOR 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. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to €200 million.
At December 31, 2021 and 2020, there were no borrowings and no letters of credit outstanding under the European revolving credit facility.
Each of our first lien revolving credit facility and our European revolving credit facility have customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2020 under the first lien facility and December 31, 2018 under the European facility.
Accounts Receivable Securitization Facilities (On-Balance Sheet)
On October 11, 2021, GEBV and certain other of our European subsidiaries amended and restated the definitive agreements for our pan-European accounts receivable securitization facility, extending the term through 2027. The terms of the facility provide the flexibility to designate annually the maximum amount of funding available under the facility in an amount of not less than €30 million and not more than €450 million. For the period from October 16, 2020 through October 18, 2021, the designated maximum amount of the facility was €280 million. For the period from October 19, 2021 through October 19, 2022, the designated maximum amount of the facility was increased to €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 19, 2022.
At December 31, 2021, the amounts available and utilized under this program totaled $279 million (€246 million). At December 31, 2020, the amounts available and utilized under this program totaled $291 million (€237 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 December 31, 2021, the gross amount of receivables sold was $605 million, compared to $451 million at December 31, 2020. The increase from December 31, 2020 is primarily due to the increase in our accounts receivable base as a result of the Cooper Tire acquisition and higher sales in our legacy business.
Supplier Financing
We have entered into payment processing agreements with several financial institutions. Under these agreements, the financial institutions act as our paying agents with respect to accounts payable due to our suppliers. These agreements also allow our suppliers to sell their receivables to the financial institutions at the sole discretion of both the supplier and the financial institution on terms that are negotiated between them. We are not always notified when our suppliers sell receivables under these programs. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our suppliers' decisions to sell their receivables under the program. Agreements for such supplier financing programs totaled up to $630 million and $500 million at December 31, 2021 and 2020, respectively. The increase from December 31, 2020 is primarily due to the overall increase in our cost base as a result of the Cooper Tire acquisition.
Further Information
On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR (“IBA”), confirmed its previously announced plans to cease publication of USD LIBOR on December 31, 2021 for only the one week and two month USD
38
LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. In addition, the IBA ceased publication of all tenors of euro and Swiss franc LIBOR and most tenors of Japanese yen and British pound LIBOR on December 31, 2021. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee that has been convened by the Federal Reserve Board and the Federal Reserve Bank of New York to encourage market participants’ use of the Secured Overnight Financing Rate, known as SOFR. Additionally, the International Swaps and Derivatives Association, Inc. published amendments to its definition book to incorporate new benchmark fallbacks for derivative contracts that reference certain interbank offered rates, including LIBOR. We cannot currently predict the effect of the discontinuation of, or other changes to, LIBOR or any establishment of alternative reference rates in the United States, the United Kingdom, the European Union or elsewhere on the global capital markets. The uncertainty regarding the future of LIBOR, as well as the transition from LIBOR to any alternative reference rate or rates, could have adverse impacts on floating rate obligations, loans, deposits, derivatives and other financial instruments that currently use LIBOR as a benchmark rate. We have identified and evaluated our financing obligations and other contracts that refer to LIBOR and expect to be able to transition those obligations and contracts to an alternative reference rate upon the discontinuation of LIBOR. Our first lien revolving credit facility and our European revolving credit facility, which constitute the most significant of our LIBOR-based debt obligations, contain “fallback” provisions that address the discontinuation of LIBOR and facilitate the adoption of an alternate rate of interest. We have not issued any long term floating rate notes. Our first lien revolving credit facility also contains express provisions for the use, at our option, of an alternative base rate (the higher of (a) the prime rate, (b) the federal funds effective rate or the overnight bank funding rate plus 50 basis points or (c) LIBOR plus 100 basis points). We do not believe that the discontinuation of LIBOR, or its replacement with an alternative reference rate or rates, will have a material impact on our results of operations, financial position or liquidity.
For a further description of the terms of our outstanding notes, first lien revolving credit facility, 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.
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 only become subject to this financial covenant when certain events occur. This financial covenant and the related events are as follows:
In addition, our European revolving credit facility contains non-financial covenants similar to the non-financial covenants in our first lien revolving credit facility that are described above and a financial covenant applicable only to GEBV and its subsidiaries. This financial covenant provides that we are not permitted to allow GEBV’s ratio of Consolidated Net GEBV Indebtedness to Consolidated GEBV EBITDA for a period of four consecutive fiscal quarters to be greater than 3.0 to 1.0 at the end of any fiscal quarter. Consolidated Net GEBV Indebtedness is determined net of the sum of cash and cash equivalents in excess of $100 million held by GEBV and its subsidiaries, cash and cash equivalents in excess of $150 million held by the Parent Company and its U.S. subsidiaries, and availability under our first lien revolving credit facility if the ratio of EBITDA to Consolidated Interest Expense described above is not applicable and the conditions to borrowing under the first lien revolving credit facility are met. Consolidated Net GEBV Indebtedness also excludes loans from other consolidated Goodyear entities. This financial covenant is also included in our pan-European accounts receivable securitization facility. At December 31, 2021, 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
39
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.
As of December 31, 2021, 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 our previous financing activities, 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 assets as security for additional secured indebtedness. In addition, no assurance can be given as to our ability to raise additional unsecured debt.
Dividends and Common Stock Repurchase Program
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.
During 2020 and 2019, we paid cash dividends of $37 million and $148 million, respectively, on our common stock. This excludes dividends earned on stock based compensation plans of $1 million and $2 million for the years 2020 and 2019, respectively. On April 16, 2020, we announced that we have suspended the quarterly dividend on our common stock.
From time to time, we repurchase shares of our common stock under programs approved by the Board of Directors. During 2021, 2020 and 2019, we did not repurchase any shares of our common stock under such programs.
The restrictions imposed by our credit facilities and indentures are not expected to affect our ability to pay dividends or repurchase our capital stock in the future.
Asset Dispositions
The restrictions on asset sales imposed by our material indebtedness have not affected our ability to divest non-core businesses, and those divestitures have not affected our ability to comply with those restrictions.
Supplemental Guarantor Financial Information
Certain of our subsidiaries, which are listed on Exhibit 22.1 to this Annual Report on Form 10-K and are generally holding or operating companies, have guaranteed our obligations under the $800 million outstanding principal amount of 9.5% senior notes due 2025, the $900 million outstanding principal amount of 5% senior notes due 2026, the $700 million outstanding principal amount of 4.875% senior notes due 2027, the $850 million outstanding principal amount of 5% senior notes due 2029, the $550 million outstanding principal amount of 5.25% senior notes due April 2031, the $600 million outstanding principal amount of 5.25% senior notes due July 2031 and the $450 million outstanding principal amount of 5.625% senior notes due 2033 (collectively, the “Notes”).
The Notes have been issued by The Goodyear Tire & Rubber Company (the “Parent Company”) and are its senior unsecured obligations. The Notes rank equally in right of payment with all of our existing and future senior unsecured obligations and senior to any of our future subordinated indebtedness. The Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the assets securing that indebtedness. The Notes are fully and unconditionally guaranteed on a joint and several basis by each of our wholly-owned U.S. and Canadian subsidiaries that also guarantee our obligations under 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
40
subordinated to existing and future secured indebtedness of the Subsidiary Guarantors to the extent of the assets securing that indebtedness.
The Notes are structurally subordinated to all of the existing and future debt and other liabilities, including trade payables, of our subsidiaries that do not guarantee the Notes (the “Non-Guarantor Subsidiaries”). The Non-Guarantor Subsidiaries will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make funds available to pay those amounts. Certain Non-Guarantor Subsidiaries are limited in their ability to remit funds to us by means of dividends, advances or loans due to required foreign government and/or currency exchange board approvals or limitations in credit agreements or other debt instruments of those subsidiaries.
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
41
to other creditors or conferred an unfair advantage upon the holder of Notes and (3) equitable subordination is not inconsistent with the provisions of the relevant solvency statute.
If a court canceled a Guarantee, the holders of Notes would no longer have a claim against that Subsidiary Guarantor or its assets.
Each Guarantee is limited, by its terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Guarantee, as it relates to that Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.
Each Subsidiary Guarantor is a consolidated subsidiary of the Parent Company at the date of the 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. On July 2, 2021, Cooper Tire and certain of its subsidiaries were added as Subsidiary Guarantors.
|
| Summarized Balance Sheet |
| |
(In millions) |
| December 31, |
| |
Total Current Assets(1) |
| $ | 5,161 |
|
Total Non-Current Assets |
|
| 8,406 |
|
|
|
|
| |
Total Current Liabilities |
| $ | 2,932 |
|
Total Non-Current Liabilities |
|
| 8,967 |
|
|
| Summarized Statement of Operations |
| |
(In millions) |
| Year Ended |
| |
Net Sales |
| $ | 9,549 |
|
Cost of Goods Sold |
|
| 7,623 |
|
Selling, Administrative and General Expense |
|
| 1,457 |
|
Rationalizations |
|
| 37 |
|
Interest Expense |
|
| 322 |
|
Other (Income) Expense |
|
| (93 | ) |
Income before Income Taxes(2) |
| $ | 203 |
|
|
|
|
| |
Net Income |
| $ | 542 |
|
Goodyear Net Income |
| $ | 542 |
|
42
COMMITMENTS AND CONTINGENT LIABILITIES
Contractual Obligations
The following table presents our contractual obligations and commitments to make future payments as of December 31, 2021:
(In millions) |
| Total |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Beyond |
| |||||||
Debt Obligations(1) |
| $ | 7,176 |
|
| $ | 730 |
|
| $ | 232 |
|
| $ | 329 |
|
| $ | 823 |
|
| $ | 903 |
|
| $ | 4,159 |
|
Finance Lease Obligations(2) |
|
| 255 |
|
|
| 17 |
|
|
| 4 |
|
|
| 3 |
|
|
| 3 |
|
|
| 2 |
|
|
| 226 |
|
Interest Payments(3) |
|
| 2,697 |
|
|
| 386 |
|
|
| 357 |
|
|
| 352 |
|
|
| 298 |
|
|
| 237 |
|
|
| 1,067 |
|
Operating Lease Obligations(4) |
|
| 1,313 |
|
|
| 255 |
|
|
| 212 |
|
|
| 171 |
|
|
| 137 |
|
|
| 110 |
|
|
| 428 |
|
Pension Benefits(5) |
|
| 345 |
|
|
| 70 |
|
|
| 65 |
|
|
| 65 |
|
|
| 65 |
|
|
| 80 |
|
| NA |
| |
Other Postretirement Benefits(6) |
|
| 248 |
|
|
| 26 |
|
|
| 26 |
|
|
| 25 |
|
|
| 25 |
|
|
| 25 |
|
|
| 121 |
|
Workers’ Compensation(7) |
|
| 248 |
|
|
| 38 |
|
|
| 21 |
|
|
| 16 |
|
|
| 13 |
|
|
| 10 |
|
|
| 150 |
|
Binding Commitments(8) |
|
| 2,836 |
|
|
| 1,887 |
|
|
| 473 |
|
|
| 180 |
|
|
| 132 |
|
|
| 118 |
|
|
| 46 |
|
Uncertain Income Tax Positions(9) |
|
| 17 |
|
|
| 4 |
|
|
| 8 |
|
|
| 1 |
|
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| $ | 15,135 |
|
| $ | 3,413 |
|
| $ | 1,398 |
|
| $ | 1,142 |
|
| $ | 1,500 |
|
| $ | 1,485 |
|
| $ | 6,197 |
|
We made significant contributions to fully fund our U.S. pension plans in 2013 and 2014. We have no minimum funding requirements for our funded U.S. pension plans under current ERISA law or the provisions of our USW collective bargaining agreement, including a provision which requires us to maintain an annual ERISA funded status for the Goodyear hourly U.S. pension plan of at least 97%.
Future U.S. pension contributions will be affected by our ability to offset changes in future interest rates with returns from our asset portfolios and any changes to ERISA law. For further information on the U.S. pension investment strategy, refer to Note to the Consolidated Financial Statements No. 18, Pension, Other Postretirement Benefits and Savings Plans.
Future non-U.S. contributions are affected by factors such as:
43
Additional other long term liabilities include items such as general and product liabilities, environmental liabilities and miscellaneous other long term liabilities. These other liabilities are not contractual obligations by nature. We cannot, with any degree of reliability, determine the years in which these liabilities might ultimately be settled. Accordingly, these other long term liabilities are not included in the above table.
In addition, pursuant to certain long term agreements, we will purchase varying amounts of certain raw materials and finished goods at agreed upon base prices that may be subject to periodic adjustments for changes in raw material costs and market price adjustments, or in quantities that may be subject to periodic adjustments for changes in our or our suppliers' production levels. These contingent contractual obligations, the amounts of which cannot be estimated, are not included in the table above.
We do not engage in the trading of commodity contracts or any related derivative contracts. We generally purchase raw materials and energy through short term, intermediate and long term supply contracts at fixed prices or at formula prices related to market prices or negotiated prices. We may, however, from time to time, enter into contracts to hedge our energy costs.
At December 31, 2021, we had an agreement to provide a revolving loan commitment to TireHub of up to $100 million. As of December 31, 2021, no funds were drawn on this commitment.
Off-Balance Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has:
We have entered into certain arrangements under which we have provided guarantees that are off-balance sheet arrangements. Those guarantees totaled $34 million at December 31, 2021. For further information about our guarantees, refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities.
44
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. On an ongoing basis, management reviews its estimates, based on currently available information. Changes in facts and circumstances may alter such estimates and affect our results of operations and financial position in future periods. Our critical accounting policies relate to:
Acquisitions.We allocate the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess value of the purchase price for an acquired business over the estimated fair value of the assets acquired and liabilities assumed is recognized as goodwill. The valuation of the acquired assets and liabilities will impact the determination of future operating results. We use a variety of information sources to determine the fair value of acquired assets and liabilities including: third-party appraisers for the values and lives of property, identifiable intangibles and inventories; and actuaries and other third-party specialists for defined benefit pension plans, workers' compensation and general and product liabilities. Goodwill is assigned to reporting units as of the date of the related acquisition. If goodwill is assigned to more than one reporting unit, we utilize a method that is consistent with the manner in which the amount of goodwill in a business combination is determined. Transaction costs related to the acquisition of a business are expensed as incurred.
We estimate the fair value of acquired customer relationships using the multi-period excess earnings method. Fair value is estimated as the present value of the benefits anticipated from ownership of the asset, in excess of the returns required on the investment in contributory assets which are necessary to realize those benefits. The intangible asset’s operating margins are determined as the residual earnings after quantifying operating margins from contributory assets. Assumptions used in these calculations are considered from a market participant perspective and include revenue growth rates, operating margins, contributory asset charges, customer attrition rates and discount rates.
We estimate the fair value of trade names (definite and indefinite) using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the assets. Assumed royalty rates are applied to projected revenue for the remaining useful lives of the assets to estimate the royalty savings. Assumptions used in the determination of the fair value of a trade name include revenue growth rates, including a terminal growth rate, the royalty rate and the discount rate.
While we use our best estimates and assumptions, fair value estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments required after the measurement period are recorded in the consolidated statement of operations.
Future changes in the judgments, assumptions and estimates that are used in our acquisition valuations and intangible asset and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.
General and Product Liability and Other Litigation. We have recorded liabilities totaling $293$390 million, including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at December 31, 2019.2021. General and product liability and other litigation liabilities are recorded based on management’s assessment that a loss arising from these matters is probable. If the loss can be reasonably estimated, we record the amount of the estimated loss. If the loss is estimated within a range and no point within the range is more probable than another, we record the minimum amount in the range. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Loss ranges are based upon the specific facts of each claim or class of claims and are determined after review by counsel. Court rulings on our cases or similar cases may impact our assessment of the probability and our estimate of the loss, which may have an impact on our reported results of operations, financial position and liquidity. We record receivables for insurance recoveries related to our litigation claims when it is probable that we will receive reimbursement from the insurer. Specifically, we are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to asbestos in certain products previously manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in federal and state courts.
45
We periodically, and at least annually, update, using actuarial analyses, 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. In determining the estimate of our asbestos liability, we evaluated claims over the next ten-year period. Due to the difficulties in making these estimates, analysis based on new data and/or changed circumstances arising in the future may result in an increase in the recorded obligation, and that increase may be significant. We had recorded gross liabilities for both asserted and unasserted asbestos claims, inclusive of defense costs, totaling $153$131 million at December 31, 2019.
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. 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. This determination is based on consultation with our outside legal counsel and takes into consideration agreements with certain of our insurance carriers, the financial viability and legal obligations of our insurance carriers, and other relevant factors.
As of December 31, 2019,2021, we recorded a receivable related to asbestos claims of $95$77 million, and we expect that approximately 60% of asbestos claim related losses would be recoverable through insurance through the period covered by the estimated liability. Of this amount, $13$12 million was included in Current Assets as part of Accounts Receivable at December 31, 2019.2021. The recorded receivable consists of an amount we expect to collect under coverage-in-place agreements with certain primary and excess insurance carriers as well as an amount we believe is probable of recovery from certain of our other excess insurance carriers. Although we believe these amounts are collectible under primary and certain excess policies today, future disputes with insurers could result in significant charges to operations.
Workers’ Compensation. We hadhave recorded liabilities, on a discounted basis, of $198$194 million for anticipated costs related to U.S. workers’ compensation claims at December 31, 2019.2021. The costs include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on our assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and current cost trends. The amount of our ultimate liability in respect of these matters may differ from these estimates. We periodically, and at least annually, update our loss development factors based on actuarial analyses. The liability is discounted using the risk-free rate of return.
For further information on general and product liability and other litigation, and workers’ compensation, refer to Note to the Consolidated Financial Statements No. 19,20, Commitments and Contingent Liabilities, in this Form 10-K.
Recoverability of Goodwill.Goodwill and Intangible Assets. Goodwill isand indefinite-lived intangible assets are tested for impairment annually or more frequently if an indicator of impairment is present. Intangible assets subject to amortization are tested only if a triggering event would require evaluation. Goodwill and Intangible Assets totaled $565$1,004 million and $1,039 million, respectively, at December 31, 2019.2021.
We test goodwill and indefinite-lived intangible assets for impairment on at least an annual basis, 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 a reporting unit or intangible asset to its carrying amount, including goodwill.amount. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit or intangible asset unless the entity determines that it is more likely than not (defined as a likelihood of more than 50%) that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit or intangible asset is less than its carrying amount, then an impairment charge isloss will be recorded for thatthe difference notbetween the carrying value and the fair value.
At October 31, 2021, after considering changes to exceed the total goodwill allocated to that reporting unit. Our policy is to perform a quantitative assessment at least once every five years.
Deferred Tax Asset Valuation Allowances and Uncertain Income Tax Positions. At December 31, 2019,2021, our valuation allowanceallowances on certain of our U.S. federal, state and local net deferred tax assets was $13totaled $26 million primarily related to state tax loss and credit carryforwards, and our valuation allowanceallowances on our foreign net deferred tax assets was $969 million.totaled $1.0 billion. At December 31, 2018,2020, our valuation allowanceallowances on certain of our U.S. federal, state and local net deferred tax assets was $113totaled $368 million and our valuation allowanceallowances on our foreign net deferred tax assets was $204 million.totaled $1.1 billion.
We record a reduction to the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing future profitability andby year, including the impact of tax consequencesplanning strategies, relative to the expiration dates, if any, of events that have been recognized in either our financial statements or tax returns.
46
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
At both December 31, 2019,2021 and 2020, we had approximately $1.2 billion of U.S. federal, state and local net deferred tax assets, net of valuation allowances totaling $26 million in 2021, primarily for state tax loss carryforwards with limited lives, and $368 million in 2020, primarily for foreign tax credits with limited lives. The increase in our U.S. net deferred tax assets as a result of the reduction in valuation allowances during 2021 was largely offset by the establishment of deferred tax liabilities related to the Cooper Tire acquisition. In the U.S., we have a cumulative loss for the three-year period ending December 31, 2021. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only include the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including recent favorable recovery trends in the tire industry and our tire volume as well as expected continued improvement. In addition, the Cooper Tire acquisition has generated significant incremental domestic earnings since the Closing Date and provides opportunities for cost and other operating synergies to further improve our U.S. profitability.
At December 31, 2021, our U.S. net deferred tax assets include $403approximately $339 million of foreign tax credits with limited lives, net of a valuation allowanceallowances of $3 million, as compared to $637 million, net of a valuation allowance of $103 million, atmillion. At December 31, 2018. If not utilized, these2020, our U.S. net deferred tax assets include $133 million of foreign tax credits will expire from 2022 to 2028. These credits were generated primarily from the receiptwith limited lives, net of foreign dividends.valuation allowances of $328 million. Our earnings and forecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income provide us sufficient positive evidence that we will be able to utilize theseour foreign tax credits despite the negative evidence of their limited carryforward periods. Thosethat expire through 2030. Our sources of foreign income are (1) 100% of our domestic profitability can be re-characterized as foreign source income under current U.S. tax law to the extent domestic losses have offset foreign source income in prior years, (2) annual net foreign source income, exclusive of dividends, primarily from royalties, and (3) tax planning strategies, including capitalizing research and development costs, accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, and reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, all of which would increase our domestic profitability.
During the fourth quarter of 2021, we completed an intercompany sale of certain intellectual property. As a result of this transaction, U.S. taxable income for 2021 includes approximately $1.5 billion of accelerated income. External specialists assisted management with this transaction. The federal tax charge of $315 million related to this accelerated income was fully offset by the utilization of existing deferred tax assets, including $205 million related to tax loss carryforwards, which were primarily generated in 2020 as a result of a significant tax loss in the U.S. driven by the macroeconomic impacts of the COVID-19 pandemic, and $110 million of foreign tax credits.
Tax loss carryforwards must be utilized prior to foreign tax credits and other tax assets for tax purposes. Considering the magnitude of tax loss carryforwards that were utilized by this transaction, together with our earnings and other sources of income described above, we concluded that it is more likely than not that we will be able to utilize, prior to their expiration, certain U.S. tax assets. Accordingly, during the fourth quarter of 2021, we reduced U.S. valuation allowances by $325 million related to foreign tax credits and $15 million related to state tax loss carryforwards.
We consideredconsider our current forecasts of future profitability in assessing our ability to realize our remaining netdeferred tax assets, including our foreign tax credits. TheseAs noted above, these forecasts include the impact of recent trends, including various macroeconomic factors such as raw material prices,the impact of the COVID-19 pandemic, on our profitability, as well as the impact of tax planning strategies. Macroeconomic factors, including raw material prices,the impact of the COVID-19 pandemic, possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future foreign source incomeearnings will not be sufficient to fully utilize theseour U.S. net deferred tax assets, including our foreign tax credits. However, we believe our forecasts of future profitability along with the three significant sources of foreign income described above provide us sufficient positive, objectively verifiable evidence to conclude that it is more likely than not that, at December 31, 2021, our U.S. net deferred tax assets, including our foreign tax credits, net of remaining valuation allowances, will be fully utilized priorutilized.
At both December 31, 2021 and 2020, we also had approximately $1.3 billion of foreign net deferred tax assets, and valuation allowances of $1.0 billion and $1.1 billion, respectively. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to their various expiration dates.
47
deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $885 million on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances having a significant impact on our financial position or results of operations will exist within the next twelve months.
We recognize the effects of changes in tax rates and laws on deferred tax balances in the period in which legislation is enacted. We remeasure existing deferred tax assets and liabilities considering the tax rates at which they will be realized. We also consider the effects of enacted tax laws in our analysis of the need for valuation allowances.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including those for transfer pricing. 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, resulting in an increase in our effective tax rate in the period of resolution. To reduce our risk of an unfavorable transfer price settlement, the Company applies consistent transfer pricing policies and practices globally, supports pricing with economic studies and seeks advance pricing agreements and joint audits to the extent possible. 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. We report interest and penalties related to uncertain income tax positions as income tax expense.
For additional information regarding uncertain income tax positions, tax planning and valuation allowances, refer to Note to the Consolidated Financial Statements No. 6,7, Income Taxes, in this Form 10-K.
Pensions and Other Postretirement Benefits. We have recorded liabilities for pension and other postretirement benefits of $684$270 million and $241$406 million, respectively, at December 31, 2019.2021. Our recorded liabilities and net periodic costs for pensions and other postretirement benefits are based on a number of assumptions, including:
Certain of these assumptions are determined with the assistance of independent actuaries. Assumptions about life expectancies, retirement rates, future compensation levels and future health care costs are based on past experience and anticipated future trends. The discount rate for our U.S. plans is based on a yield curve derived from a portfolio of corporate bonds from issuers rated AA or higher by established rating agencies as of December 31 and is reviewed annually. Our expected benefit payment cash flows are discounted based on spot rates developed from the yield curve. The mortality assumption for our U.S. plans is based on actual historical experience or published actuarial tables, an assumed long term rate of future improvement based on published actuarial tables, and current government regulations related to lump sum payment factors. The long term rate of return on U.S. plan assets is based on estimates of future long term rates of return similar to the target allocation of substantially all fixed income securities. Actual U.S. pension fund asset allocations are reviewed on a monthly basis and the pension fund is rebalanced to target ranges on an as-needed basis. These assumptions are reviewed regularly and revised when appropriate. Changes in one or more of them may affect the amount of our recorded liabilities and net periodic costs for these benefits. Other assumptions involving demographic factors such as retirement age and turnover are evaluated periodically and are updated to reflect our experience and expectations for the future. If actual experience differs from expectations, our financial position, results of operations and liquidity in future periods may be affected.
48
The weighted average discount rate used in estimating the total liability for our U.S. pension and other postretirement benefit plans was 3.22%2.82% and 3.14%2.87%, respectively, at December 31, 2019,2021, compared to 4.24%2.42% and 4.16%2.34%, respectively, at December 31, 2018.2020. The decreaseincrease in the discount rate at December 31, 20192021 was due primarily to lowerhigher yields on highly rated corporate bonds. Interest cost included in our U.S. net periodic pension cost was $94 million in 2021, compared to $126 million in 2020 and $173 million in 2019, compared to $157 million in 2018 and $160 million in 2017.2019. Interest cost included in our worldwide net periodic other postretirement benefits cost was $9 million in 2021, compared to $8 million in 2020 and $11 million in 2019, compared to $12 million in 2018 and $13 million in 2017.
The following table presents the sensitivity of our U.S. projected pension benefit obligation and accumulated other postretirement benefits obligation and annual expense to the indicated increase/decrease in key assumptions:
| + / − Change at December 31, 2019 | |||||||||
| (Dollars in millions) | Change | PBO/ABO | Annual Expense | ||||||
| Pensions: | |||||||||
| Assumption: | |||||||||
| Discount rate | +/- 0.5% | $ | 267 | $ | 4 | ||||
| Other Postretirement Benefits: | |||||||||
| Assumption: | |||||||||
| Discount rate | +/- 0.5% | $ | 4 | $ | — | ||||
| Health care cost trends — total cost | +/- 1.0% | 1 | — | ||||||
|
|
|
| + / − Change at December 31, 2021 |
| |||||
(Dollars in millions) |
| Change |
| PBO/ABO |
|
| Annual Expense |
| ||
Assumption: |
|
|
|
|
|
|
|
| ||
Pensions |
| +/- 0.5% |
| $ | 309 |
|
| $ | 4 |
|
Other Postretirement Benefits |
| +/- 0.5% |
|
| 15 |
|
|
| 1 |
|
Changes in general interest rates and corporate (AA or better) credit spreads impact our discount rate and thereby our U.S. pension benefit obligation. Our U.S. pension plans are invested in a portfolio of substantially all fixed income securities designed to offset the impact of future discount rate movements on liabilities for these plans. If corporate (AA or better) interest rates increase or decrease in parallel (i.e., across all maturities), the investment portfolio described above is designed to mitigate a substantial portion of the expected change in our U.S. pension benefit obligation. For example, if corporate (AA or better) interest rates increased or decreased by 0.5%, the investment portfolio described above would be expected to mitigate more thanapproximately 85% of the expected change in our U.S. pension benefit obligation.
At December 31, 2019,2021, our net actuarial loss included in Accumulated Other Comprehensive Loss ("AOCL") related to global pension plans was $3,162$2,625 million, $2,380$2,160 million of which related to our U.S. pension plans. The net actuarial loss included in AOCL related to our U.S. pension plans is a result ofprimarily due to declines in U.S. discount rates and plan asset losses that occurred prior to 2015, plus the impact of prior increases in estimated life expectancies. For purposes of determining our 20192021 U.S. pension total
The actual rate of return on our U.S. pension fund was 15.90%1.80%, (1.90%)13.20% and 8.70%15.90% in 2019, 20182021, 2020 and 2017,2019, respectively, as compared to the expected rate of 5.25%3.74%, 4.58%4.22% and 5.08%5.25% in 2019, 20182021, 2020 and 2017,2019, respectively. We use the fair value of our pension assets in the calculation of pension expense for all of our U.S. pension plans.
The weighted average amortization period for our U.S. pension plans is approximately 1716 years.
Service cost of pension plans was recorded in CGS, as part of the cost of inventory sold during the period, or SAG in our Consolidated Statements of Operations, based on the specific roles (i.e., manufacturing vs. non-manufacturing) of employee groups covered by each of our pension plans. In 2021, 2020 and 2019, 2018 and 2017, approximately 45% and 55%the amount of service cost was included in CGS and SAG respectively.is approximately equal. Non-service related net periodic pension costs were recorded in Other (Income) Expense.
Globally, we expect our 20202022 net periodic pension cost to be approximately $110$70 million to $130$80 million, including approximately $35$40 million of service cost, compared to $132$77 million in 2019,2021, which included $29$39 million of service cost. The decrease in expected net periodic pension cost is primarily due to lower interest cost for our U.S. pension plans from decreases in interest rates.
Though we experienced a decreasean increase in our U.S. discount rate at the end of 2019 and2021, a large portion of the $30$7 million net actuarial loss included in AOCL for our worldwide other postretirement benefit plans as of December 31, 20192021 is a result of the overall decline in U.S. discount rates over time. For purposes of determining 20192021 worldwide net periodic other postretirement benefits cost, we recognized $3 million of net actuarial losses in 2019.2021. We will recognize approximately $4$2 million of net actuarial losses in 2020.2022. If our future experience is consistent with our assumptions as of December 31, 2019,2021, actuarial loss recognition over the next few years will remain at an amount near that to be recognized in 2020 before it begins to gradually decline.
For further information on pensions and other postretirement benefits, refer to Note to the Consolidated Financial Statements No. 17,18, Pension, Other Postretirement Benefits and Savings Plans, in this Form 10-K.
| (In millions) | 2019 | 2018 | |||||
| First lien revolving credit facility | $ | 1,662 | $ | 1,633 | |||
| European revolving credit facility | 899 | 629 | |||||
| Chinese credit facilities | 290 | 199 | |||||
| Mexican credit facilities | — | 140 | |||||
| Other domestic and international debt | 338 | 221 | |||||
| Notes payable and overdrafts | 389 | 329 | |||||
| $ | 3,578 | $ | 3,151 | ||||
and
2018.
| (In millions) | Total | 2020 | 2021 | 2022 | 2023 | 2024 | Beyond 2024 | ||||||||||||||||||||
Debt Obligations(1) | $ | 5,444 | $ | 907 | $ | 250 | $ | 391 | $ | 1,648 | $ | 85 | $ | 2,163 | |||||||||||||
Finance Lease Obligations(2) | 249 | 4 | 15 | 2 | 1 | 2 | 225 | ||||||||||||||||||||
Interest Payments(3) | 1,670 | 270 | 218 | 205 | 190 | 129 | 658 | ||||||||||||||||||||
Operating Lease Obligations(4) | 1,124 | 242 | 192 | 141 | 109 | 81 | 359 | ||||||||||||||||||||
Pension Benefits(5) | 310 | 62 | 62 | 62 | 62 | 62 | NA | ||||||||||||||||||||
Other Postretirement Benefits(6) | 153 | 17 | 17 | 16 | 16 | 15 | 72 | ||||||||||||||||||||
Workers’ Compensation(7) | 261 | 39 | 23 | 18 | 14 | 11 | 156 | ||||||||||||||||||||
Binding Commitments(8) | 2,405 | 1,310 | 390 | 181 | 152 | 130 | 242 | ||||||||||||||||||||
Uncertain Income Tax Positions(9) | 8 | 2 | 4 | — | — | — | 2 | ||||||||||||||||||||
| $ | 11,624 | $ | 2,853 | $ | 1,171 | $ | 1,016 | $ | 2,192 | $ | 515 | $ | 3,877 | ||||||||||||||
Certain information in this Annual Report on Form 10-K (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 Annual Report on Form 10-K. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including:
50
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.
51
ITEM 7A. 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 materials 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-costlower 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 December 31, 2019, 32%2021, 15% of our debt was at variable interest rates averaging 3.81%4.01% compared to 33%24% at an average rate of 4.92%2.79% at December 31, 2018.
The following table presents information about long term fixed rate debt, excluding finance leases, at December 31:
| (In millions) | 2019 | 2018 | |||||
| Carrying amount — liability | $ | 3,434 | $ | 3,609 | |||
| Fair value — liability | 3,558 | 3,443 | |||||
| Pro forma fair value — liability | 3,629 | 3,583 | |||||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Carrying amount — liability |
| $ | 5,781 |
|
| $ | 4,094 |
|
Fair value — liability |
|
| 6,149 |
|
|
| 4,283 |
|
Pro forma fair value — liability |
|
| 6,409 |
|
|
| 4,353 |
|
The pro forma information assumes aan 100 basis point decrease in market interest rates at December 31 of each year, 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 foreign currency derivative information at December 31:
| (In millions) | 2019 | 2018 | |||||
| Fair value — asset (liability) | $ | (8 | ) | $ | 11 | ||
| Pro forma decrease in fair value | (199 | ) | (152 | ) | |||
| Contract maturities | 1/20-12/21 | 1/19-12/20 | |||||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Fair value — asset (liability) |
| $ | 5 |
|
| $ | (33 | ) |
Pro forma decrease in fair value |
|
| (98 | ) |
|
| (167 | ) |
Contract maturities |
| 1/22-12/22 |
|
| 1/21-12/21 |
| ||
The pro forma decrease in fair value assumes a 10% adverse change in underlying foreign exchange rates at December 31 of each year, 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 Sheets at December 31 as follows:
| (In millions) | 2019 | 2018 | |||||
| Current asset (liability): | |||||||
| Accounts receivable | $ | 10 | $ | 16 | |||
| Other current liabilities | (18 | ) | (7 | ) | |||
| Long term asset (liability): | |||||||
| Other assets | $ | 1 | $ | 2 | |||
| Other long term liabilities | (1 | ) | — | ||||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Current asset (liability): |
|
|
|
|
|
| ||
Accounts receivable |
| $ | 10 |
|
| $ | 1 |
|
Other current liabilities |
|
| (5 | ) |
|
| (34 | ) |
For further information on foreign currency contracts, refer to Note to the Consolidated Financial Statements No. 15,16, Financing Arrangements and Derivative Financial Instruments, in this Form 10-K.
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.
ITEM 8. FINANCIAL STATEMENTS.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | |||
54 | |||
55 | |||
Consolidated Financial Statements of The Goodyear Tire & Rubber Company: | |||
58 | |||
59 | |||
Consolidated Balance Sheets at December 31, | 60 | ||
61 | |||
64 | |||
65 | |||
| Financial Statement Schedule: | |||
The following consolidated financial statement schedule of The Goodyear Tire & Rubber Company is filed as part of this Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements of The Goodyear Tire & Rubber Company: | |||
FS-2 | |||
Schedules not listed above have been omitted since they are not applicable or are not required, or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined under Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the Company’s internal control over financial reporting as of December 31, 20192021 using the framework specified in Internal Control — Integrated Framework (2013), published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2019.2021.
As permitted by Securities and Exchange Commission guidance, management excluded the internal controls of Cooper Tire, which was acquired on June 7, 2021, from the scope of its assessment of internal control over financial reporting as of December 31, 2021, relating to approximately 14% of consolidated total assets and 12% of consolidated net sales as of and for the year ended December 31, 2021.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 20192021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is presented in this Annual Report on Form 10-K.
To theBoard of Directors and Shareholders of The Goodyear Tire & Rubber Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the consolidated financial statements, including the related notes and financial statement schedule, of The Goodyear Tire & Rubber Company and its subsidiaries (the “Company”) as listed in the index appearing under Item 8 (collectively referred to as the “consolidated financial statements”). We also have audited the Company'sCompany’s internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20192021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of January 1, 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management'sManagement’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Cooper Tire & Rubber Company from its assessment of internal control over financial reporting as of December 31, 2021 because it was acquired by the Company in a purchase business combination during 2021. We have also excluded Cooper Tire & Rubber Company from our audit of internal control over financial reporting. Cooper Tire & Rubber Company is a wholly-owned subsidiary whose total assets and total net sales excluded from management’s assessment and our audit of internal control over financial reporting represent 14% and 12%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
55
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Foreign Tax Credits
As described in Note 62 to the consolidated financial statements, the Company completed the acquisition of Cooper Tire on June 7, 2021 for consideration of approximately $3.1 billion. The merger was accounted for using the acquisition method of accounting. Based on the preliminary purchase price allocation, management recorded intangible assets, including $350 million of customer relationships and $560 million of indefinite-lived trade names. The estimated fair values of identifiable intangible assets acquired were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. Management estimated the fair value of acquired customer relationships and acquired indefinite-lived trade names using the multi-period excess earnings method and relief from royalty method, respectively. Assumptions used in the determination of the fair value of the customer relationships include revenue growth rates, operating margins, contributory asset charges, customer attrition rates and discount rate. Assumptions used in the determination of the fair value of the trade names include revenue growth rates, including a terminal growth rate, royalty rate and discount rate.
The principal considerations for our determination that performing procedures relating to the valuation of acquired intangible assets – customer relationships and indefinite-lived trade names from the Cooper Tire acquisition is a critical audit matter are (i) the significant judgment by management when determining the fair value of the these intangible assets; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to operating margins, customer attrition rates and discount rate used in the valuation of the customer relationships, and the terminal growth rate, royalty rate and discount rate used in the valuation of the indefinite-lived trade names; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls over management’s valuation of the acquired customer relationships and indefinite-lived trade names and controls over the development of assumptions related to operating margins, customer attrition rates and discount rate used in the valuation of the customer relationships, and the terminal growth rate, royalty rate and discount rate used in the valuation of the indefinite-lived trade names. These procedures also included, among others (i) reading the merger agreement and (ii) testing management’s process for determining the fair value of the customer relationships and indefinite-lived trade names. Testing management’s process included evaluating the appropriateness of the valuation methods, testing the completeness and accuracy of the underlying data used by management, and evaluating the reasonableness of management’s significant assumptions related to the operating margins, customer attrition rates and discount rate used in the valuation of the customer relationships, and terminal growth rate, royalty rate and discount rate used in the valuation of the indefinite-lived trade names. Evaluating the reasonableness of operating margins, customer attrition rates and terminal growth rate involved considering the past performance of Cooper Tire, as well as economic and industry data. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation methods and royalty rate and discount rate assumptions.
Utilization of Deferred Tax Assets – Sale of Certain Intellectual Property
As described in Note 7 to the consolidated financial statements, during the fourth quarter of 2019,2021, the Company’s foreign sourceCompany completed an intercompany sale of certain intellectual property. As a result of this transaction, U.S. taxable income for 2021 included approximately $1.5 billion of accelerated royalty income, (the "transaction”). The transaction, in combination with other tax planning,which resulted in the utilization of deferred tax assets consisting of $205 million in tax loss carryforwards and $110 million of foreign tax credits of $310 million in 2019, a significant portion of which related to the transaction.credits. Management performs scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize these foreigndeferred tax creditsassets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration and considers prudent tax
56
planning strategies available(including an assessment of their feasibility) to accelerate taxable amountsincome if required to utilize expiring foreigndeferred tax credits. The utilization of foreign tax credits requires judgment in assessing the tax consequences of events that have been recognized in either the Company’s financial statements or tax returns.
The principal considerations for our determination that performing procedures relating to the utilization of foreigndeferred tax creditsassets – sale of certain intellectual property is a critical audit matter are there was(i) the significant judgment by management in evaluating the tax consequences of the transaction, including determining the appropriate application of tax law to the transaction and a high degree of estimation uncertainty relative to the numerous and complexcomplexity of tax laws. This in turn led tolaw; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the appropriateness of the application of tax law includingrelated to evaluating the tax implications of specific tax actions executed to accelerate recognition of royalty income in the U.S. Also, the evaluation of audit evidence available to support the application of tax law to the transaction is complextransaction; and required significant auditor judgment as the nature of the evidence is often highly subjective, and(iii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment including controls over the valuation of the Company’s EMEA reporting unit.utilization of deferred tax assets. These procedures also included, among others (i) testingreading of intercompany agreements relevant to the transaction and (ii) evaluating management’s process for developing the fair value estimateassessment of the EMEA reporting unit, (ii) evaluating the appropriatenesstechnical merits of the discounted cash flow modeltransaction, including evaluation of external tax opinions and market approach, (iii) testing the completeness, accuracy, and relevanceapplication of underlying data used in the models, and (iv) evaluating the significant assumptions used by management, including the projected long term operating margin, discount rate, and the selection of market multiples. Evaluating management’s assumptions related to the projected long term operating margin involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.relevant tax law. Professionals with specialized skill and knowledge were used to assist in the evaluationevaluating management’s assessment of the Company’s discounted cash flow modeltechnical merits of the transaction and certain significant assumptions, including the discount rate and the selectionapplication of market multiples.
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
February 14, 2022
We have served as the Company’s auditor since 1898.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year Ended December 31, | |||||||||||
| (In millions, except per share amounts) | 2019 | 2018 | 2017 | ||||||||
| Net Sales (Note 2) | $ | 14,745 | $ | 15,475 | $ | 15,377 | |||||
| Cost of Goods Sold | 11,602 | 11,961 | 11,680 | ||||||||
| Selling, Administrative and General Expense | 2,323 | 2,312 | 2,279 | ||||||||
| Rationalizations (Note 3) | 205 | 44 | 135 | ||||||||
| Interest Expense (Note 4) | 340 | 321 | 335 | ||||||||
| Other (Income) Expense (Note 5) | 98 | (174 | ) | 70 | |||||||
| Income before Income Taxes | 177 | 1,011 | 878 | ||||||||
| United States and Foreign Tax Expense (Note 6) | 474 | 303 | 513 | ||||||||
| Net Income (Loss) | (297 | ) | 708 | 365 | |||||||
| Less: Minority Shareholders’ Net Income | 14 | 15 | 19 | ||||||||
| Goodyear Net Income (Loss) | $ | (311 | ) | $ | 693 | $ | 346 | ||||
| Goodyear Net Income (Loss) — Per Share of Common Stock | |||||||||||
| Basic | $ | (1.33 | ) | $ | 2.92 | $ | 1.39 | ||||
| Weighted Average Shares Outstanding (Note 7) | 233 | 237 | 249 | ||||||||
| Diluted | $ | (1.33 | ) | $ | 2.89 | $ | 1.37 | ||||
| Weighted Average Shares Outstanding (Note 7) | 233 | 239 | 253 | ||||||||
|
| Year Ended December 31, |
| |||||||||
(In millions, except per share amounts) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Net Sales (Note 3) |
| $ | 17,478 |
|
| $ | 12,321 |
|
| $ | 14,745 |
|
Cost of Goods Sold |
|
| 13,692 |
|
|
| 10,337 |
|
|
| 11,602 |
|
Selling, Administrative and General Expense |
|
| 2,699 |
|
|
| 2,192 |
|
|
| 2,323 |
|
Goodwill and Other Asset Impairments (Notes 12 and 13) |
|
| 0 |
|
|
| 330 |
|
|
| 0 |
|
Rationalizations (Note 4) |
|
| 93 |
|
|
| 159 |
|
|
| 205 |
|
Interest Expense (Note 5) |
|
| 387 |
|
|
| 324 |
|
|
| 340 |
|
Other (Income) Expense (Note 6) |
|
| 94 |
|
|
| 119 |
|
|
| 98 |
|
Income (Loss) before Income Taxes |
|
| 513 |
|
|
| (1,140 | ) |
|
| 177 |
|
United States and Foreign Tax Expense (Benefit) (Note 7) |
|
| (267 | ) |
|
| 110 |
|
|
| 474 |
|
Net Income (Loss) |
|
| 780 |
|
|
| (1,250 | ) |
|
| (297 | ) |
Less: Minority Shareholders’ Net Income |
|
| 16 |
|
|
| 4 |
|
|
| 14 |
|
Goodyear Net Income (Loss) |
| $ | 764 |
|
| $ | (1,254 | ) |
| $ | (311 | ) |
Goodyear Net Income (Loss) — Per Share of Common Stock |
|
|
|
|
|
|
|
|
| |||
Basic |
| $ | 2.92 |
|
| $ | (5.35 | ) |
| $ | (1.33 | ) |
Weighted Average Shares Outstanding (Note 8) |
|
| 261 |
|
|
| 234 |
|
|
| 233 |
|
Diluted |
| $ | 2.89 |
|
| $ | (5.35 | ) |
| $ | (1.33 | ) |
Weighted Average Shares Outstanding (Note 8) |
|
| 264 |
|
|
| 234 |
|
|
| 233 |
|
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Year Ended December 31, | |||||||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Net Income (Loss) | $ | (297 | ) | $ | 708 | $ | 365 | ||||
| Other Comprehensive Income (Loss): | |||||||||||
| Foreign currency translation, net of tax of $4 in 2019 (($10) in 2018, $39 in 2017) | 5 | (264 | ) | 257 | |||||||
| Defined benefit plans: | |||||||||||
| Amortization of prior service cost and unrecognized gains and losses included in total benefit cost, net of tax of $33 in 2019 ($34 in 2018, $40 in 2017) | 104 | 105 | 77 | ||||||||
| (Increase)/decrease in net actuarial losses, net of tax of ($42) in 2019 ($1 in 2018, ($37) in 2017) | (169 | ) | 16 | (100 | ) | ||||||
| Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements, and divestitures, net of tax of $2 in 2019 ($5 in 2018, $14 in 2017) | 4 | 20 | 27 | ||||||||
| Prior service credit (cost) from plan amendments, net of tax of $1 in 2019 (($3) in 2018, ($2) in 2017) | 1 | (12 | ) | (4 | ) | ||||||
| Deferred derivative gains (losses), net of tax of $0 in 2019 ($3 in 2018, ($8) in 2017) | 10 | 9 | (20 | ) | |||||||
| Reclassification adjustment for amounts recognized in income, net of tax of $0 in 2019 ($0 in 2018, $1 in 2017) | (14 | ) | 7 | 1 | |||||||
| Other Comprehensive Income (Loss) | (59 | ) | (119 | ) | 238 | ||||||
| Comprehensive Income (Loss) | (356 | ) | 589 | 603 | |||||||
| Less: Comprehensive Income (Loss) Attributable to Minority Shareholders | 15 | (4 | ) | 35 | |||||||
| Goodyear Comprehensive Income (Loss) | $ | (371 | ) | $ | 593 | $ | 568 | ||||
|
| Year Ended December 31, |
| |||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Net Income (Loss) |
| $ | 780 |
|
| $ | (1,250 | ) |
| $ | (297 | ) |
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
| |||
Foreign currency translation, net of tax of ($4) in 2021 ($4 in 2020, $4 in 2019) |
|
| (139 | ) |
|
| (134 | ) |
|
| 5 |
|
Defined benefit plans: |
|
|
|
|
|
|
|
|
| |||
Amortization of prior service cost and unrecognized gains and losses included in total benefit cost, net of tax of $34 in 2021 ($35 in 2020, $33 in 2019) |
|
| 105 |
|
|
| 109 |
|
|
| 104 |
|
Decrease/(increase) in net actuarial losses, net of tax of $48 in 2021 (($10) in 2020, ($42) in 2019) |
|
| 153 |
|
|
| (3 | ) |
|
| (169 | ) |
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements, and divestitures, net of tax of $10 in 2021 ($7 in 2020, $2 in 2019) |
|
| 33 |
|
|
| 22 |
|
|
| 4 |
|
Prior service credit (cost) from plan amendments, net of tax of $0 in 2021 (($1) in 2020, $1 in 2019) |
|
| 1 |
|
|
| (2 | ) |
|
| 1 |
|
Deferred derivative gains (losses), net of tax of $0 in 2021 ($0 in 2020, $0 in 2019) |
|
| 1 |
|
|
| 15 |
|
|
| 10 |
|
Reclassification adjustment for amounts recognized in income, net of tax of $0 in 2021 ($0 in 2020, $0 in 2019) |
|
| (2 | ) |
|
| (13 | ) |
|
| (14 | ) |
Other Comprehensive Income (Loss) |
|
| 152 |
|
|
| (6 | ) |
|
| (59 | ) |
Comprehensive Income (Loss) |
|
| 932 |
|
|
| (1,256 | ) |
|
| (356 | ) |
Less: Comprehensive Income (Loss) Attributable to Minority Shareholders |
|
| (4 | ) |
|
| (3 | ) |
|
| 15 |
|
Goodyear Comprehensive Income (Loss) |
| $ | 936 |
|
| $ | (1,253 | ) |
| $ | (371 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
| December 31, | |||||||
| (In millions, except share data) | 2019 | 2018 | |||||
| Assets: | |||||||
| Current Assets: | |||||||
| Cash and Cash Equivalents (Note 1) | $ | 908 | $ | 801 | |||
| Accounts Receivable (Note 9) | 1,941 | 2,030 | |||||
| Inventories (Note 10) | 2,851 | 2,856 | |||||
| Prepaid Expenses and Other Current Assets | 234 | 238 | |||||
| Total Current Assets | 5,934 | 5,925 | |||||
| Goodwill (Note 11) | 565 | 569 | |||||
| Intangible Assets (Note 11) | 137 | 136 | |||||
| Deferred Income Taxes (Note 6) | 1,527 | 1,847 | |||||
| Other Assets (Note 12) | 959 | 1,136 | |||||
| Operating Lease Right-of-Use Assets (Note 14) | 855 | — | |||||
| Property, Plant and Equipment (Note 13) | 7,208 | 7,259 | |||||
| Total Assets | $ | 17,185 | $ | 16,872 | |||
| Liabilities: | |||||||
| Current Liabilities: | |||||||
| Accounts Payable — Trade | $ | 2,908 | $ | 2,920 | |||
| Compensation and Benefits (Notes 17 and 18) | 536 | 471 | |||||
| Other Current Liabilities | 734 | 737 | |||||
| Notes Payable and Overdrafts (Note 15) | 348 | 410 | |||||
| Operating Lease Liabilities due Within One Year (Note 14) | 199 | — | |||||
| Long Term Debt and Finance Leases due Within One Year (Notes 14 and 15) | 562 | 243 | |||||
| Total Current Liabilities | 5,287 | 4,781 | |||||
| Operating Lease Liabilities (Note 14) | 668 | — | |||||
| Long Term Debt and Finance Leases (Notes 14 and 15) | 4,753 | 5,110 | |||||
| Compensation and Benefits (Notes 17 and 18) | 1,334 | 1,345 | |||||
| Deferred Income Taxes (Note 6) | 90 | 95 | |||||
| Other Long Term Liabilities | 508 | 471 | |||||
| Total Liabilities | 12,640 | 11,802 | |||||
| Commitments and Contingent Liabilities (Note 19) | |||||||
| Shareholders’ Equity: | |||||||
| Goodyear Shareholders’ Equity: | |||||||
| Common Stock, no par value: | |||||||
| Authorized, 450 million shares, Outstanding shares — 233 million (232 million in 2018) | 233 | 232 | |||||
| Capital Surplus | 2,141 | 2,111 | |||||
| Retained Earnings | 6,113 | 6,597 | |||||
| Accumulated Other Comprehensive Loss (Note 21) | (4,136 | ) | (4,076 | ) | |||
| Goodyear Shareholders’ Equity | 4,351 | 4,864 | |||||
| Minority Shareholders’ Equity — Nonredeemable | 194 | 206 | |||||
| Total Shareholders’ Equity | 4,545 | 5,070 | |||||
| Total Liabilities and Shareholders’ Equity | $ | 17,185 | $ | 16,872 | |||
|
| December 31, |
| |||||
(In millions, except share data) |
| 2021 |
|
| 2020 |
| ||
Assets: |
|
|
|
|
|
| ||
Current Assets: |
|
|
|
|
|
| ||
Cash and Cash Equivalents (Note 1) |
| $ | 1,088 |
|
| $ | 1,539 |
|
Accounts Receivable (Note 10) |
|
| 2,387 |
|
|
| 1,691 |
|
Inventories (Note 11) |
|
| 3,594 |
|
|
| 2,153 |
|
Prepaid Expenses and Other Current Assets |
|
| 262 |
|
|
| 237 |
|
Total Current Assets |
|
| 7,331 |
|
|
| 5,620 |
|
Goodwill (Note 12) |
|
| 1,004 |
|
|
| 408 |
|
Intangible Assets (Note 12) |
|
| 1,039 |
|
|
| 135 |
|
Deferred Income Taxes (Note 7) |
|
| 1,596 |
|
|
| 1,467 |
|
Other Assets (Note 13) |
|
| 1,106 |
|
|
| 952 |
|
Operating Lease Right-of-Use Assets (Note 15) |
|
| 981 |
|
|
| 851 |
|
Property, Plant and Equipment (Note 14) |
|
| 8,345 |
|
|
| 7,073 |
|
Total Assets |
| $ | 21,402 |
|
| $ | 16,506 |
|
Liabilities: |
|
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
|
| ||
Accounts Payable — Trade |
| $ | 4,148 |
|
| $ | 2,945 |
|
Compensation and Benefits (Notes 18 and 19) |
|
| 689 |
|
|
| 540 |
|
Other Current Liabilities |
|
| 822 |
|
|
| 865 |
|
Notes Payable and Overdrafts (Note 16) |
|
| 406 |
|
|
| 406 |
|
Operating Lease Liabilities due Within One Year (Note 15) |
|
| 204 |
|
|
| 198 |
|
Long Term Debt and Finance Leases due Within One Year (Notes 15 and 16) |
|
| 343 |
|
|
| 152 |
|
Total Current Liabilities |
|
| 6,612 |
|
|
| 5,106 |
|
Operating Lease Liabilities (Note 15) |
|
| 819 |
|
|
| 684 |
|
Long Term Debt and Finance Leases (Notes 15 and 16) |
|
| 6,648 |
|
|
| 5,432 |
|
Compensation and Benefits (Notes 18 and 19) |
|
| 1,445 |
|
|
| 1,470 |
|
Deferred Income Taxes (Note 7) |
|
| 135 |
|
|
| 84 |
|
Other Long Term Liabilities |
|
| 559 |
|
|
| 471 |
|
Total Liabilities |
|
| 16,218 |
|
|
| 13,247 |
|
Commitments and Contingent Liabilities (Note 20) |
|
|
|
|
|
| ||
Shareholders’ Equity: |
|
|
|
|
|
| ||
Goodyear Shareholders’ Equity: |
|
|
|
|
|
| ||
Common Stock, 0 par value: |
|
|
|
|
|
| ||
Authorized, 450 million shares, Outstanding shares — 282 million (233 million in 2020) |
|
| 282 |
|
|
| 233 |
|
Capital Surplus |
|
| 3,107 |
|
|
| 2,171 |
|
Retained Earnings |
|
| 5,573 |
|
|
| 4,809 |
|
Accumulated Other Comprehensive Loss (Note 22) |
|
| (3,963 | ) |
|
| (4,135 | ) |
Goodyear Shareholders’ Equity |
|
| 4,999 |
|
|
| 3,078 |
|
Minority Shareholders’ Equity — Nonredeemable |
|
| 185 |
|
|
| 181 |
|
Total Shareholders’ Equity |
|
| 5,184 |
|
|
| 3,259 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 21,402 |
|
| $ | 16,506 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| Accumulated | Minority | |||||||||||||||||||||||||||||
| Other | Goodyear | Shareholders' | Total | |||||||||||||||||||||||||||
| Common Stock | Capital | Retained | Comprehensive | Shareholders' | Equity — Non- | Shareholders' | ||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Shares | Amount | Surplus | Earnings | Loss | Equity | Redeemable | Equity | ||||||||||||||||||||||
| Balance at December 31, 2016 | ||||||||||||||||||||||||||||||
| (after deducting 26,866,893 common treasury shares) | 251,596,534 | $ | 252 | $ | 2,645 | $ | 5,808 | $ | (4,198 | ) | $ | 4,507 | $ | 218 | $ | 4,725 | ||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||
| Net income | 346 | 346 | 19 | 365 | ||||||||||||||||||||||||||
| Foreign currency translation (net of tax of $39) | 240 | 240 | 17 | 257 | ||||||||||||||||||||||||||
| Amortization of prior service cost and unrecognized gains and losses included in total benefit cost (net of tax of $40) | 77 | 77 | 77 | |||||||||||||||||||||||||||
| Increase in net actuarial losses (net of tax of ($37)) | (99 | ) | (99 | ) | (1 | ) | (100 | ) | ||||||||||||||||||||||
| Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures (net of tax of $14) | 27 | 27 | 27 | |||||||||||||||||||||||||||
| Prior service cost from plan amendments (net of tax of ($2)) | (4 | ) | (4 | ) | (4 | ) | ||||||||||||||||||||||||
| Deferred derivative losses (net of tax of ($8)) | (20 | ) | (20 | ) | (20 | ) | ||||||||||||||||||||||||
| Reclassification adjustment for amounts recognized in income (net of tax of $1) | 1 | 1 | 1 | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | 222 | 16 | 238 | |||||||||||||||||||||||||||
| Total comprehensive income (loss) | 568 | 35 | 603 | |||||||||||||||||||||||||||
| Stock-based compensation plans | 24 | 24 | 24 | |||||||||||||||||||||||||||
| Repurchase of common stock | (12,755,547 | ) | (13 | ) | (387 | ) | (400 | ) | (400 | ) | ||||||||||||||||||||
| Dividends declared | (110 | ) | (110 | ) | (6 | ) | (116 | ) | ||||||||||||||||||||||
| Common stock issued from treasury | 1,313,615 | 1 | 13 | 14 | 14 | |||||||||||||||||||||||||
| Balance at December 31, 2017 | ||||||||||||||||||||||||||||||
| (after deducting 38,308,825 common treasury shares) | 240,154,602 | $ | 240 | $ | 2,295 | $ | 6,044 | $ | (3,976 | ) | $ | 4,603 | $ | 247 | $ | 4,850 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| Minority |
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Goodyear |
|
| Shareholders' |
|
| Total |
| ||||||||
|
| Common Stock |
|
| Capital |
|
| Retained |
|
| Comprehensive |
|
| Shareholders' |
|
| Equity — Non- |
|
| Shareholders' |
| |||||||||||
(Dollars in millions, except per share amounts) |
| Shares |
|
| Amount |
|
| Surplus |
|
| Earnings |
|
| Loss |
|
| Equity |
|
| Redeemable |
|
| Equity |
| ||||||||
Balance at December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 46,292,384 common treasury shares) |
|
| 232,171,043 |
|
| $ | 232 |
|
| $ | 2,111 |
|
| $ | 6,597 |
|
| $ | (4,076 | ) |
| $ | 4,864 |
|
| $ | 206 |
|
| $ | 5,070 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
| (311 | ) |
|
|
|
|
| (311 | ) |
|
| 14 |
|
|
| (297 | ) | ||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (60 | ) |
|
| (60 | ) |
|
| 1 |
|
|
| (59 | ) | ||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (371 | ) |
|
| 15 |
|
|
| (356 | ) | |||||
Adoption of new accounting standard |
|
|
|
|
|
|
|
|
|
|
| (23 | ) |
|
|
|
|
| (23 | ) |
|
|
|
|
| (23 | ) | |||||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 29 |
|
|
|
|
|
|
|
|
| 29 |
|
|
|
|
|
| 29 |
| |||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
| (150 | ) |
|
|
|
|
| (150 | ) |
|
| (5 | ) |
|
| (155 | ) | ||||
Common stock issued from treasury |
|
| 479,275 |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
| 1 |
|
|
|
|
|
| 1 |
| ||||
Purchase of minority shares |
|
|
|
|
|
|
|
| 1 |
|
|
|
|
|
|
|
|
| 1 |
|
|
| (22 | ) |
|
| (21 | ) | ||||
Balance at December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 45,813,109 common treasury shares) |
|
| 232,650,318 |
|
| $ | 233 |
|
| $ | 2,141 |
|
| $ | 6,113 |
|
| $ | (4,136 | ) |
| $ | 4,351 |
|
| $ | 194 |
|
| $ | 4,545 |
|
We declared and paid cash dividends of $0.44$0.64 per common share for the year ended December 31, 2017.
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY — (Continued)
| Accumulated | Minority | ||||||||||||||||||||||||||||||
| Other | Goodyear | Shareholders' | Total | ||||||||||||||||||||||||||||
| Common Stock | Capital | Retained | Comprehensive | Shareholders' | Equity — Non- | Shareholders' | |||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Shares | Amount | Surplus | Earnings | Loss | Equity | Redeemable | Equity | |||||||||||||||||||||||
| Balance at December 31, 2017 | |||||||||||||||||||||||||||||||
| (after deducting 38,308,825 common treasury shares) | 240,154,602 | $ | 240 | $ | 2,295 | $ | 6,044 | $ | (3,976 | ) | $ | 4,603 | $ | 247 | $ | 4,850 | |||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||
| Net income | 693 | 693 | 15 | 708 | |||||||||||||||||||||||||||
| Foreign currency translation (net of tax of ($10)) | (245 | ) | (245 | ) | (19 | ) | (264 | ) | |||||||||||||||||||||||
| Amortization of prior service cost and unrecognized gains and losses included in total benefit cost (net of tax of $34) | 105 | 105 | 105 | ||||||||||||||||||||||||||||
| Decrease in net actuarial losses (net of tax of $1) | 16 | 16 | 16 | ||||||||||||||||||||||||||||
| Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures (net of tax of $5) | 20 | 20 | 20 | ||||||||||||||||||||||||||||
| Prior service cost from plan amendments (net of tax of ($3)) | (12 | ) | (12 | ) | (12 | ) | |||||||||||||||||||||||||
| Deferred derivative gains (net of tax of $3) | 9 | 9 | 9 | ||||||||||||||||||||||||||||
| Reclassification adjustment for amounts recognized in income (net of tax of $0) | 7 | 7 | 7 | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) | (100 | ) | (19 | ) | (119 | ) | |||||||||||||||||||||||||
| Total comprehensive income (loss) | 593 | (4 | ) | 589 | |||||||||||||||||||||||||||
| Adoption of new accounting standard | (1 | ) | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Stock-based compensation plans | 19 | 19 | 19 | ||||||||||||||||||||||||||||
| Repurchase of common stock | (8,936,302 | ) | (9 | ) | (211 | ) | (220 | ) | (220 | ) | |||||||||||||||||||||
| Dividends declared | (139 | ) | (139 | ) | (8 | ) | (147 | ) | |||||||||||||||||||||||
| Common stock issued from treasury | 952,743 | 1 | 3 | 4 | 4 | ||||||||||||||||||||||||||
| Purchase of minority shares | 5 | 5 | (29 | ) | (24 | ) | |||||||||||||||||||||||||
| Balance at December 31, 2018 | |||||||||||||||||||||||||||||||
| (after deducting 46,292,384 common treasury shares) | 232,171,043 | $ | 232 | $ | 2,111 | $ | 6,597 | $ | (4,076 | ) | $ | 4,864 | $ | 206 | $ | 5,070 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| Minority |
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Goodyear |
|
| Shareholders' |
|
| Total |
| ||||||||
|
| Common Stock |
|
| Capital |
|
| Retained |
|
| Comprehensive |
|
| Shareholders' |
|
| Equity — Non- |
|
| Shareholders' |
| |||||||||||
(Dollars in millions, except per share amounts) |
| Shares |
|
| Amount |
|
| Surplus |
|
| Earnings |
|
| Loss |
|
| Equity |
|
| Redeemable |
|
| Equity |
| ||||||||
Balance at December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 45,813,109 common treasury shares) |
|
| 232,650,318 |
|
| $ | 233 |
|
| $ | 2,141 |
|
| $ | 6,113 |
|
| $ | (4,136 | ) |
| $ | 4,351 |
|
| $ | 194 |
|
| $ | 4,545 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
| (1,254 | ) |
|
|
|
|
| (1,254 | ) |
|
| 4 |
|
|
| (1,250 | ) | ||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
|
|
| 1 |
|
|
| (7 | ) |
|
| (6 | ) | ||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,253 | ) |
|
| (3 | ) |
|
| (1,256 | ) | |||||
Adoption of new accounting standard |
|
|
|
|
|
|
|
|
|
|
| (12 | ) |
|
|
|
|
| (12 | ) |
|
|
|
|
| (12 | ) | |||||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 32 |
|
|
|
|
|
|
|
|
| 32 |
|
|
|
|
|
| 32 |
| |||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
| (38 | ) |
|
|
|
|
| (38 | ) |
|
| (10 | ) |
|
| (48 | ) | ||||
Common stock issued from treasury |
|
| 569,780 |
|
|
|
|
|
| (2 | ) |
|
|
|
|
|
|
|
| (2 | ) |
|
|
|
|
| (2 | ) | ||||
Balance at December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 45,243,329 common treasury shares) |
|
| 233,220,098 |
|
| $ | 233 |
|
| $ | 2,171 |
|
| $ | 4,809 |
|
| $ | (4,135 | ) |
| $ | 3,078 |
|
| $ | 181 |
|
| $ | 3,259 |
|
We declared and paid cash dividends of $0.58$0.16 per common share for the year ended December 31, 2018.
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY — (Continued)
| Accumulated | Minority | ||||||||||||||||||||||||||||||
| Other | Goodyear | Shareholders' | Total | ||||||||||||||||||||||||||||
| Common Stock | Capital | Retained | Comprehensive | Shareholders' | Equity — Non- | Shareholders' | |||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Shares | Amount | Surplus | Earnings | Loss | Equity | Redeemable | Equity | |||||||||||||||||||||||
| Balance at December 31, 2018 | |||||||||||||||||||||||||||||||
| (after deducting 46,292,384 common treasury shares) | 232,171,043 | $ | 232 | $ | 2,111 | $ | 6,597 | $ | (4,076 | ) | $ | 4,864 | $ | 206 | $ | 5,070 | |||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||
| Net income (loss) | (311 | ) | (311 | ) | 14 | (297 | ) | ||||||||||||||||||||||||
| Foreign currency translation (net of tax of $4) | 4 | 4 | 1 | 5 | |||||||||||||||||||||||||||
| Amortization of prior service cost and unrecognized gains and losses included in total benefit cost (net of tax of $33) | 104 | 104 | 104 | ||||||||||||||||||||||||||||
| Increase in net actuarial losses (net of tax of ($42)) | (169 | ) | (169 | ) | (169 | ) | |||||||||||||||||||||||||
| Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures (net of tax of $2) | 4 | 4 | 4 | ||||||||||||||||||||||||||||
| Prior service credit from plan amendments (net of tax of $1) | 1 | 1 | 1 | ||||||||||||||||||||||||||||
| Deferred derivative gains (net of tax of $0) | 10 | 10 | 10 | ||||||||||||||||||||||||||||
| Reclassification adjustment for amounts recognized in income (net of tax of $0) | (14 | ) | (14 | ) | (14 | ) | |||||||||||||||||||||||||
| Other comprehensive income (loss) | (60 | ) | 1 | (59 | ) | ||||||||||||||||||||||||||
| Total comprehensive income (loss) | (371 | ) | 15 | (356 | ) | ||||||||||||||||||||||||||
| Adoption of new accounting standard (Note 1) | (23 | ) | (23 | ) | (23 | ) | |||||||||||||||||||||||||
| Stock-based compensation plans | 29 | 29 | 29 | ||||||||||||||||||||||||||||
| Dividends declared | (150 | ) | (150 | ) | (5 | ) | (155 | ) | |||||||||||||||||||||||
| Common stock issued from treasury | 479,275 | 1 | 1 | 1 | |||||||||||||||||||||||||||
| Purchase of minority shares | 1 | 1 | (22 | ) | (21 | ) | |||||||||||||||||||||||||
| Balance at December 31, 2019 | |||||||||||||||||||||||||||||||
| (after deducting 45,813,109 common treasury shares) | 232,650,318 | $ | 233 | $ | 2,141 | $ | 6,113 | $ | (4,136 | ) | $ | 4,351 | $ | 194 | $ | 4,545 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| Minority |
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Goodyear |
|
| Shareholders' |
|
| Total |
| ||||||||
|
| Common Stock |
|
| Capital |
|
| Retained |
|
| Comprehensive |
|
| Shareholders' |
|
| Equity — Non- |
|
| Shareholders' |
| |||||||||||
(Dollars in millions, except per share amounts) |
| Shares |
|
| Amount |
|
| Surplus |
|
| Earnings |
|
| Loss |
|
| Equity |
|
| Redeemable |
|
| Equity |
| ||||||||
Balance at December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 45,243,329 common treasury shares) |
|
| 233,220,098 |
|
| $ | 233 |
|
| $ | 2,171 |
|
| $ | 4,809 |
|
| $ | (4,135 | ) |
| $ | 3,078 |
|
| $ | 181 |
|
| $ | 3,259 |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
| 764 |
|
|
|
|
|
| 764 |
|
|
| 16 |
|
|
| 780 |
| ||||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 172 |
|
|
| 172 |
|
|
| (20 | ) |
|
| 152 |
| ||||
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 936 |
|
|
| (4 | ) |
|
| 932 |
| |||||
Common stock issued |
|
| 45,824,480 |
|
|
| 46 |
|
|
| 892 |
|
|
|
|
|
|
|
|
| 938 |
|
|
|
|
|
| 938 |
| |||
Stock-based compensation plans |
|
|
|
|
|
|
|
| 26 |
|
|
|
|
|
|
|
|
| 26 |
|
|
|
|
|
| 26 |
| |||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13 | ) |
|
| (13 | ) | ||||||
Common stock issued from treasury |
|
| 2,748,645 |
|
|
| 3 |
|
|
| 18 |
|
|
|
|
|
|
|
|
| 21 |
|
|
|
|
|
| 21 |
| |||
Acquisition of Cooper Tire's minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21 |
|
|
| 21 |
| ||||||
Balance at December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(after deducting 42,494,684 common treasury shares) |
|
| 281,793,223 |
|
| $ | 282 |
|
| $ | 3,107 |
|
| $ | 5,573 |
|
| $ | (3,963 | ) |
| $ | 4,999 |
|
| $ | 185 |
|
| $ | 5,184 |
|
There were 0 dividends declared andor paid cash dividends of $0.64 per common share for the year ended December 31, 2019.
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | |||||||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net Income (Loss) | $ | (297 | ) | $ | 708 | $ | 365 | ||||
| Adjustments to Reconcile Net Income (Loss) to Cash Flows from Operating Activities: | |||||||||||
| Depreciation and Amortization | 795 | 778 | 781 | ||||||||
| Amortization and Write-Off of Debt Issuance Costs | 15 | 15 | 21 | ||||||||
| Provision for Deferred Income Taxes | 323 | 131 | 366 | ||||||||
| Net Pension Curtailments and Settlements (Note 17) | 6 | 22 | 19 | ||||||||
| Net Rationalization Charges (Note 3) | 205 | 44 | 135 | ||||||||
| Rationalization Payments | (59 | ) | (174 | ) | (154 | ) | |||||
| Net Gains on Asset Sales (Note 5) | (16 | ) | (1 | ) | (14 | ) | |||||
| Gain on TireHub transaction, net of transaction costs (Note 5) | — | (272 | ) | — | |||||||
| Operating Lease Expense (Note 14) | 292 | — | — | ||||||||
| Operating Lease Payments (Note 14) | (267 | ) | — | — | |||||||
| Pension Contributions and Direct Payments | (79 | ) | (74 | ) | (90 | ) | |||||
| Changes in Operating Assets and Liabilities, Net of Asset Acquisitions and Dispositions: | |||||||||||
| Accounts Receivable | 71 | (172 | ) | (147 | ) | ||||||
| Inventories | 6 | (171 | ) | (44 | ) | ||||||
| Accounts Payable — Trade | 5 | 223 | 85 | ||||||||
| Compensation and Benefits | 184 | (26 | ) | (65 | ) | ||||||
| Other Current Liabilities | (50 | ) | (181 | ) | (76 | ) | |||||
| Other Assets and Liabilities | 73 | 66 | (24 | ) | |||||||
| Total Cash Flows from Operating Activities | 1,207 | 916 | 1,158 | ||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Capital Expenditures | (770 | ) | (811 | ) | (881 | ) | |||||
| Asset Dispositions (Note 5) | 12 | 2 | 12 | ||||||||
| Short Term Securities Acquired | (113 | ) | (68 | ) | (83 | ) | |||||
| Short Term Securities Redeemed | 106 | 68 | 83 | ||||||||
| Notes Receivable | (7 | ) | (55 | ) | — | ||||||
| Other Transactions | (28 | ) | (3 | ) | (10 | ) | |||||
| Total Cash Flows from Investing Activities | (800 | ) | (867 | ) | (879 | ) | |||||
| Cash Flows from Financing Activities: | |||||||||||
| Short Term Debt and Overdrafts Incurred | 1,880 | 1,944 | 1,054 | ||||||||
| Short Term Debt and Overdrafts Paid | (1,933 | ) | (1,795 | ) | (1,046 | ) | |||||
| Long Term Debt Incurred | 5,942 | 6,455 | 6,463 | ||||||||
| Long Term Debt Paid | (6,008 | ) | (6,469 | ) | (6,342 | ) | |||||
| Common Stock Issued (Note 18) | 1 | 4 | 14 | ||||||||
| Common Stock Repurchased (Note 20) | — | (220 | ) | (400 | ) | ||||||
| Common Stock Dividends Paid (Note 20) | (148 | ) | (138 | ) | (110 | ) | |||||
| Transactions with Minority Interests in Subsidiaries | (26 | ) | (31 | ) | (7 | ) | |||||
| Debt Related Costs and Other Transactions | (15 | ) | 7 | (41 | ) | ||||||
| Total Cash Flows from Financing Activities | (307 | ) | (243 | ) | (415 | ) | |||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | 1 | (43 | ) | 57 | |||||||
| Net Change in Cash, Cash Equivalents and Restricted Cash | 101 | (237 | ) | (79 | ) | ||||||
| Cash, Cash Equivalents and Restricted Cash at Beginning of the Year | 873 | 1,110 | 1,189 | ||||||||
| Cash, Cash Equivalents and Restricted Cash at End of the Year | $ | 974 | $ | 873 | $ | 1,110 | |||||
|
| Year Ended December 31, |
| |||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
| |||
Net Income (Loss) |
| $ | 780 |
|
| $ | (1,250 | ) |
| $ | (297 | ) |
Adjustments to Reconcile Net Income (Loss) to Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
| |||
Depreciation and Amortization |
|
| 883 |
|
|
| 859 |
|
|
| 795 |
|
Amortization and Write-Off of Debt Issuance Costs |
|
| 14 |
|
|
| 11 |
|
|
| 15 |
|
Amortization of Inventory Fair Value Adjustment Related to the Cooper Tire Acquisition (Note 2) |
|
| 110 |
|
|
| 0 |
|
|
| 0 |
|
Transaction and Other Costs Related to the Cooper Tire Acquisition (Note 2) |
|
| 56 |
|
|
| 0 |
|
|
| 0 |
|
Cash Payments for Transaction and Other Costs Related to the Cooper Tire Acquisition |
|
| (42 | ) |
|
| 0 |
|
|
| 0 |
|
Goodwill and Other Asset Impairments (Notes 12 and 13) |
|
| 0 |
|
|
| 330 |
|
|
| 0 |
|
Provision for Deferred Income Taxes |
|
| (471 | ) |
|
| 23 |
|
|
| 323 |
|
Net Pension Curtailments and Settlements (Note 18) |
|
| 43 |
|
|
| 18 |
|
|
| 6 |
|
Net Rationalization Charges (Note 4) |
|
| 93 |
|
|
| 159 |
|
|
| 205 |
|
Rationalization Payments |
|
| (197 | ) |
|
| (186 | ) |
|
| (59 | ) |
Net (Gains) Losses on Asset Sales (Note 6) |
|
| (20 | ) |
|
| 2 |
|
|
| (16 | ) |
Operating Lease Expense (Note 15) |
|
| 295 |
|
|
| 286 |
|
|
| 292 |
|
Operating Lease Payments (Note 15) |
|
| (278 | ) |
|
| (268 | ) |
|
| (267 | ) |
Pension Contributions and Direct Payments |
|
| (91 | ) |
|
| (56 | ) |
|
| (79 | ) |
Changes in Operating Assets and Liabilities, Net of Asset Acquisitions and Dispositions: |
|
|
|
|
|
|
|
|
| |||
Accounts Receivable |
|
| (300 | ) |
|
| 132 |
|
|
| 71 |
|
Inventories |
|
| (982 | ) |
|
| 713 |
|
|
| 6 |
|
Accounts Payable — Trade |
|
| 923 |
|
|
| 26 |
|
|
| 5 |
|
Compensation and Benefits |
|
| 64 |
|
|
| 95 |
|
|
| 184 |
|
Other Current Liabilities |
|
| (11 | ) |
|
| 26 |
|
|
| (50 | ) |
Other Assets and Liabilities |
|
| 193 |
|
|
| 195 |
|
|
| 73 |
|
Total Cash Flows from Operating Activities |
|
| 1,062 |
|
|
| 1,115 |
|
|
| 1,207 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
| |||
Acquisition of Cooper Tire, net of cash and restricted cash acquired (Note 2) |
|
| (1,856 | ) |
|
| 0 |
|
|
| 0 |
|
Capital Expenditures |
|
| (981 | ) |
|
| (647 | ) |
|
| (770 | ) |
Asset Dispositions |
|
| 14 |
|
|
| 0 |
|
|
| 12 |
|
Short Term Securities Acquired |
|
| (118 | ) |
|
| (96 | ) |
|
| (113 | ) |
Short Term Securities Redeemed |
|
| 125 |
|
|
| 96 |
|
|
| 106 |
|
Notes Receivable |
|
| 16 |
|
|
| (13 | ) |
|
| (7 | ) |
Other Transactions |
|
| 7 |
|
|
| (7 | ) |
|
| (28 | ) |
Total Cash Flows from Investing Activities |
|
| (2,793 | ) |
|
| (667 | ) |
|
| (800 | ) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
| |||
Short Term Debt and Overdrafts Incurred |
|
| 1,095 |
|
|
| 1,651 |
|
|
| 1,880 |
|
Short Term Debt and Overdrafts Paid |
|
| (1,047 | ) |
|
| (1,593 | ) |
|
| (1,933 | ) |
Long Term Debt Incurred |
|
| 9,862 |
|
|
| 6,251 |
|
|
| 5,942 |
|
Long Term Debt Paid |
|
| (8,504 | ) |
|
| (6,059 | ) |
|
| (6,008 | ) |
Common Stock Issued |
|
| 9 |
|
|
| 0 |
|
|
| 1 |
|
Common Stock Dividends Paid (Note 21) |
|
| 0 |
|
|
| (37 | ) |
|
| (148 | ) |
Transactions with Minority Interests in Subsidiaries |
|
| (13 | ) |
|
| (10 | ) |
|
| (26 | ) |
Debt Related Costs and Other Transactions |
|
| (93 | ) |
|
| 0 |
|
|
| (15 | ) |
Total Cash Flows from Financing Activities |
|
| 1,309 |
|
|
| 203 |
|
|
| (307 | ) |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash |
|
| (38 | ) |
|
| (1 | ) |
|
| 1 |
|
Net Change in Cash, Cash Equivalents and Restricted Cash |
|
| (460 | ) |
|
| 650 |
|
|
| 101 |
|
Cash, Cash Equivalents and Restricted Cash at Beginning of the Period |
|
| 1,624 |
|
|
| 974 |
|
|
| 873 |
|
Cash, Cash Equivalents and Restricted Cash at End of the Period |
| $ | 1,164 |
|
| $ | 1,624 |
|
| $ | 974 |
|
The accompanying notes are an integral part of these consolidated financial statements.
64
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies
A summary of the significant accounting policies used in the preparation of the accompanying consolidated financial statements follows:
Basis of Presentation
On June 7, 2021 (the “Closing Date”), we completed the acquisition of Cooper Tire & Rubber Company (“Cooper Tire”), pursuant to the terms of the Agreement and Plan of Merger, dated as of February 22, 2021 (the “Merger Agreement”), by and among Goodyear, Vulcan Merger Sub Inc., a direct, wholly owned subsidiary of Goodyear (“Merger Sub”), and Cooper Tire. On the Closing Date, Merger Sub merged with and into Cooper Tire, with Cooper Tire surviving the merger and becoming a wholly owned subsidiary of Goodyear (the “Merger”). As a result of the Merger, Cooper Tire, along with its subsidiaries, became subsidiaries of Goodyear. For further information about the Merger, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition.
We maintain a robust business continuity plan to adequately respond to situations such as the COVID-19 pandemic, including a framework for remote work arrangements, in order to effectively maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures.
Recently Adopted Accounting Standards
Effective January 1, 2019,2021, we adopted an accounting standards update with new guidance intended to increase transparencywhich eliminates differences in practice among fair value accounting for investments in equity securities, equity method investments and comparability among organizations relating to leases. The new guidance requires lessees to recognize a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. The standards update retained a dual model for lease classification, requiring leases to be classified as finance or operating leases to determine recognition in the statements of operations and cash flows; however, substantially all leases are now required to be recognized on the balance sheet. The standards update also requires quantitative and qualitative disclosures regarding key information about leasing arrangements. We elected the optional transition method and applied the new guidance at the date of adoption, without adjusting the comparative periods presented. We also elected the practical expedients permitted under the transition guidance that retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard, and we have elected to not evaluate land easements that existed as of, or expired before, adoption of the new standard. In addition, we did not reassess whether any contracts entered into prior to adoption are leases.
| Balance at | Adjustment for | Balance at | |||||||||
| (In millions) | December 31, 2018 | New Standard | January 1, 2019 | ||||||||
| Deferred Income Taxes — Asset | $ | 1,847 | $ | 7 | $ | 1,854 | |||||
| Operating Lease Right-of-Use Assets | — | 882 | 882 | ||||||||
| Property, Plant and Equipment, less Accumulated Depreciation | 7,259 | (16 | ) | 7,243 | |||||||
| Operating Lease Liabilities due Within One Year | — | 204 | 204 | ||||||||
| Operating Lease Liabilities | — | 684 | 684 | ||||||||
| Long Term Debt and Finance Leases | 5,110 | 14 | 5,124 | ||||||||
| Other Long Term Liabilities | 471 | (6 | ) | 465 | |||||||
| Retained Earnings | 6,597 | (23 | ) | 6,574 | |||||||
In January 2020,November 2021, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update with clarifying guidance on the applicationdisclosure of the measurement alternativecertain types of government assistance. Specifically, on an annual basis, entities will be required to make certain disclosures for certain equity securities and the scoping assessmenttransactions with a government that are accounted for forward contracts and purchased options on certain securities.by analogizing to a grant model. The standards update is effective either prospectively or retrospectively for fiscal years and interimannual periods beginning after December 15, 2020,2021, with early adoption permitted. We are currently assessing the impact of this standards update on our consolidated financial statements.
In December 2019,Acquisitions
We include the FASB issued an accounting standards update with new guidance that changesresults of operations of the accounting for certain income tax transactions. The standards update is effective for fiscalyears and interim periods beginning after December 15, 2020, with early adoption permitted. The amendmentsbusinesses in this update related to separatewhich we acquire a controlling financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to changesinterest in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis. All other amendments should be applied on a prospective basis. We are currently assessing the impact of this standards update on our consolidated financial statements.
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 carried at cost. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the consolidated financial statements. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to:
65
Changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.
Revenue Recognition and Accounts Receivable Valuation
Sales are recognized when obligations under the terms of a contract are satisfied and control is transferred. This generally occurs with shipment or delivery, depending on the terms of the underlying contract, or when services have been rendered. Sales are measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The amount of consideration we receive and sales we recognize can vary due to changes in sales incentives, rebates, rights of return or other items we offer our customers, for which we estimate the expected amounts based on an analysis of historical experience,
Appropriate provisions are made for uncollectible accounts based on historical loss experience, portfolio duration, economic conditions and credit risk, considering both expected future losses as well as current incurred losses. The adequacy of the allowances are assessed quarterly. Effective January 1, 2020, we adopted, using the modified retrospective adoption approach, an accounting standards update with new guidance related to the accounting for credit losses on financial instruments. Our adoption of this standards update resulted in adjustments in 2020 that decreased Retained Earnings by $12 million, with Accounts Receivable decreasing by $15 million and Deferred Income Taxes increasing by $3 million.
Research and Development Costs
Research and development costs include, among other things, materials, equipment, compensation and contract services. These costs are expensed as incurred and included as a component of CGS. Research and development expenditures were $430$496 million, $424$390 million and $406$430 million in 2021, 2020 and 2019, 2018 and 2017, respectively.
Warranty
Warranties are provided on the sale of certain of our products and services and an accrual for estimated future claims is recorded at the time revenue is recognized. Tire replacement under most of the warranties we offer is on a prorated basis. Warranty reserves are based on past claims experience, sales history and other considerations. Refer to Note to the Consolidated Financial Statements No. 19,20, Commitments and Contingent Liabilities, in this Form 10-K.Liabilities.
Environmental Cleanup Matters
We expense environmental costs related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. We determine our liability on a site by site basis and record a liability at the time when it is probable and can be reasonably estimated. Our estimated liability is reduced to reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective sharesshare of the relevant costs. Our estimated liability is not discounted or reduced for possible recoveries from insurance carriers. Refer to Note to the Consolidated Financial Statements No. 19,20, Commitments and Contingent Liabilities, in this Form 10-K.Liabilities.
Legal Costs
We record a liability for estimated legal and defense costs related to pending general and product liability claims, environmental matters and workers’ compensation claims. Refer to Note to the Consolidated Financial Statements No. 19,20, Commitments and Contingent Liabilities, in this Form 10-K.Liabilities.
Advertising Costs
Costs incurred for producing and communicating advertising are generally expensed when incurred as a component of selling, administrative and general expense ("SAG"). Costs incurred under our cooperative advertising programs with dealers and franchisees are generally recorded as reductions of sales as related revenues are recognized. Advertising costs, including costs
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for our cooperative advertising programs with dealers and franchisees, were $353$382 million, $345$304 million and $320$353 million in 2021, 2020 and 2019, 2018 and 2017, respectively.
Rationalizations
We record costs for rationalization actions implemented to reduce excess and high-cost manufacturing capacity and operating and administrative costs. Associate-related costs include severance, supplemental unemployment compensation and benefits, medical benefits, pension curtailments, postretirement benefits, and other termination benefits. For ongoing benefit arrangements, a liability is recognized when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated. For one-time benefit arrangements, a liability is incurred and must be accrued at the date the plan is communicated to employees, unless they will be retained beyond a minimum retention period. In this case, the liability is calculated at the date the plan is communicated to employees and is accrued ratably over the future service period. For voluntary benefit arrangements, a liability is not estimable and is not recognized until eligible associates apply for the benefit and we accept the applications. Other costs generally include non-cancelable lease, costs, contract terminationstermination and relocation costs. A liability for these costs is recognized in the period in which the liability is incurred. Rationalization charges related to accelerated depreciation and asset impairments are recorded in CGS or SAG. Refer to Note to the Consolidated Financial Statements No. 3,4, Costs Associated with Rationalization Programs, in this Form 10-K.Programs.
Income taxes are recognized during the year in which transactions enter into the determination of financial statement income, with deferred taxes being provided for temporary differences between carrying values of assets and liabilities for financial reporting purposes and such carrying values as measured under applicable tax laws. The effect on deferred tax assets or liabilities of a change in the tax law or tax rate is recognized in the period the change is enacted. Valuation allowances are recorded to reduce net deferred tax assets to the amount that is more likely than not to be realized. The calculation of our tax liabilities also involves considering uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain income tax positions based on our estimate of whether it is more likely than not that additional taxes will be required and we report related interest and penalties as income taxes. To the extent that we incur expense under the global intangible low-taxed income provisions, we will treat it as a component of income tax expense in the period incurred. Our policy is to utilize an item-by-item approach to release stranded income tax effects from Accumulated Other Comprehensive Loss ("AOCL"). Refer to Note to the Consolidated Financial Statements No. 6,7, Income Taxes, in this Form 10-K.Taxes.
Cash and Cash Equivalents / Consolidated Statements of Cash Flows
Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less. Substantially all of our cash and short-term investment securities are held with investment grade rated counterparties. At December 31, 2019,2021, our cash investments with any single counterparty did not exceed $170approximately $310 million.
Cash flows associated with derivative financial instruments designated as hedges of identifiable transactions or events are classified in the same category as the cash flows from the related hedged items. Cash flows associated with derivative financial instruments not designated as hedges are classified as operating activities. Bank overdrafts, if any, are recorded within Notes Payable and Overdrafts. Cash flows associated with bank overdrafts are classified as financing activities.
Customer prepayments for products and government grants received that predominately relate to operations are reported as operating activities. Government grants received that are predominately related to capital expenditures are reported as investing activities. The Consolidated Statements of Cash Flows are presented net of finance leases of $36$39 million, $6$3 million and $5$36 million originating in the years ended December 31, 2021, 2020 and 2019, 2018respectively, and 2017, respectively.accrued capital expenditures financed with extended terms of $15 million in 2020 which were paid in 2021. Cash flows from investing activities in 2021 exclude $257 million of accrued capital expenditures remaining unpaid at December 31, 2021, and include payment for $224 million of capital expenditures that were accrued and unpaid at December 31, 2020. Cash flows from investing activities in 2020 exclude $224 million of accrued capital expenditures remaining unpaid at December 31, 2020, and include payment for $243 million of capital expenditures that were accrued and unpaid at December 31, 2019. Cash flows from investing activities in 2019 exclude $243$243 million of accrued capital expenditures remaining unpaid at December 31, 2019, and include payment for $266$266 million of capital expenditures that were accrued and unpaid at December 31, 2018. Cash flows from investing activities in 2018 exclude $266 million
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Restricted Cash
The following table provides a reconciliation of Cash, Cash Equivalents and Restricted Cash as reported within the Consolidated Statements of Cash Flows:
|
| December 31, |
| |||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cash and Cash Equivalents |
| $ | 1,088 |
|
| $ | 1,539 |
|
| $ | 908 |
|
Restricted Cash(1) |
|
| 76 |
|
|
| 85 |
|
|
| 66 |
|
Total Cash, Cash Equivalents and Restricted Cash |
| $ | 1,164 |
|
| $ | 1,624 |
|
| $ | 974 |
|
| December 31, | |||||||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Cash and Cash Equivalents | $ | 908 | $ | 801 | $ | 1,043 | |||||
| Restricted Cash | 66 | 72 | 67 | ||||||||
| Total Cash, Cash Equivalents and Restricted Cash | $ | 974 | $ | 873 | $ | 1,110 | |||||
Restricted Cash which is included in Prepaid Expenses and Other Current Assets in the Consolidated Balance Sheets, primarily represents amounts required to be set aside in connection withrelation to (i) accounts receivable factoring programs.programs and (ii) change-in-control provisions of certain Cooper Tire compensation plans. The restrictions lapse when cash from factored accounts receivable is remitted to the purchaser of those receivables.receivables or as the compensation payments are made, respectively. At December 31, 2021, $62 million and $14 million were recorded in Prepaid Expenses and Other Current Assets and Other Assets in the Consolidated Balance Sheets, respectively. At December 31, 2020, $85 million was recorded in Prepaid Expenses and Other Current Assets in the Consolidated Balance Sheets.
Restricted Net Assets
In certain countries where we operate, transfers of funds into or out of such countries by way of dividends, loans or advances are generally or periodically subject to various governmental regulations. In addition, certain of our credit agreements and other debt instruments limit the ability of foreign subsidiaries to make cash distributions. At December 31, 2019,2021, approximately $711$1,006 million of net assets were subject to such regulations or limitations.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out or the average cost method. Costs include direct material, direct labor and applicable manufacturing and engineering overhead. We allocate fixed manufacturing overheads based on normal production capacity and recognize abnormal manufacturing costs as period costs. We
Goodwill and Other Intangible Assets
Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Goodwill and intangible assets with indefinite useful lives are not amortized but are assessed for impairment annually 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 to its carrying amount. Under the qualitative assessment, an entity is not required to calculate the fair value unless the entity determines that it is more likely than not that the fair value is less than the carrying amount. If under the quantitative assessment the fair value is less than the carrying amount, then an impairment loss will be recorded for the difference between the carrying value and the fair value, limited to the carrying amount of goodwill. We perform a quantitative assessment at least once every five years.
In addition to annual testing, impairment testing is conducted when events occur or circumstances change that would more likely than not reduce the fair value of the asset below its carrying amount. Goodwill and intangible assets with indefinite useful lives would be written down to fair value if considered impaired. Intangible assets with finite useful lives are amortized to their estimated residual values over such finite lives, and reviewed for impairment whenever events or circumstances warrant such a review. Refer to Note to the Consolidated Financial Statements No. 11,12, Goodwill and Intangible Assets, in this Form 10-K.Assets.
Investments
Investments in marketable securities are stated at fair value. Fair value is determined using quoted market prices at the end of the reporting period and, when appropriate, exchange rates at that date. Unrealized gains and losses on marketable equity securities are recorded in earnings. Unrealized gains and losses on marketable debt securities classified as available-for-sale are recorded in AOCL, net of tax. Our investmentinvestments in TireHub, isLLC (“TireHub”), a distribution joint venture in the U.S., and ACTR Company Limited, a tire manufacturing joint venture in Vietnam, are accounted for under the equity method.
We regularly review our investments to determine whether a decline in fair value below their recorded amount is other than temporary. If the decline in fair value is judged to be other than temporary, the investment is written down to fair value and the amount of the write-down is included in the Consolidated Statements of Operations. Refer to Notes to the Consolidated Financial Statements No. 12,13, Other Assets and Investments, No. 16,17, Fair Value Measurements, and No. 21,22, Reclassifications out of Accumulated Other Comprehensive Loss, in this Form 10-K.Loss.
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Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method. Additions and improvements that substantially extend the useful life of property, plant and equipment, and interest costs incurred during the construction period of major projects are capitalized. Government grants to us that are predominately related to capital expenditures are recorded as reductions of the cost of the associated assets. Repair and maintenance costs are expensed as incurred. Property, plant and equipment are depreciated to their estimated residual values over their estimated useful lives, and reviewed for impairment whenever events or circumstances warrant such a review. Depreciation expense for property, plant and equipment was $793$862 million, $776$857 million and $779$793 million in 2019, 20182021, 2020 and 2017,2019, respectively. Refer to Notes to the Consolidated Financial Statements No. 4,5, Interest Expense, and No. 13,14, Property, Plant and Equipment.
Leases
Effective January 1, 2019, we adopted, using the modified retrospective adoption approach, an accounting standards update with new guidance relating to leases. Our adoption of this standards update resulted in adjustments that increased Total Assets by $873 million, increased Long Term Debt and Finance Leases by $14 million, and decreased Goodyear Shareholders’ Equity and Total Shareholders’ Equity by $23 million.
We determine if an arrangement is or contains a lease at inception. We enter into leases primarily for our distribution facilities, manufacturing equipment, administrative offices, retail stores, vehicles and data processing equipment under varying terms and conditions. Our leases have remaining lease terms of less than 1 year to approximately 50 years. Most of our leases include options to extend the lease, with renewal terms ranging from 1 to 50 years or more, and some include options to terminate the lease within 1 year. If it is reasonably certain that an option to extend or terminate a lease will be exercised, that option is considered in the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize short-term lease expense for these leases on a straight-line basis over the lease term.
Certain of our lease agreements include variable lease payments, generally based on consumer price indices. Variable lease payments that are assigned to an index are determined based on the initial index at commencement, and the variability based on changes in the index is accounted for as it changes. The variable portion of payments is not included in the initial measurement of the right-of-use asset or lease liability due to the uncertainty of the payment amount and are recorded as lease expense in the period incurred. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We have lease agreements with lease and non-lease components, which are accounted for separately.
Operating leases are included in Operating Lease Right-of-Use (“ROU”) Assets, Operating Lease Liabilities due Within One Year and Operating Lease Liabilities on our Consolidated Balance Sheets. Finance leases are included in Property, Plant and Equipment, Long Term Debt and Finance Leases due Within One Year, and Long Term Debt and Finance Leases on our Consolidated Balance Sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Generally, we use our incremental borrowing rate based on the information available at the commencement date in this Form 10-K.determining the present value of lease payments, unless there is a rate stated in the lease agreement. Operating lease expense is recognized on a straight-line basis over the lease term. Refer to Note to the Consolidated Financial Statements No. 15, Leases.
Foreign Currency Translation
The functional currency for most subsidiaries outside the United States is the local currency. Financial statements of these subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses. The U.S. dollar is used as the functional currency in countries with a history of high inflation and in countries that predominantly sell into the U.S. dollar export market. For all operations, gains or losses from remeasuring foreign currency transactions into the functional currency are included in Other (Income) Expense. Translation adjustments are recorded in AOCL. Income taxes are generally not provided for foreign currency translation adjustments.
Derivative Financial Instruments and Hedging Activities
To qualify for hedge accounting, hedging instruments must be designated as hedges and meet defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or changes in fair value of the hedging instrument substantially offset those of the position being hedged.
Derivative contracts are reported at fair value on the Consolidated Balance Sheets as Accounts Receivable, Other Assets, Other Current Liabilities or Other Long Term Liabilities. Deferred gains and losses on contracts designated as cash flow hedges are recorded net of tax in AOCL.
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Interest Rate Contracts — Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in AOCL. Amounts are transferred from AOCL and recognized in income as Interest Expense in the same period that the hedged item is recognized in income. Gains and losses on contracts designated as fair value hedges are recognized in income in the current period as Interest Expense. Gains and losses on contracts with no hedging designation are recorded in the current period in Other (Income) Expense.
Foreign Currency Contracts — Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in AOCL. Amounts are transferred from AOCL and recognized in income in the same period and on the same line that the hedged item is recognized in income. Gains and losses on contracts designated as fair value hedges, excluding premiums and discounts, are recorded in Other (Income) Expense in the current period. Gains and losses on contracts with no hedging designation are also recorded in Other (Income) Expense in the current period. We do not include premiums or discounts on forward currency contracts in our assessment of hedge effectiveness. Premiums and discounts on contracts designated as hedges are recorded in AOCL. The amounts are recognized in the Statement of Operations on a straight-line basis over the life of the contract on the same line that the hedged item is recognized in the Statement of Operations.
Net Investment Hedging — Nonderivative instruments denominated in foreign currencies are used from time to time to hedge net investments in foreign subsidiaries. Gains and losses on these instruments are deferred and recorded in AOCL as Foreign Currency Translation Adjustments. These gains and losses are only recognized in income upon the complete or partial sale of the related investment or the complete liquidation of the investment.
Termination of Contracts — Gains and losses (including deferred gains and losses in AOCL) are recognized in Other (Income) Expense when contracts are terminated concurrently with the termination of the hedged position. To the extent that such position remains outstanding, gains and losses are amortized to Interest Expense or to Other (Income) Expense over the remaining life of that position. Gains and losses on contracts that we temporarily continue to hold after the early termination of a hedged position, or that otherwise no longer qualify for hedge accounting, are recognized in Other (Income) Expense. Refer to Note to the Consolidated Financial Statements No. 15,16, Financing Arrangements and Derivative Financial Instruments, in this Form 10-K.Instruments.
Stock-Based Compensation
We measure compensation cost arising from the grant of stock-based awards to employees at fair value and recognize such cost in income over the period during which the service is provided, usually the vesting period. We recognize compensation expense using the straight-line approach.
Stock-based awards to employees include grants of performance share units, restricted stock units and stock options. We measure the fair value of grants of performance share units and restricted stock units based primarily on the closing market price of a share of our common stock on the date of the grant, modified as appropriate to take into account the features of such grants.
We estimate the fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows:
Refer to Note to the Consolidated Financial Statements No. 18,19, Stock Compensation Plans, in this Form 10-K.Plans.
Earnings Per Share of Common Stock
Basic earnings per share are computed based on the weighted average number of common shares outstanding. As part of the Cooper Tire acquisition in June 2021, Goodyear issued approximately 46 million shares of common stock. This issuance is included in our weighted average shares outstanding balance, prorated for 2021 since the Closing Date. Diluted earnings per share primarily reflects the dilutive impact of outstanding stock options and other stock based awards. All earnings per share amounts in these notes to the consolidated financial statements are diluted, unless otherwise noted. Refer to Note to the Consolidated Financial Statements No. 7,8, Earnings Per Share, in this Form 10-K.Share.
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Fair Value Measurements
Valuation Hierarchy
Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. Valuation methodologies used for assets and liabilities measured at fair value are as follows:
Investments
Where quoted prices are available in an active market, investments are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices are not available, fair values are estimated using quoted prices of securities with similar characteristics or inputs other than quoted prices that are observable for the security, and would be classified within Level 2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities would be classified within Level 3 of the valuation hierarchy.
Derivative Financial Instruments
Exchange-traded derivative financial instruments that are valued using quoted prices would be classified within Level 1 of the valuation hierarchy. Derivative financial instruments valued using internally-developed models that use as their basis readily observable market parameters are classified within Level 2 of the valuation hierarchy. Derivative financial instruments that are valued based upon models with significant unobservable market parameters, and that are normally traded less actively, would be classified within Level 3 of the valuation hierarchy. Refer to Notes to the Consolidated Financial Statements No. 15,16, Financing Arrangements and Derivative Financial Instruments, and No. 16,17, Fair Value Measurements, in this Form 10-K.Measurements.
Reclassifications and Adjustments
Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation. In the second quarter of 2021, we recorded an out of period adjustment of $8 million of income related to accrued freight charges in Americas. Additionally, in the first quarter of 2021, we recorded out of period adjustments totaling $20 million of expense, primarily related to the valuation of inventory in Americas. The adjustments relate to the years, and interim periods therein, of 2016 to 2020. The adjustments did not have a material effect on any of the periods impacted.
Note 2. Cooper Tire Acquisition
On June 7, 2021, we completed our acquisition of all of the outstanding shares of common stock of Cooper Tire pursuant to the terms of the Merger Agreement. Cooper Tire’s results of operations have been included in our consolidated financial statements since the Closing Date. Cooper Tire stockholders received $41.75 per share in cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock per share of Cooper Tire common stock (the "Merger Consideration") as consideration pursuant to the terms of the Merger Agreement, which amounted to approximately $3.1 billion. The acquisition will expand Goodyear’s product offering by combining two portfolios of complementary brands.
We used the net proceeds from the issuance of new senior notes with an aggregate principal amount of $1.45 billion, together with cash on hand and borrowings under our first lien revolving credit facility, to finance the acquisition of Cooper Tire and related transaction costs. For further information regarding the new senior notes and the first lien revolving credit facility, refer to Note to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments.
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The calculation of the Merger Consideration is as follows:
(In millions, except share and per share amounts) |
| Shares |
|
| Per Share (4) |
|
| Total |
| |||
Cash paid for Cooper Tire Shares(1) |
|
|
|
|
|
|
| $ | 2,121 |
| ||
Cash paid for other Cooper Tire incentive compensation awards(2) |
|
|
|
|
|
|
|
| 34 |
| ||
Cash component of the Merger Consideration |
|
|
|
|
|
|
| $ | 2,155 |
| ||
Shares of Goodyear Common Stock issued to Cooper Tire Stockholders(3) |
|
| 46,060,349 |
|
| $ | 20.46 |
|
|
| 942 |
|
Merger Consideration |
|
|
|
|
|
|
| $ | 3,097 |
| ||
(In millions, except share and per share amounts) |
| Shares |
|
| Per Share |
|
| Total |
| |||
Shares of Cooper Tire Common Stock outstanding |
|
| 50,523,922 |
|
|
|
|
|
|
| ||
Shares issuable pursuant to conversion of share units |
|
| 269,238 |
|
|
|
|
|
|
| ||
Cooper Tire Shares |
|
| 50,793,160 |
|
| $ | 41.75 |
|
| $ | 2,121 |
|
|
| Shares |
|
| Exchange |
|
| Total |
| |||
Cooper Tire Shares |
|
| 50,793,160 |
|
|
|
|
|
|
| ||
Less: Cooper Tire Shares settled in cash(5) |
|
| 9,975 |
|
|
|
|
|
|
| ||
|
|
| 50,783,185 |
|
|
| 0.907 |
|
|
| 46,060,349 |
|
The following table presents supplemental cash flow information related to the acquisition of Cooper Tire:
(In millions) |
|
|
| |
Cash component of the Merger Consideration |
| $ | 2,155 |
|
Less: |
|
|
| |
Cash acquired |
|
| 231 |
|
Restricted cash acquired |
|
| 68 |
|
Acquisition of Cooper Tire, net of cash and restricted cash acquired |
| $ | 1,856 |
|
The Consolidated Statements of Cash Flows are presented net of the stock component of the Merger Consideration, which represents a non-cash transaction.
Under the acquisition method of accounting, the Merger Consideration is allocated, as of the Closing Date, to the identifiable assets acquired and liabilities assumed of Cooper Tire, which are recognized and measured at fair value based on management’s estimates, available information, and supportable assumptions that management considers reasonable. Certain of these fair value estimates, including those related to Property, Plant and Equipment, certain liabilities and Goodwill, are preliminary and dependent upon management completing further analyses and studies. Given the complex nature of the related valuations and analyses to be completed and the timing of the acquisition, the preliminary purchase price allocation is subject to change. The final valuation of assets acquired and liabilities assumed may be materially different from the estimated values shown below.
Since the initial measurement of the identified assets acquired and liabilities assumed, progress was made in completing certain of our additional valuations and analyses. As such, we updated our initial allocation of the Merger Consideration that was
72
completed during the second quarter of 2021. Principle changes include (i) decreasing the value attributed to customer relationships primarily to reflect updated assumptions related to customer attrition rates, (ii) updating the value attributed to trade names to reflect our long-term view of how each acquired brand fits into the overall product portfolio of the combined company and the appropriate royalty rate to value each acquired brand based on expected profitability, (iii) decreasing the value attributed to Property, Plant and Equipment primarily to reflect updated assumptions related to the estimated economic value of certain underlying assets, (iv) decreasing the value attributed to pension and other postretirement benefit liabilities primarily to reflect updated plan population data, (v) increasing the value attributed to a liability for environmental matters primarily to reflect updated estimated lifecycle remediation cost data, and (vi) a reclassification between Accounts Receivable and Accounts Payable to conform to Goodyear's classification of customer rebate and discount program liabilities. These adjustments were recorded net of adjustments to Deferred Tax Liabilities with the corresponding offset recorded to Goodwill, as applicable.
The following table sets forth measurement period changes since the second quarter of 2021, as well as the updated and initial preliminary allocation of the Merger Consideration to the estimated fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of Cooper Tire, with the excess recorded to Goodwill, as of the Closing Date:
(In millions) |
| Updated |
|
| Measurement |
|
| Initial |
| |||
Cash and Cash Equivalents |
| $ | 231 |
|
| $ | 0 |
|
| $ | 231 |
|
Accounts Receivable |
|
| 541 |
|
|
| (80 | ) |
|
| 621 |
|
Inventories |
|
| 695 |
|
|
| 2 |
|
|
| 693 |
|
Property, Plant and Equipment |
|
| 1,348 |
|
|
| (24 | ) |
|
| 1,372 |
|
Goodwill |
|
| 618 |
|
|
| 143 |
|
|
| 475 |
|
Intangible Assets |
|
| 926 |
|
|
| (160 | ) |
|
| 1,086 |
|
Other Assets |
|
| 357 |
|
|
| (5 | ) |
|
| 362 |
|
|
|
| 4,716 |
|
|
| (124 | ) |
|
| 4,840 |
|
|
|
|
|
|
|
|
|
|
| |||
Accounts Payable — Trade |
|
| 381 |
|
|
| (83 | ) |
|
| 464 |
|
Compensation and Benefits |
|
| 356 |
|
|
| (30 | ) |
|
| 386 |
|
Debt, Finance Leases and Notes Payable and Overdrafts |
|
| 151 |
|
|
| 0 |
|
|
| 151 |
|
Deferred Tax Liabilities, net |
|
| 292 |
|
|
| (55 | ) |
|
| 347 |
|
Other Liabilities |
|
| 418 |
|
|
| 44 |
|
|
| 374 |
|
Minority Equity |
|
| 21 |
|
|
| 0 |
|
|
| 21 |
|
|
|
| 1,619 |
|
|
| (124 | ) |
|
| 1,743 |
|
Merger Consideration |
| $ | 3,097 |
|
| $ | 0 |
|
| $ | 3,097 |
|
The estimated value of Inventory includes adjustments totaling $232 million, comprised of $122 million, primarily to adjust inventory valued on a last-in, first-out ("LIFO") basis to a current cost basis, and $110 million to step-up inventory to estimated fair value. The fair value step-up was fully amortized to CGS in 2021 as the related inventory was sold, which negatively impacted our 2021 results. We have eliminated the LIFO reserve on Cooper Tire’s U.S. inventories as we predominately determine the value of our inventory using the first-in, first-out ("FIFO") method. To estimate the fair value of inventory, we considered the components of Cooper Tire’s inventory, as well as estimates of selling prices and selling and distribution costs that were based on Cooper Tire’s historical experience.
The estimated value of Property, Plant and Equipment includes adjustments totaling $138 million to increase the net book value of $1,210 million to the preliminary fair value estimate of $1,348 million. This estimate is based on a combination of cost and market approaches, including appraisals, and preliminary expectations as to the duration of time we expect to realize benefits from those assets, as we continue to assess the underlying condition of Cooper Tire’s fixed assets.
The estimated fair values of identifiable intangible assets acquired were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. The estimated useful lives are based on our historical experience and expectations as to the duration of time we expect to realize benefits from those assets.
73
The estimated fair values of the identifiable intangible assets acquired, their weighted average estimated useful lives and the related valuation methodology are as follows:
(In millions) |
| Updated |
|
| Measurement |
|
| Initial |
|
| Weighted Average |
| Valuation Methodology | |||
Trade names (indefinite-lived) |
| $ | 560 |
|
| $ | 250 |
|
| $ | 310 |
|
| N/A |
| Relief-from-royalty |
Trade names (definite-lived) |
|
| 10 |
|
|
| (30 | ) |
|
| 40 |
|
| 14 years |
| Relief-from-royalty |
Customer relationships |
|
| 350 |
|
|
| (380 | ) |
|
| 730 |
|
| 12 years |
| Multi-period excess earnings |
Non-compete and other |
|
| 6 |
|
|
| 0 |
|
|
| 6 |
|
| 2 years |
| Discounted cash flow |
|
| $ | 926 |
|
| $ | (160 | ) |
| $ | 1,086 |
|
|
|
|
|
At the Closing Date, all of the calculated Goodwill of $618 million was allocated to our Americas segment. The goodwill consists of expected future economic benefits that will arise from expected future product sales, operating efficiencies and other synergies that may result from the Merger, including income tax synergies, and is not deductible for tax purposes.
Net sales and earnings related to Cooper Tire’s operations that have been included in our Consolidated Statements of Operations for the period from the Closing Date through December 31, 2021 are as follows:
(In millions) |
| Year Ended |
| |
Net Sales |
| $ | 2,126 |
|
Income (Loss) before Income Taxes |
|
| 166 |
|
Goodyear Net Income (Loss) |
|
| 135 |
|
During the year ended December 31, 2021, we incurred transaction and other costs in connection with the Merger totaling $56 million, including $10 million for a commitment fee related to a bridge term loan facility that was not utilized to finance the transaction and $6 million related to the post-combination settlement of certain Cooper Tire incentive compensation awards during the second quarter of 2021. For the year ended December 31, 2021, $50 million of these costs are included in Other (Income) Expense, with the remainder included in CGS and SAG in our Consolidated Statements of Operations.
Pro forma financial information
The following table summarizes, on a pro forma basis, the combined results of operations of Goodyear and Cooper Tire as though the acquisition and the related financing had occurred as of January 1, 2020. The pro forma results are not necessarily indicative of either the actual consolidated results had the acquisition of Cooper Tire occurred on January 1, 2020, nor are they indicative of future consolidated operating results.
|
| Year Ended December 31, |
| |||||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Net Sales |
| $ | 18,732 |
|
| $ | 14,902 |
|
Income (Loss) before Income Taxes |
|
| 791 |
|
|
| (1,281 | ) |
Goodyear Net Income (Loss) |
|
| 974 |
|
|
| (1,369 | ) |
These pro forma amounts have been calculated after applying Goodyear’s accounting policies and making certain adjustments, which primarily include: (i) depreciation adjustments relating to fair value step-ups to property, plant and equipment; (ii) amortization adjustments relating to fair value estimates of acquired intangible assets; (iii) incremental interest expense associated with the $1.45 billion senior note issuance and additional borrowings under our first lien revolving credit facility used, in part, to fund the acquisition, related debt issuance costs, and fair value adjustments related to Cooper Tire's debt; (iv) CGS adjustments relating to fair value step-ups to inventory and the change from LIFO to FIFO; (v) executive severance and stock-based compensation that was accelerated and settled on the Closing Date; and (vi) transaction related costs of both Goodyear and Cooper Tire.
74
Note 2.3. Net Sales
The following table shows disaggregated net sales from contracts with customers by major source for the year ended December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(In millions) |
| Americas |
|
| Europe, Middle East |
|
| Asia Pacific |
|
| Total |
| ||||
Tire unit sales |
| $ | 8,221 |
|
| $ | 4,669 |
|
| $ | 2,027 |
|
| $ | 14,917 |
|
Other tire and related sales |
|
| 653 |
|
|
| 454 |
|
|
| 95 |
|
|
| 1,202 |
|
Retail services and service related sales |
|
| 587 |
|
|
| 112 |
|
|
| 59 |
|
|
| 758 |
|
Chemical sales |
|
| 569 |
|
|
| 0 |
|
|
| — |
|
|
| 569 |
|
Other |
|
| 21 |
|
|
| 8 |
|
|
| 3 |
|
|
| 32 |
|
Net Sales by reportable segment |
| $ | 10,051 |
|
| $ | 5,243 |
|
| $ | 2,184 |
|
| $ | 17,478 |
|
The following table shows disaggregated net sales from contracts with customers by major source for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(In millions) |
| Americas |
|
| Europe, Middle East |
|
| Asia Pacific |
|
| Total |
| ||||
Tire unit sales(1) |
| $ | 5,138 |
|
| $ | 3,611 |
|
| $ | 1,590 |
|
| $ | 10,339 |
|
Other tire and related sales |
|
| 549 |
|
|
| 309 |
|
|
| 98 |
|
|
| 956 |
|
Retail services and service related sales |
|
| 538 |
|
|
| 95 |
|
|
| 55 |
|
|
| 688 |
|
Chemical sales |
|
| 317 |
|
|
| — |
|
|
| — |
|
|
| 317 |
|
Other |
|
| 14 |
|
|
| 5 |
|
|
| 2 |
|
|
| 21 |
|
Net Sales by reportable segment |
| $ | 6,556 |
|
| $ | 4,020 |
|
| $ | 1,745 |
|
| $ | 12,321 |
|
The following table shows disaggregated net sales from contracts with customers by major source for the year ended December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(In millions) |
| Americas |
|
| Europe, Middle East |
|
| Asia Pacific |
|
| Total |
| ||||
Tire unit sales |
| $ | 6,300 |
|
| $ | 4,300 |
|
| $ | 1,924 |
|
| $ | 12,524 |
|
Other tire and related sales |
|
| 659 |
|
|
| 363 |
|
|
| 117 |
|
|
| 1,139 |
|
Retail services and service related sales |
|
| 535 |
|
|
| 39 |
|
|
| 70 |
|
|
| 644 |
|
Chemical sales |
|
| 403 |
|
|
| — |
|
|
| — |
|
|
| 403 |
|
Other |
|
| 25 |
|
|
| 6 |
|
|
| 4 |
|
|
| 35 |
|
Net Sales by reportable segment |
| $ | 7,922 |
|
| $ | 4,708 |
|
| $ | 2,115 |
|
| $ | 14,745 |
|
| Europe, Middle East | |||||||||||||||
| (In millions) | Americas | and Africa | Asia Pacific | Total | |||||||||||
| Tire unit sales | $ | 6,300 | $ | 4,300 | $ | 1,924 | $ | 12,524 | |||||||
| Other tire and related sales | 659 | 363 | 117 | 1,139 | |||||||||||
| Retail services and service related sales | 535 | 39 | 70 | 644 | |||||||||||
| Chemical sales | 403 | — | — | 403 | |||||||||||
| Other | 25 | 6 | 4 | 35 | |||||||||||
| Net Sales by reportable segment | $ | 7,922 | $ | 4,708 | $ | 2,115 | $ | 14,745 | |||||||
| Europe, Middle East | |||||||||||||||
| (In millions) | Americas | and Africa | Asia Pacific | Total | |||||||||||
| Tire unit sales | $ | 6,381 | $ | 4,670 | $ | 2,009 | $ | 13,060 | |||||||
| Other tire and related sales | 656 | 379 | 127 | 1,162 | |||||||||||
| Retail services and service related sales | 564 | 34 | 77 | 675 | |||||||||||
| Chemical sales | 554 | — | — | 554 | |||||||||||
| Other | 13 | 7 | 4 | 24 | |||||||||||
| Net Sales by reportable segment | $ | 8,168 | $ | 5,090 | $ | 2,217 | $ | 15,475 | |||||||
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 $23 million and $39$23 million at both December 31, 20192021 and 2018, respectively.2020. Deferred revenue included in Other Long Term Liabilities in the Consolidated Balance Sheets totaled $31$21 million and $39$27 million at December 31, 20192021 and 2018,2020, respectively. We recognize deferred revenue after we have transferred control of the goods or services to the customer and all revenue recognition criteria are met.
The following table presents the balances of deferred revenue related to contracts with customers, and changes during the years ended December 31:
| (In millions) | 2019 | 2018 | |||||
| Balance at January 1 | $ | 78 | $ | 121 | |||
| Revenue deferred during period | 155 | 116 | |||||
| Revenue recognized during period | (179 | ) | (159 | ) | |||
| Impact of foreign currency translation | — | — | |||||
| Balance at December 31 | $ | 54 | $ | 78 | |||
|
|
|
|
|
|
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Balance at January 1 |
| $ | 50 |
|
| $ | 54 |
|
Revenue deferred during period |
|
| 211 |
|
|
| 169 |
|
Revenue recognized during period |
|
| (217 | ) |
|
| (173 | ) |
Impact of foreign currency translation |
|
| 0 |
|
|
| 0 |
|
Balance at December 31 |
| $ | 44 |
|
| $ | 50 |
|
75
Note 3.4. Costs Associated with Rationalization Programs
In order to maintain our global competitiveness, we have implemented rationalization actions over the past several years to reduce high-cost and excess manufacturing capacity and associate headcount.
The following table presents the roll-forward of the liability balance between periods:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| Associate- |
|
| Other Costs |
|
| Total |
| |||
Balance at December 31, 2018 |
| $ | 80 |
|
| $ | 1 |
|
| $ | 81 |
|
2019 charges(1) |
|
| 185 |
|
|
| 19 |
|
|
| 204 |
|
Incurred, net of foreign currency translation of $(2) million and $0 million, respectively |
|
| (41 | ) |
|
| (20 | ) |
|
| (61 | ) |
Reversed to the Statement of Operations |
|
| (4 | ) |
|
| 0 |
|
|
| (4 | ) |
Balance at December 31, 2019 |
| $ | 220 |
|
| $ | 0 |
|
| $ | 220 |
|
2020 charges(1) |
|
| 129 |
|
|
| 27 |
|
|
| 156 |
|
Incurred, net of foreign currency translation of $12 million and $0 million, respectively |
|
| (147 | ) |
|
| (27 | ) |
|
| (174 | ) |
Reversed to the Statement of Operations |
|
| (2 | ) |
|
| 0 |
|
|
| (2 | ) |
Balance at December 31, 2020 |
| $ | 200 |
|
| $ | 0 |
|
| $ | 200 |
|
2021 charges |
|
| 52 |
|
|
| 43 |
|
|
| 95 |
|
Incurred, net of foreign currency translation of $(8) million and $0 million, respectively |
|
| (162 | ) |
|
| (43 | ) |
|
| (205 | ) |
Reversed to the Statement of Operations |
|
| (2 | ) |
|
| 0 |
|
|
| (2 | ) |
Balance at December 31, 2021 |
| $ | 88 |
|
| $ | 0 |
|
| $ | 88 |
|
| (In millions) | Associate-Related Costs | Other Costs | Total | ||||||||
| Balance at December 31, 2016 | $ | 214 | $ | 5 | $ | 219 | |||||
2017 charges(1) | 103 | 32 | 135 | ||||||||
| Incurred, net of foreign currency translation of $25 million and $1 million, respectively | (94 | ) | (34 | ) | (128 | ) | |||||
| Reversed to the Statement of Operations | (13 | ) | — | (13 | ) | ||||||
| Balance at December 31, 2017 | $ | 210 | $ | 3 | $ | 213 | |||||
2018 charges(1) | 47 | 17 | 64 | ||||||||
| Incurred, net of foreign currency translation of $(3) million and $0 million, respectively | (158 | ) | (19 | ) | (177 | ) | |||||
| Reversed to the Statement of Operations | (19 | ) | — | (19 | ) | ||||||
| Balance at December 31, 2018 | $ | 80 | $ | 1 | $ | 81 | |||||
2019 charges(1) | 185 | 19 | 204 | ||||||||
| Incurred, net of foreign currency translation of $(2) million and $0 million, respectively | (41 | ) | (20 | ) | (61 | ) | |||||
| Reversed to the Statement of Operations | (4 | ) | — | (4 | ) | ||||||
| Balance at December 31, 2019 | $ | 220 | $ | — | $ | 220 | |||||
During the first quarter of 2021, we approved a plan primarily designed to modernize 2 of our tire manufacturing facilitiesreduce SAG in Germany. The plan is in furtherance of our strategy to strengthen the competitiveness of our manufacturing footprintEurope, Middle East, and increase production of premium, large-rim diameter consumer tires. The plan will result in approximately 1,100 job reductions as a result of changes to the layout of the plants, efficiency gains from new equipment and a reduction in the production of tires for declining, less profitable market segments.Africa ("EMEA"). We have $100$16 million accrued related to this plan at December 31, 2019,2021, which is expected to be substantially paid through 2022.
During the first quarter of 2021, we approved aincreased by $32 million the estimated total cost of our previously announced plan primarily to offer voluntary buy-outs to certain associates atpermanently close our Gadsden, Alabama tire manufacturing facility as part of("Gadsden"), primarily to reflect our strategydecision to strengthen the competitiveness of ourtransfer additional machinery and equipment from Gadsden to other tire manufacturing footprint by curtailing production of tires for declining, less profitable segments of the tire market. Approximately 740 eligible associates submitted buy-out applications between October 1 and November 1, 2019, which have been accepted by us.facilities. We have $69$14 million accrued at December 31, 2021 related to this plan, at December 31, 2019, which is expected to be substantially paid within the next twelve months. During the first and second quarters of 2021, we increased by $29 million the estimated total cost of our previously announced plan to modernize 2 of our tire manufacturing facilities in 2020.
The remainder of the accrual balance at December 31, 20192021 is expected to be substantially utilized in the next 12 months and includes $24$9 million related to global plans to reduce SAG headcount, $5 million related to the closed Amiens, France tire manufacturing facility, $5 million related to plans to reduce manufacturing headcount and improve operating efficiency in Europe, Middle EastEMEA, and Africa ("EMEA"), $16 million related to global plans to reduce SAG headcount and $7$3 million related to a plan primarily to reduce manufacturing headcount and improve operating efficiency in Americas.
76
The following table shows net rationalization charges included in Income (Loss) before Income Taxes:
| (In millions) | 2019 | 2018 | 2017 | |||||||||
| Current Year Plans | ||||||||||||
| Associate severance and other related costs | $ | 183 | $ | 40 | $ | 81 | ||||||
| Benefit plan curtailment and special termination benefits | 5 | — | — | |||||||||
| Other exit and non-cancelable lease costs | 11 | — | 2 | |||||||||
| Current Year Plans - Net Charges | $ | 199 | $ | 40 | $ | 83 | ||||||
| Prior Year Plans | ||||||||||||
| Associate severance and other related costs | $ | (2 | ) | $ | (11 | ) | $ | 9 | ||||
| Benefit plan curtailment and special termination benefits | — | (1 | ) | 13 | ||||||||
Other exit and non-cancelable lease costs | 8 | 16 | 30 | |||||||||
| Prior Year Plans - Net Charges | 6 | 4 | 52 | |||||||||
| Total Net Charges | $ | 205 | $ | 44 | $ | 135 | ||||||
| Asset write-off and accelerated depreciation charges | $ | 15 | $ | 4 | $ | 40 | ||||||
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Current Year Plans |
|
|
|
|
|
|
|
|
| |||
Associate severance and other related costs |
| $ | 19 |
|
| $ | 77 |
|
| $ | 183 |
|
Benefit plan curtailment and special termination benefits |
|
| 0 |
|
|
| 9 |
|
|
| 5 |
|
Other exit and non-cancelable lease costs |
|
| 0 |
|
|
| 16 |
|
|
| 11 |
|
Current Year Plans - Net Charges |
| $ | 19 |
|
| $ | 102 |
|
| $ | 199 |
|
Prior Year Plans |
|
|
|
|
|
|
|
|
| |||
Associate severance and other related costs |
| $ | 31 |
|
| $ | 50 |
|
| $ | (2 | ) |
Benefit plan curtailment and special termination benefits |
|
| 0 |
|
|
| (4 | ) |
|
| 0 |
|
Other exit and non-cancelable lease costs |
|
| 43 |
|
|
| 11 |
|
|
| 8 |
|
Prior Year Plans - Net Charges |
| $ | 74 |
|
| $ | 57 |
|
| $ | 6 |
|
Total Net Charges |
| $ | 93 |
|
| $ | 159 |
|
| $ | 205 |
|
Asset write-off and accelerated depreciation charges |
| $ | 1 |
|
| $ | 105 |
|
| $ | 15 |
|
Substantially all of the new charges in 20192021 related to future cash outflows. Current year plan charges for the year ended December 31, 2021 primarily related to a plan to reduce SAG headcount in EMEA.
Net prior year plan charges recognized in the year ended December 31, 20192021 include $105$37 million related to Gadsden, $26 million related to the modernization of two of our tire manufacturing facilities in Germany, and $10 million related to various plans to reduce manufacturing headcount and improve operating efficiency in EMEA. Net prior year plan charges also include reversals of $2 million for actions no longer needed for their originally intended purposes.
Ongoing rationalization plans had approximately $830 million in charges through 2021 and approximately $40 million is expected to be incurred in future periods.
Approximately 60 associates will be released under new plans initiated in 2021, of which approximately 15 were released through December 31, 2021. In 2021, approximately 300 associates were released under plans initiated in prior years. Approximately 200 associates remain to be released under all ongoing rationalization plans.
Rationalization activities initiated in 2020 include current year charges primarily related to the permanent closure of Gadsden. Net prior year plan charges recognized in 2020 include $30 million related to additional termination benefits for associates at the closed Amiens, France tire manufacturing facility. In addition, net prior year plan charges include $19 million related to the plan to modernize two of our tire manufacturing facilities in Germany, $76$5 million related to a plan primarily to offer voluntary buy-outs to certain associates at Gadsden, and $3 million related to the closure of our tire manufacturing facility in Philippsburg, Germany. Net prior year plan charges for the year ended December 31, 2020 also include reversals of $2 million for actions no longer needed for their originally intended purposes and a curtailment credit of $4 million for a postretirement benefit plan related to the exit of employees under an approved rationalization plan.
Rationalization activities initiated in 2019 include current year charges of $105 million related to the plan to modernize 2 of our tire manufacturing facilities in Germany, $76 million related to the Gadsden Alabamavoluntary buy-out plan, and $18$18 million related to separate plans to reduce manufacturing headcount and improve operating efficiency in Americas and EMEA.
Asset write-off and accelerated depreciation charges in 2020 and 2019 primarily related to the curtailment of production at our Gadsden, Alabama manufacturing facility.Gadsden. Asset write-off and accelerated depreciation charges for all periods were recorded in CGS.
Note 4.5. Interest Expense
Interest expense includes interest and the amortization of deferred financing fees and debt discounts, less amounts capitalized, as follows:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Interest expense before capitalization |
| $ | 403 |
|
| $ | 339 |
|
| $ | 351 |
|
Capitalized interest |
|
| (16 | ) |
|
| (15 | ) |
|
| (11 | ) |
|
| $ | 387 |
|
| $ | 324 |
|
| $ | 340 |
|
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Interest expense before capitalization | $ | 351 | $ | 335 | $ | 358 | |||||
| Capitalized interest | (11 | ) | (14 | ) | (23 | ) | |||||
| $ | 340 | $ | 321 | $ | 335 | ||||||
Cash payments for interest, net of amounts capitalized, were $324$316 million $331, $315 million and $314$324 million in 2021, 2020 and 2019, 2018 and 2017, respectively.
77
Note 5.6. Other (Income) Expense
|
|
|
|
|
|
| |||||||||||||||||
| (In millions) | 2019 | 2018 | 2017 |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||||||||
| Gain on TireHub transaction, net of transaction costs | $ | — | $ | (272 | ) | $ | — | ||||||||||||||||
| Non-service related pension and other postretirement benefits costs | 118 | 121 | 62 | ||||||||||||||||||||
| Interest income on indirect tax settlements in Brazil | (8 | ) | (38 | ) | — | ||||||||||||||||||
Non-service related pension and other postretirement benefits cost |
| $ | 92 |
| $ | 110 |
| $ | 118 |
| |||||||||||||
Interest income on a favorable indirect tax ruling in Brazil |
| (48 | ) |
| 0 |
| (8 | ) | |||||||||||||||
| Financing fees and financial instruments expense | 34 | 36 | 55 |
| 39 |
| 26 |
| 34 |
| |||||||||||||
| Net foreign currency exchange (gains) losses | (22 | ) | (16 | ) | (7 | ) |
| 29 |
| (9 | ) |
| (22 | ) | |||||||||
| General and product liability expense - discontinued products | 11 | 9 | — |
| 0 |
| 10 |
| 11 |
| |||||||||||||
| Royalty income | (19 | ) | (20 | ) | (32 | ) |
| (24 | ) |
| (19 | ) |
| (19 | ) | ||||||||
| Net (gains) losses on asset sales | (16 | ) | (1 | ) | (14 | ) |
| (20 | ) |
| 2 |
| (16 | ) | |||||||||
| Interest income | (18 | ) | (16 | ) | (13 | ) |
| (24 | ) |
| (14 | ) |
| (18 | ) | ||||||||
| Miscellaneous expense | 18 | 23 | 19 | ||||||||||||||||||||
Transaction costs |
| 40 |
| 0 |
| 0 |
| ||||||||||||||||
Miscellaneous (income) expense |
|
| 10 |
|
|
| 13 |
|
|
| 18 |
| |||||||||||
| $ | 98 | $ | (174 | ) | $ | 70 |
| $ | 94 |
|
| $ | 119 |
|
| $ | 98 |
| |||||
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. Non-service related pension and other postretirement benefits cost includes net pension settlement and curtailment charges of $43 million, $18 million and $6 million in 2021, 2020 and 2019, respectively. For further information, refer to Note to the Consolidated Financial Statements No. 17,18, Pension, Other Postretirement Benefits and Savings Plans, in this Form 10-K.
We, along with other companies, had previously filed various claims with the Brazilian tax authorities challenging the legality of the government's calculation of certain indirect taxes fortaxes. During the years 2001 through 2018. During 2018, we receivedsecond quarter of 2021, the Brazilian Supreme Court rendered a final ruling that was favorable rulings related to companies on certain of the remaining open aspects of these claims. As a result of thethis ruling, we recorded a gain in CGS of $69 million and related interest income of $48 million in Other (Income) Expense. During 2019, there were previous favorable rulings related to certain aspects of these claims. As a result, we recorded a gain of $53$11 million in CGS and related interest income of $38$8 million in Other (Income) Expense for the year ended December 31, 2018. During 2019, there were additional favorable rulings related to these claims. As a result, we recorded an additional gain of $11 million in CGS and related interest income of $8 million in Other (Income) Expense.
Financing fees and financial instruments expense consists of commitment fees and charges incurred in connection with financing transactions. Financing fees and financial instruments expense in 2017 included2021 include a premium of $25$10 million charge for a commitment fee on a bridge term loan facility related to the redemptionCooper Tire acquisition that was not utilized and was terminated upon the closing of our $700 million 7% senior notes due 2022 in May 2017.
Net foreign currency exchange (gains) and losses; generallosses include $7 million of expense in the first quarter of 2021 related to the out of period adjustments discussed in Note to the Consolidated Financial Statements No. 1, Accounting Policies.
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;recoveries, decreased primarily due to actuarial adjustments in 2021 to reflect favorable claim count trends.
Net (gains) losses on asset sales of $(20) million in 2021 primarily relate to the sale of land in Hanau, Germany.
Transaction costs include legal, consulting and other expenses incurred by us in connection with the Cooper Tire acquisition.
Miscellaneous (income) expense for the year ended December 31, 2021 includes an insurance settlement of $(10) million. Miscellaneous (income) expense for the year ended December 31, 2019 includes expenses of $25 million incurred by the Company as a direct result of flooding at our Beaumont, Texas chemical facility during the third quarter of 2019.
Other (Income) Expense also includes royalty income, which is derived primarily from licensing arrangements; net (gains) and losses on asset sales;arrangements, and interest income.
78
Note 6.7. Income Taxes
The components of Income (Loss) before Income Taxes follow:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
U.S. |
| $ | (102 | ) |
| $ | (993 | ) |
| $ | (39 | ) |
Foreign |
|
| 615 |
|
|
| (147 | ) |
|
| 216 |
|
|
| $ | 513 |
|
| $ | (1,140 | ) |
| $ | 177 |
|
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| U.S. | $ | (39 | ) | $ | 439 | $ | 394 | ||||
| Foreign | 216 | 572 | 484 | ||||||||
| $ | 177 | $ | 1,011 | $ | 878 | ||||||
A reconciliation of income taxes at the U.S. statutory rate to United States and Foreign Tax Expense (Benefit) follows:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
U.S. federal income tax expense (benefit) at the statutory rate of 21% |
| $ | 108 |
|
| $ | (239 | ) |
| $ | 37 |
|
Net establishment (release) of U.S. valuation allowances |
|
| (340 | ) |
|
| 310 |
|
|
| (98 | ) |
Deferred tax impact of enacted tax rate and law changes |
|
| (61 | ) |
|
| (18 | ) |
|
| 3 |
|
Adjustment for foreign income taxed at different rates |
|
| 24 |
|
|
| 7 |
|
|
| 16 |
|
Net establishment (release) of uncertain tax positions |
|
| (6 | ) |
|
| 6 |
|
|
| 7 |
|
U.S. charges (benefits) related to foreign tax credits, R&D and foreign |
|
| (4 | ) |
|
| (9 | ) |
|
| (17 | ) |
Net foreign losses (income) with no tax due to valuation allowances |
|
| 3 |
|
|
| 37 |
|
|
| 48 |
|
State income taxes, net of U.S. federal benefit |
|
| 1 |
|
|
| (17 | ) |
|
| (1 | ) |
Net establishment (release) of foreign valuation allowances |
|
| (1 | ) |
|
| 0 |
|
|
| 140 |
|
Goodwill impairment |
|
| 0 |
|
|
| 34 |
|
|
| 0 |
|
Federal and state tax on accelerated royalty income transaction |
|
| 0 |
|
|
| 0 |
|
|
| 334 |
|
Other |
|
| 9 |
|
|
| (1 | ) |
|
| 5 |
|
United States and Foreign Tax Expense (Benefit) |
| $ | (267 | ) |
| $ | 110 |
|
| $ | 474 |
|
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| U.S. federal income tax expense at the statutory rate of 21% (35% for 2017) | $ | 37 | $ | 212 | $ | 307 | |||||
| Federal and state tax on accelerated royalty income transaction | 334 | — | — | ||||||||
| Net establishment (release) of foreign valuation allowances | 140 | (5 | ) | 1 | |||||||
| Net establishment (release) of U.S. valuation allowances | (98 | ) | 25 | 5 | |||||||
| Net foreign losses (income) with no tax due to valuation allowances | 48 | 7 | (7 | ) | |||||||
| U.S. charges (benefits) related to foreign tax credits, R&D and foreign derived intangible deduction | (17 | ) | 20 | (23 | ) | ||||||
| Adjustment for foreign income taxed at different rates | 16 | 30 | (55 | ) | |||||||
| Net establishment (resolution) of uncertain tax positions | 7 | 18 | (6 | ) | |||||||
| Deferred tax impact of enacted tax rate and law changes | 3 | — | 389 | ||||||||
| State income taxes, net of U.S. federal benefit | (1 | ) | (1 | ) | 9 | ||||||
| Provision for undistributed foreign earnings, net | — | (9 | ) | (162 | ) | ||||||
| Transition tax | — | 8 | 77 | ||||||||
| Domestic production activities deduction | — | (1 | ) | (16 | ) | ||||||
| Other | 5 | (1 | ) | (6 | ) | ||||||
| United States and Foreign Tax Expense | $ | 474 | $ | 303 | $ | 513 | |||||
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Current: |
|
|
|
|
|
|
|
|
| |||
Federal |
| $ | 1 |
|
| $ | (5 | ) |
| $ | 0 |
|
Foreign |
|
| 166 |
|
|
| 95 |
|
|
| 134 |
|
State |
|
| 37 |
|
|
| (3 | ) |
|
| 17 |
|
|
|
| 204 |
|
|
| 87 |
|
|
| 151 |
|
Deferred: |
|
|
|
|
|
|
|
|
| |||
Federal |
|
| (362 | ) |
|
| 63 |
|
|
| 133 |
|
Foreign |
|
| (23 | ) |
|
| (31 | ) |
|
| 153 |
|
State |
|
| (86 | ) |
|
| (9 | ) |
|
| 37 |
|
|
|
| (471 | ) |
|
| 23 |
|
|
| 323 |
|
United States and Foreign Tax Expense (Benefit) |
| $ | (267 | ) |
| $ | 110 |
|
| $ | 474 |
|
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Current: | |||||||||||
| Federal | $ | — | $ | (15 | ) | $ | (22 | ) | |||
| Foreign | 134 | 188 | 166 | ||||||||
| State | 17 | (1 | ) | 3 | |||||||
| 151 | 172 | 147 | |||||||||
| Deferred: | |||||||||||
| Federal | 133 | 120 | 389 | ||||||||
| Foreign | 153 | 6 | (8 | ) | |||||||
| State | 37 | 5 | (15 | ) | |||||||
| 323 | 131 | 366 | |||||||||
| United States and Foreign Tax Expense | $ | 474 | $ | 303 | $ | 513 | |||||
Income tax expensebenefit in 20192021 was $474$267 million on income before income taxes of $177$513 million. In 2019,2021, income tax benefit includes net discrete benefits totaling $409 million, including a reduction in our valuation allowances of $340 million for certain U.S. deferred tax assets for foreign tax credits and state tax loss carryforwards, a $39 million benefit to adjust our deferred tax assets in England for a second quarter enacted change in the tax rate, a $21 million benefit to reflect an increase in our estimated state tax rate used in calculating our U.S. net deferred tax assets as a result of a change in the overall mix of our earnings by state after including the impact of the acquisition of Cooper Tire, an $8 million benefit related to a favorable court ruling in Brazil, and a net benefit of $1 million for various other items.
In 2020, income tax expense of $110 million was unfavorably impacted by net discrete adjustmentstax expense totaling $386$305 million, including the establishment of a $295 million valuation allowance on certain deferred tax assets for foreign tax credits during the first quarter of 2020. Discrete tax expense also includes a net charge of $10 million, including a $15 million charge related to a U.S. valuation allowance for state tax loss carryforwards, a $13 million benefit to adjust our deferred tax assets in England for a third quarter enacted change in the tax rate, and various other net charges totaling $8 million.
In 2019, income tax expense of $474 million was unfavorably impacted by net discrete tax expense totaling $386 million. Discrete adjustments were due totax expense includes non-cash charges of $334$334 million related to an acceleration of royalty income in the U.S. from the sale of certain European royalty payments to Luxembourg and $150$150 million related to an increase in our valuation allowance on tax losses in Luxembourg, which were partially offset by a non-cash tax benefit of $98$98 million related to a reduction of our U.S. valuation allowance for foreign tax credits.
79
We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. We give operating results during the most recent three-year period a significant weight in our analysis. We typically only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. We also consider prudent tax planning strategies available(including an assessment of their feasibility) to accelerate taxable amountsincome if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized.
At both December 31, 2021 and 2020, we had approximately $1.2 billion of U.S. federal, state and local net deferred tax assets, net of valuation allowances totaling $26 million in 2021, primarily for state tax loss carryforwards with limited lives, and $368 million in 2020, primarily for foreign tax credits with limited lives. The increase in our U.S. net deferred tax assets as a result of the reduction in valuation allowances during 2021 was largely offset by the establishment of deferred tax liabilities related to the Cooper Tire acquisition. In the U.S., we have a cumulative loss for the three-year period ending December 31, 2021. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only include the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including recent favorable recovery trends in the tire industry and our tire volume as well as expected continued improvement. In addition, the Cooper Tire acquisition has generated significant incremental domestic earnings since the Closing Date and provides opportunities for cost and other operating synergies to further improve our U.S. profitability.
At December 31, 2019,2021, our U.S. net deferred tax assets include approximately $403$339 million of foreign tax credits with limited lives, net of a valuation allowanceallowances of $3 million, as compared to $637 million, net of a valuation allowance of $103 million, at$3 million. At December 31, 2018. If not utilized, these2020, our U.S. net deferred tax assets include $133 million of foreign tax credits will expire from 2022 to 2028. These credits were generated primarily from the receiptwith limited lives, net of foreign dividends.valuation allowances of $328 million. Our earnings and forecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income provide us sufficient positive evidence that we will be able to utilize theseour foreign tax credits despite the negative evidence of their limited carryforward periods. Thosethat expire through 2030. Our sources of foreign income are (1) 100% of our domestic profitability can be re-characterized as foreign source income under current U.S. tax law to the extent domestic losses have offset foreign source income in prior years, (2) annual net foreign source income, exclusive of dividends, primarily from royalties, and (3) tax planning strategies, including capitalizing research and development costs, accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, and reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, all of which would increase our domestic profitability.
During the fourth quarter of 20192021, we completed an intercompany sale of certain intellectual property. As a result of this transaction, U.S. taxable income for 2021 includes approximately $1.5 billion of accelerated royalty income in the U.S. of $2.1 billion received from Luxembourg as payment for the purchase of the right to receive technology royalties from our European operations for a period of 12 years.income. External specialists assisted management with this transaction. The royalty sale transaction resulted in a U.S.federal tax charge of $334$315 million and a deferred tax asset and offsetting valuation allowance of $576 million in Luxembourg.
Tax loss carryforwards must be utilized prior to foreign tax credits and other tax assets for tax purposes. Considering the magnitude of $98 million.
We consideredconsider our current forecasts of future profitability in assessing our ability to realize our remaining netdeferred tax assets, including our foreign tax credits. TheseAs noted above, these forecasts include the impact of recent trends, including various macroeconomic factors such as raw material prices,the impact of the COVID-19 pandemic, on our profitability, as well as the impact of tax planning strategies. Macroeconomic factors, including raw material prices,the impact of the COVID-19 pandemic, possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future foreign source incomeearnings will not be sufficient to fully utilize theseour U.S. net deferred tax assets, including our foreign tax credits. However, we believe our forecasts of future profitability along with the three significant sources of foreign income described above provide us sufficient positive, objectively verifiable evidence to conclude that it is more likely than not that, at December 31, 2021, our U.S. net deferred tax assets, including our foreign tax credits, net of remaining valuation allowances, will be fully utilized prior to their various expiration dates.
At both December 31, 2021 and 2020, we also had approximately $1.3 billion of foreign net deferred tax assets, and valuation allowances of $1.0 billion and $1.1 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
80
deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $885 million on all of our net deferred tax assets. In Luxembourg, we maintained a valuation allowance on all deferred tax assets with limited lives. As a result of recent negative evidence, including cumulative losses in the most recent three-year period and a forecast of continued losses for 2020, we increased our valuation allowance on our net deferred tax assets in Luxembourg to now include losses with unlimited lives, resulting in a non-cash tax charge of $150 million. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances having a significant impact on our financial position or results of operations will exist within the next twelve months.
|
|
|
|
|
|
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Tax loss carryforwards and credits |
| $ | 1,274 |
|
| $ | 1,570 |
|
Prepaid royalty income |
|
| 534 |
|
|
| 629 |
|
Capitalized research and development expenditures |
|
| 453 |
|
|
| 421 |
|
Partnership basis differences |
|
| 364 |
|
|
| 0 |
|
Accrued expenses deductible as paid |
|
| 331 |
|
|
| 255 |
|
Postretirement benefits and pensions |
|
| 126 |
|
|
| 209 |
|
Lease liabilities |
|
| 101 |
|
|
| 76 |
|
Rationalizations and other provisions |
|
| 26 |
|
|
| 34 |
|
Vacation and sick pay |
|
| 25 |
|
|
| 21 |
|
Other |
|
| 98 |
|
|
| 133 |
|
|
|
| 3,332 |
|
|
| 3,348 |
|
Valuation allowance |
|
| (1,044 | ) |
|
| (1,469 | ) |
Total deferred tax assets |
|
| 2,288 |
|
|
| 1,879 |
|
Property basis differences |
|
| (503 | ) |
|
| (420 | ) |
Intangible property basis differences related to Cooper Tire acquisition |
|
| (227 | ) |
|
| 0 |
|
Right-of-use assets |
|
| (96 | ) |
|
| (75 | ) |
Tax on undistributed earnings of subsidiaries |
|
| (1 | ) |
|
| (1 | ) |
Total net deferred tax assets |
| $ | 1,461 |
|
| $ | 1,383 |
|
| (In millions) | 2019 | 2018 | |||||
| Tax loss carryforwards and credits | $ | 1,159 | $ | 1,473 | |||
| Prepaid royalty income | 576 | — | |||||
| Capitalized research and development expenditures | 416 | 404 | |||||
| Accrued expenses deductible as paid | 347 | 261 | |||||
| Postretirement benefits and pensions | 221 | 207 | |||||
| Rationalizations and other provisions | 38 | 26 | |||||
| Vacation and sick pay | 23 | 23 | |||||
| Deferred interest deductions | — | 40 | |||||
| Other | 106 | 111 | |||||
| 2,886 | 2,545 | ||||||
| Valuation allowance | (982 | ) | (317 | ) | |||
| Total deferred tax assets | 1,904 | 2,228 | |||||
| Property basis differences | (466 | ) | (475 | ) | |||
| Tax on undistributed earnings of subsidiaries | (1 | ) | (1 | ) | |||
| Total net deferred tax assets | $ | 1,437 | $ | 1,752 | |||
At December 31, 2019,2021, we had $611$748 million of tax assets for net operating loss, capital loss and tax credit carryforwards related to certain foreign subsidiaries. These carryforwards are primarily from countries with unlimited carryforward periods, but include $63$61 million of tax credit carryforwards in various European countries that are subject to expiration from 20202022 to 2029. On December 31, 2019, deferred taxes included $576 million for the prepaid royalty income in Luxembourg, as further described above.2031. A valuation allowance totaling $969$1,018 million has been recorded against these and other deferred tax assets where recovery of the asset or carryforward is uncertain. In addition, we had $489$444 million of federal and $59$82 million of state tax assets for net operating loss and tax credit carryforwards. The federal carryforwards consist of $406include $339 million of foreign tax credits that are subject to expiration from 20222023 to 20282030 and $83$105 million of tax assets related to research and development credits and other federal credits that are subject to expiration from 2030 to 2039.2041. The state carryforwards include $66 million that are subject to expiration from 2020 2022 to 2034.2040. A valuation allowance of $13$26 million has been recorded against federal and state deferred tax assets where recovery is uncertain.
At December 31, 2019,2021, we had unrecognized tax benefits of $82$90 million that if recognized, would have a favorable impact on our tax expense of $56$61 million. We had accrued interest of $1$2 million as of December 31, 2019.2021. If not favorably settled, $6$15 million of the unrecognized tax benefits and all of the accrued interest would require the use of our cash. Included in the increases related to prior year tax positions is $13 million related to the acquisition of Cooper Tire. We do not expect changes during 20202022 to our unrecognized tax benefits to have a significant impact on our financial position or results of operations.A summary of our unrecognized tax benefits and changes during the year follows:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Balance at January 1 |
| $ | 85 |
|
| $ | 82 |
|
| $ | 71 |
|
Increases related to prior year tax positions |
|
| 28 |
|
|
| 26 |
|
|
| 24 |
|
Decreases related to prior year tax positions |
|
| (12 | ) |
|
| (1 | ) |
|
| 0 |
|
Settlements |
|
| (5 | ) |
|
| (15 | ) |
|
| (11 | ) |
Foreign currency impact |
|
| (7 | ) |
|
| (7 | ) |
|
| (2 | ) |
Increases related to current year tax positions |
|
| 3 |
|
|
| 0 |
|
|
| 0 |
|
Lapse of statute of limitations |
|
| (2 | ) |
|
| 0 |
|
|
| 0 |
|
Balance at December 31 |
| $ | 90 |
|
| $ | 85 |
|
| $ | 82 |
|
| Reconciliation of Unrecognized Tax Benefits | |||||||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Balance at January 1 | $ | 71 | $ | 52 | $ | 63 | |||||
| Increases related to prior year tax positions | 24 | 9 | 2 | ||||||||
| Decreases related to prior year tax positions | — | (1 | ) | (2 | ) | ||||||
| Settlements | (11 | ) | (2 | ) | (8 | ) | |||||
| Foreign currency impact | (2 | ) | (5 | ) | — | ||||||
| Increases related to current year tax positions | — | 21 | — | ||||||||
| Lapse of statute of limitations | — | (3 | ) | (3 | ) | ||||||
| Balance at December 31 | $ | 82 | $ | 71 | $ | 52 | |||||
We are open to examination in the United StatesU.S. for 20192021 and in Germany from 20162018 onward. Generally, for our remaining tax jurisdictions, years from 20142016 onward are still open to examination.
81
of the United States.U.S. A foreign withholding tax charge of approximately $80$100 million (net of foreign tax credits) would be required if these earnings and profits were to be distributed to the United States.
Net cash payments for income taxes were $142$201 million, $178$45 million and $144$142 million in 2021, 2020 and 2019, 2018 and 2017, respectively.
Note 7.8. 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:
|
|
|
|
|
|
|
|
|
| |||
(In millions, except per share amounts) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Earnings (loss) per share — basic: |
|
|
|
|
|
|
|
|
| |||
Goodyear net income (loss) |
| $ | 764 |
|
| $ | (1,254 | ) |
| $ | (311 | ) |
Weighted average shares outstanding |
|
| 261 |
|
|
| 234 |
|
|
| 233 |
|
Earnings (loss) per common share — basic |
| $ | 2.92 |
|
| $ | (5.35 | ) |
| $ | (1.33 | ) |
|
|
|
|
|
|
|
|
|
| |||
Earnings (loss) per share — diluted: |
|
|
|
|
|
|
|
|
| |||
Goodyear net income (loss) |
| $ | 764 |
|
| $ | (1,254 | ) |
| $ | (311 | ) |
Weighted average shares outstanding |
|
| 261 |
|
|
| 234 |
|
|
| 233 |
|
Dilutive effect of stock options and other dilutive securities |
|
| 3 |
|
|
| 0 |
|
|
| 0 |
|
Weighted average shares outstanding — diluted |
|
| 264 |
|
|
| 234 |
|
|
| 233 |
|
Earnings (loss) per common share — diluted |
| $ | 2.89 |
|
| $ | (5.35 | ) |
| $ | (1.33 | ) |
| (In millions, except per share amounts) | 2019 | 2018 | 2017 | ||||||||
| Earnings (loss) per share — basic: | |||||||||||
| Goodyear net income (loss) | $ | (311 | ) | $ | 693 | $ | 346 | ||||
| Weighted average shares outstanding | 233 | 237 | 249 | ||||||||
| Earnings (loss) per common share — basic | $ | (1.33 | ) | $ | 2.92 | $ | 1.39 | ||||
| Earnings (loss) per share — diluted: | |||||||||||
| Goodyear net income (loss) | $ | (311 | ) | $ | 693 | $ | 346 | ||||
| Weighted average shares outstanding | 233 | 237 | 249 | ||||||||
| Dilutive effect of stock options and other dilutive securities | — | 2 | 4 | ||||||||
| Weighted average shares outstanding — diluted | 233 | 239 | 253 | ||||||||
| Earnings (loss) per common share — diluted | $ | (1.33 | ) | $ | 2.89 | $ | 1.37 | ||||
Weighted average shares outstanding — diluted for 2021 excludes approximately 2 million equivalent shares related to options with exercise prices greater than the average market price of our common shares (i.e., “underwater” options). There were approximately 9 million and 2 million equivalent shares related to underwater options for 2020 and 2019, respectively. Additionally, weighted average shares outstanding — diluted for 2019 excludes the dilutive effect of approximately 3 million equivalent shares related primarily to options with exercise prices less than the average market price of our common shares (i.e., "in-the-money" options), as their inclusion would have been anti-dilutive due to the Goodyear net loss. Additionally, weighted average shares outstanding — diluted for 2019 excludes approximately 2 million equivalent shares related to options with exercise prices greater than the average market price of our common shares (i.e., “underwater” options). There were approximately 2 million and 1 million equivalent shares related to0 in-the-money options with exercise prices greater than the average market price of our common shares for 2018 and 2017, respectively.2020.
Note 8.9. Business Segments
Segment information reflects our strategic business units (“SBUs”), which are organized to meet customer requirements and global competition. For the year ended December 31, 2019,2021, we operated our business through 3 operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa; and Asia Pacific. Segment information is reported on the basis used for reporting to our Chief Executive Officer. Each of the 3 regional business segments is involved in the development, manufacture, distribution and sale of tires. Certain of the business segments also provide related products and services, which include retreads and automotive and commercial truck maintenance and repair services. Each segment also exports tires to other segments.
Americas manufactures and sells tires for automobiles, trucks, buses, earthmoving, mining and industrial equipment, aircraft, and for various other applications throughout North, Central and South America. Americas also provides related products and services including retreaded tires, tread rubber, and automotive and commercial truck maintenance and repair services, as well as sells chemical and natural rubber products to our other business segments and to unaffiliated customers.
EMEA manufactures and sells tires for automobiles, trucks, buses, aircraft, motorcycles, and earthmoving, mining and industrial equipment throughout Europe, the Middle East and Africa. EMEA also sells retreaded aviation tires, retreading and related services for commercial truck and earthmoving, mining and industrial equipment, and automotive maintenance and repair services.
Asia Pacific manufactures and sells tires for automobiles, trucks, buses, aircraft, farm, and earthmoving, mining and industrial equipment throughout the Asia Pacific region. Asia Pacific also provides related products and services including retreaded truck and aviation tires, tread rubber, and automotive maintenance and repair services.
82
The following table presents segment sales and operating income (loss), and the reconciliation of segment operating income (loss) to Income (Loss) before Income Taxes:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Sales |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | 10,051 |
|
| $ | 6,556 |
|
| $ | 7,922 |
|
Europe, Middle East and Africa |
|
| 5,243 |
|
|
| 4,020 |
|
|
| 4,708 |
|
Asia Pacific |
|
| 2,184 |
|
|
| 1,745 |
|
|
| 2,115 |
|
Net Sales |
| $ | 17,478 |
|
| $ | 12,321 |
|
| $ | 14,745 |
|
Segment Operating Income (Loss) |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | 914 |
|
| $ | 9 |
|
| $ | 550 |
|
Europe, Middle East and Africa |
|
| 239 |
|
|
| (72 | ) |
|
| 202 |
|
Asia Pacific |
|
| 135 |
|
|
| 49 |
|
|
| 193 |
|
Total Segment Operating Income (Loss) |
| $ | 1,288 |
|
| $ | (14 | ) |
| $ | 945 |
|
Less: |
|
|
|
|
|
|
|
|
| |||
Goodwill and Other Asset Impairments (Notes 12 and 13) |
|
| 0 |
|
|
| 330 |
|
|
| 0 |
|
Rationalizations (Note 4) |
|
| 93 |
|
|
| 159 |
|
|
| 205 |
|
Interest expense (Note 5) |
|
| 387 |
|
|
| 324 |
|
|
| 340 |
|
Other (income) expense (Note 6) |
|
| 94 |
|
|
| 119 |
|
|
| 98 |
|
Asset write-offs and accelerated depreciation (Note 4) |
|
| 1 |
|
|
| 105 |
|
|
| 15 |
|
Corporate incentive compensation plans |
|
| 87 |
|
|
| 44 |
|
|
| 50 |
|
Retained expenses of divested operations |
|
| 12 |
|
|
| 8 |
|
|
| 10 |
|
Other(1) |
|
| 101 |
|
|
| 37 |
|
|
| 50 |
|
Income (Loss) before Income Taxes |
| $ | 513 |
|
| $ | (1,140 | ) |
| $ | 177 |
|
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Sales | |||||||||||
| Americas | $ | 7,922 | $ | 8,168 | $ | 8,212 | |||||
| Europe, Middle East and Africa | 4,708 | 5,090 | 4,928 | ||||||||
| Asia Pacific | 2,115 | 2,217 | 2,237 | ||||||||
| Net Sales | $ | 14,745 | $ | 15,475 | $ | 15,377 | |||||
| Segment Operating Income | |||||||||||
| Americas | $ | 550 | $ | 654 | $ | 847 | |||||
| Europe, Middle East and Africa | 202 | 363 | 367 | ||||||||
| Asia Pacific | 193 | 257 | 342 | ||||||||
| Total Segment Operating Income | 945 | 1,274 | 1,556 | ||||||||
| Less: | |||||||||||
| Rationalizations | 205 | 44 | 135 | ||||||||
| Interest expense | 340 | 321 | 335 | ||||||||
Other (income) expense (1) | 98 | (174 | ) | 70 | |||||||
| Asset write-offs and accelerated depreciation | 15 | 4 | 40 | ||||||||
| Corporate incentive compensation plans | 50 | 13 | 33 | ||||||||
| Retained expenses of divested operations | 10 | 9 | 13 | ||||||||
Other (2) | 50 | 46 | 52 | ||||||||
| Income before Income Taxes | $ | 177 | $ | 1,011 | $ | 878 | |||||
|
|
|
|
|
|
|
|
| ||
(In millions) |
| 2021 |
|
| 2020 |
|
|
| ||
Assets |
|
|
|
|
|
|
|
| ||
Americas |
| $ | 10,874 |
|
| $ | 6,666 |
|
|
|
Europe, Middle East and Africa |
|
| 4,953 |
|
|
| 4,825 |
|
|
|
Asia Pacific |
|
| 3,125 |
|
|
| 2,725 |
|
|
|
Total Segment Assets |
|
| 18,952 |
|
|
| 14,216 |
|
|
|
Corporate(1) |
|
| 2,450 |
|
|
| 2,290 |
|
|
|
|
| $ | 21,402 |
|
| $ | 16,506 |
|
|
|
| (In millions) | 2019 | 2018 | |||||||
| Assets | |||||||||
Americas | $ | 7,606 | $ | 7,160 | |||||
| Europe, Middle East and Africa | 4,724 | 4,809 | |||||||
| Asia Pacific | 2,711 | 2,602 | |||||||
| Total Segment Assets | 15,041 | 14,571 | |||||||
Corporate(1) | 2,144 | 2,301 | |||||||
| $ | 17,185 | $ | 16,872 | ||||||
Increases in total segment assets for 2021 were driven by the acquisition of Cooper Tire.
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-offs 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, asset sales, goodwill and other asset impairment charges and certain other items.
83
individual countriescountry outside the United States to be significant to the consolidated financial statements. For long-lived assets, only the United States, China wasand Germany were considered to be significant.
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Net Sales |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 8,480 |
|
| $ | 5,424 |
|
| $ | 6,489 |
|
Other international |
|
| 8,998 |
|
|
| 6,897 |
|
|
| 8,256 |
|
|
| $ | 17,478 |
|
| $ | 12,321 |
|
| $ | 14,745 |
|
Long-Lived Assets |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 3,717 |
|
| $ | 2,517 |
|
|
|
| |
China |
|
| 833 |
|
|
| 742 |
|
|
|
| |
Germany |
|
| 679 |
|
|
| 729 |
|
|
|
| |
Other international |
|
| 3,116 |
|
|
| 3,085 |
|
|
|
| |
|
| $ | 8,345 |
|
| $ | 7,073 |
|
|
|
| |
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Net Sales | |||||||||||
| United States | $ | 6,489 | $ | 6,692 | $ | 6,678 | |||||
Germany (1) | 979 | 1,691 | 1,874 | ||||||||
| Other international | 7,277 | 7,092 | 6,825 | ||||||||
| $ | 14,745 | $ | 15,475 | $ | 15,377 | ||||||
| Long-Lived Assets | |||||||||||
| United States | $ | 2,681 | $ | 2,734 | |||||||
| China | 722 | 762 | |||||||||
| Other international | 3,805 | 3,763 | |||||||||
| $ | 7,208 | $ | 7,259 | ||||||||
Goodwill and
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Goodwill and Other Asset Impairments |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | 0 |
|
| $ | 148 |
|
| $ | 0 |
|
Europe, Middle East and Africa |
|
| 0 |
|
|
| 182 |
|
|
| 0 |
|
Total Segment Goodwill and Other Asset Impairments |
| $ | 0 |
|
| $ | 330 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Rationalizations |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | 38 |
|
| $ | 94 |
|
| $ | 90 |
|
Europe, Middle East and Africa |
|
| 49 |
|
|
| 59 |
|
|
| 115 |
|
Asia Pacific |
|
| 0 |
|
|
| 4 |
|
|
| 0 |
|
Total Segment Rationalizations |
| $ | 87 |
|
| $ | 157 |
|
| $ | 205 |
|
Corporate |
|
| 6 |
|
|
| 2 |
|
|
| 0 |
|
|
| $ | 93 |
|
| $ | 159 |
|
| $ | 205 |
|
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Net (Gains) Losses on Asset Sales |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | (1 | ) |
| $ | 0 |
|
| $ | 0 |
|
Europe, Middle East and Africa |
|
| (13 | ) |
|
| 2 |
|
|
| (16 | ) |
Total Segment Asset Sales |
| $ | (14 | ) |
| $ | 2 |
|
| $ | (16 | ) |
Corporate |
|
| (6 | ) |
|
| 0 |
|
|
| 0 |
|
|
| $ | (20 | ) |
| $ | 2 |
|
| $ | (16 | ) |
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Asset Write-Offs and Accelerated Depreciation |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | 0 |
|
| $ | 103 |
|
| $ | 13 |
|
Europe, Middle East and Africa |
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
Total Segment Asset Write-Offs and Accelerated Depreciation |
| $ | 1 |
|
| $ | 105 |
|
| $ | 15 |
|
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Rationalizations | |||||||||||
| Americas | $ | 90 | $ | 3 | $ | 6 | |||||
| Europe, Middle East and Africa | 115 | 36 | 111 | ||||||||
| Asia Pacific | — | 3 | 2 | ||||||||
| Total Segment Rationalizations | $ | 205 | $ | 42 | $ | 119 | |||||
| Corporate | — | 2 | 16 | ||||||||
| $ | 205 | $ | 44 | $ | 135 | ||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Net (Gains) Losses on Asset Sales | |||||||||||
Americas(1) | $ | — | $ | (275 | ) | $ | (4 | ) | |||
| Europe, Middle East and Africa | (16 | ) | 2 | (10 | ) | ||||||
| Total Segment Asset Sales | $ | (16 | ) | $ | (273 | ) | $ | (14 | ) | ||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Asset Write-offs and Accelerated Depreciation | |||||||||||
| Americas | $ | 13 | $ | — | $ | — | |||||
| Europe, Middle East and Africa | 2 | 4 | 40 | ||||||||
| Total Segment Asset Write-offs and Accelerated Depreciation | $ | 15 | $ | 4 | $ | 40 | |||||
84
The following tables present segment capital expenditures and depreciation and amortization:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Capital Expenditures |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | 537 |
|
| $ | 302 |
|
| $ | 369 |
|
Europe, Middle East and Africa |
|
| 270 |
|
|
| 235 |
|
|
| 227 |
|
Asia Pacific |
|
| 135 |
|
|
| 91 |
|
|
| 141 |
|
Total Segment Capital Expenditures |
| $ | 942 |
|
| $ | 628 |
|
| $ | 737 |
|
Corporate |
|
| 39 |
|
|
| 19 |
|
|
| 33 |
|
|
| $ | 981 |
|
| $ | 647 |
|
| $ | 770 |
|
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Depreciation and Amortization |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | 486 |
|
| $ | 490 |
|
| $ | 430 |
|
Europe, Middle East and Africa |
|
| 213 |
|
|
| 201 |
|
|
| 197 |
|
Asia Pacific |
|
| 146 |
|
|
| 133 |
|
|
| 133 |
|
Total Segment Depreciation and Amortization |
| $ | 845 |
|
| $ | 824 |
|
| $ | 760 |
|
Corporate |
|
| 38 |
|
|
| 35 |
|
|
| 35 |
|
|
| $ | 883 |
|
| $ | 859 |
|
| $ | 795 |
|
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Capital Expenditures | |||||||||||
| Americas | $ | 369 | $ | 406 | $ | 525 | |||||
| Europe, Middle East and Africa | 227 | 180 | 159 | ||||||||
| Asia Pacific | 141 | 188 | 164 | ||||||||
| Total Segment Capital Expenditures | $ | 737 | $ | 774 | $ | 848 | |||||
| Corporate | 33 | 37 | 33 | ||||||||
| $ | 770 | $ | 811 | $ | 881 | ||||||
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Depreciation and Amortization | |||||||||||
| Americas | $ | 430 | $ | 414 | $ | 398 | |||||
| Europe, Middle East and Africa | 197 | 201 | 191 | ||||||||
| Asia Pacific | 133 | 131 | 124 | ||||||||
| Total Segment Depreciation and Amortization | $ | 760 | $ | 746 | $ | 713 | |||||
| Corporate | 35 | 32 | 68 | ||||||||
| $ | 795 | $ | 778 | $ | 781 | ||||||
The following table presents segment equity in the net income(income) loss of investees accounted for by the equity method:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Equity in (Income) Loss |
|
|
|
|
|
|
|
|
| |||
Americas |
| $ | (18 | ) |
| $ | 31 |
|
| $ | 32 |
|
Asia Pacific |
|
| (4 | ) |
|
| 0 |
|
|
| 0 |
|
Total Segment Equity in (Income) Loss |
| $ | (22 | ) |
| $ | 31 |
|
| $ | 32 |
|
Increases in total segment equity in (income) loss for 2021 were driven by improved profitability of our TireHub joint venture in Americas and the addition of our ACTR Company Limited joint venture in Asia Pacific as a result of the acquisition of Cooper Tire.
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Equity in (Income) Loss | |||||||||||
| Americas | $ | 32 | $ | 11 | $ | (5 | ) | ||||
| Europe, Middle East and Africa | — | (1 | ) | — | |||||||
| Total Segment Equity in (Income) Loss | $ | 32 | $ | 10 | $ | (5 | ) | ||||
| (In millions) | 2019 | 2018 | |||||
| Accounts receivable | $ | 2,052 | $ | 2,143 | |||
| Allowance for doubtful accounts | (111 | ) | (113 | ) | |||
| $ | 1,941 | $ | 2,030 | ||||
|
|
|
|
|
|
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Accounts receivable |
| $ | 2,510 |
|
| $ | 1,841 |
|
Allowance for doubtful accounts |
|
| (123 | ) |
|
| (150 | ) |
|
| $ | 2,387 |
|
| $ | 1,691 |
|
| (In millions) | 2019 | 2018 | |||||
| Raw materials | $ | 530 | $ | 569 | |||
| Work in process | 143 | 152 | |||||
| Finished goods | 2,178 | 2,135 | |||||
| $ | 2,851 | $ | 2,856 | ||||
Note 11. Inventories
|
|
|
|
|
|
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Raw materials |
| $ | 958 |
|
| $ | 517 |
|
Work in process |
|
| 191 |
|
|
| 143 |
|
Finished goods |
|
| 2,445 |
|
|
| 1,493 |
|
|
| $ | 3,594 |
|
| $ | 2,153 |
|
85
Note 11.12. Goodwill and Intangible Assets
The following table presents the net carrying amount of goodwill allocated by segment, and changes during 2021:2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
(In millions) |
| Balance at |
|
| Acquisitions |
|
| Divestitures |
|
| Impairment |
|
| Translation |
|
| Balance at |
| ||||||
Americas(1) |
| $ | 91 |
|
| $ | 618 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 709 |
|
Europe, Middle East and Africa |
|
| 250 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (19 | ) |
|
| 231 |
|
Asia Pacific |
|
| 67 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (3 | ) |
|
| 64 |
|
|
| $ | 408 |
|
| $ | 618 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | (22 | ) |
| $ | 1,004 |
|
:
| (In millions) | Balance at December 31, 2018 | Acquisitions | Divestitures | Translation | Balance at December 31, 2019 | ||||||||||||||
| Americas | $ | 91 | $ | — | $ | — | $ | — | $ | 91 | |||||||||
| Europe, Middle East and Africa | 415 | 2 | — | (6 | ) | 411 | |||||||||||||
| Asia Pacific | 63 | 1 | — | (1 | ) | 63 | |||||||||||||
| $ | 569 | $ | 3 | $ | — | $ | (7 | ) | $ | 565 | |||||||||
The following table presents the net carrying amount of goodwill allocated by segment, and changes during 2018:2020:
| (In millions) | Balance at December 31, 2017 | Acquisitions | Divestitures | Translation | Balance at December 31, 2018 | ||||||||||||||
| Americas | $ | 91 | $ | — | $ | — | $ | — | $ | 91 | |||||||||
| Europe, Middle East and Africa | 437 | 2 | — | (24 | ) | 415 | |||||||||||||
| Asia Pacific | 67 | — | — | (4 | ) | 63 | |||||||||||||
| $ | 595 | $ | 2 | $ | — | $ | (28 | ) | $ | 569 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
(In millions) |
| Balance at |
|
| Acquisitions |
|
| Divestitures |
|
| Impairment |
|
| Translation |
|
| Balance at |
| ||||||
Americas |
| $ | 91 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 91 |
|
Europe, Middle East and Africa |
|
| 411 |
|
|
| 10 |
|
|
| 0 |
|
|
| (182 | ) |
|
| 11 |
|
|
| 250 |
|
Asia Pacific |
|
| 63 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4 |
|
|
| 67 |
|
|
| $ | 565 |
|
| $ | 10 |
|
| $ | 0 |
|
| $ | (182 | ) |
| $ | 15 |
|
| $ | 408 |
|
The following table presents information about intangible assets:
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||
(In millions) |
| Gross |
|
| Accumulated |
|
| Net |
|
| Gross |
|
| Accumulated |
|
| Net |
| ||||||
Intangible assets with indefinite lives |
| $ | 684 |
|
| $ | (6 | ) |
| $ | 678 |
|
| $ | 125 |
|
| $ | (6 | ) |
| $ | 119 |
|
Customer relationships |
|
| 350 |
|
|
| (18 | ) |
|
| 332 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Trademarks and patents |
|
| 32 |
|
|
| (18 | ) |
|
| 14 |
|
|
| 23 |
|
|
| (19 | ) |
|
| 4 |
|
Other intangible assets |
|
| 32 |
|
|
| (17 | ) |
|
| 15 |
|
|
| 25 |
|
|
| (13 | ) |
|
| 12 |
|
|
| $ | 1,098 |
|
| $ | (59 | ) |
| $ | 1,039 |
|
| $ | 173 |
|
| $ | (38 | ) |
| $ | 135 |
|
| 2019 | 2018 | ||||||||||||||||||||||
| (In millions) | Gross Carrying Amount(1) | Accumulated Amortization(1) | Net Carrying Amount | Gross Carrying Amount(1) | Accumulated Amortization(1) | Net Carrying Amount | |||||||||||||||||
| Intangible assets with indefinite lives | $ | 124 | $ | (6 | ) | $ | 118 | $ | 124 | $ | (6 | ) | $ | 118 | |||||||||
| Trademarks and patents | 24 | (19 | ) | 5 | 23 | (19 | ) | 4 | |||||||||||||||
| Other intangible assets | 25 | (11 | ) | 14 | 23 | (9 | ) | 14 | |||||||||||||||
| $ | 173 | $ | (36 | ) | $ | 137 | $ | 170 | $ | (34 | ) | $ | 136 | ||||||||||
Intangible assets are primarily comprised of the rights to use the Cooper and Dunlop brand namenames and related trademarks, Cooper Tire customer relationships, and certain other brand names and trademarks.
Amortization expense for intangible assets totaled $2$21 million in 2019, 20182021 and 2017.$2 million in 2020 and 2019. We estimate that annual amortization expense related to intangible assets will be approximately $2$36 million in 2020 through 2022, and $1an average of $32 million in 2023 and 2024.through 2026. The weighted average remaining amortization period is approximately 20 years.
Our annual impairment analysesanalysis for 2019, 2018 and 20172021, including the acquisition of Cooper Tire, indicated 0no impairment of goodwill or intangible assets with indefinite lives. Our quantitative
In 2020, we recorded a non-cash goodwill analysis asimpairment charge of October 31, 2019 concluded that the fair values substantially exceeded the carrying amounts for each reporting unit tested, except for the$182 million related to our EMEA reporting unit. There wereOur annual impairment analysis for 2019 indicated no events or circumstances that indicated the quantitative impairment tests should be re-performed forof goodwill or for intangible assets with indefinite lives for any reporting unit at December 31, 2019.lives.
Note 12.13. Other Assets and Investments
Dividends received from our consolidated subsidiaries were $43$177 million, $608$155 million and $558$43 million in 2021, 2020 and 2019, 2018respectively. Dividends received in 2021 were primarily from Brazil, Singapore and 2017, respectively.Peru and paid to the United States. Dividends received in 2020 were primarily from Singapore, Peru and Brazil and paid to the United States. Dividends received in 2019 were primarily from Singapore and Brazil and paid to the United States. Dividends received in 2018 were primarily from Singapore and Japan and paid to the United States. Dividends received in 2017 were primarily from Luxembourg and paid to the United States. Dividends received from our affiliates accounted for using the equity method were $4$6 million, $5$5 million and $5$4 million in 2021, 2020 and 2019, 2018 and 2017, respectively.
Investment in TireHub
The balancecarrying value of our investment in TireHub was $262$72 million and $270$77 million at December 31, 20192021 and 2018,2020, respectively, and was included in Other Assets on our Consolidated Balance Sheets. In addition, we had an outstanding loan receivable from TireHub of $14 million at December 31, 2020, which was also included in Other Assets on our Consolidated Balance Sheets.
86
Our investment in TireHub is accounted for under the equity method of accounting and, as such, includes our 50%50% share of the net lossesincome (losses) of TireHub, which totaled $33$4 million, $(36) million and $15$(33) million in 2021, 2020 and 2019, and 2018, respectively.
In 2019,2020, we contributedrecorded a loan receivable from TireHubnon-cash impairment charge of $30$148 million related to their equity, which increased our investment in TireHub.Tirehub. We concluded that there was no additional other-than-temporary decline in the fair value of our investment in Tirehub during 2021.
Investment in ACTR Company Limited
As part of the Cooper Tire acquisition, Goodyear acquired a 35% equity interest in ACTR Company Limited, a tire manufacturing joint venture in Vietnam, valued at $58 million at December 31, 2021. Our investment in ACTR is accounted for under the equity method of accounting and, as such, includes our 35% share of the net income (losses) of ACTR, which totaled $4 million in 2021.
Other Assets
Other Assets at December 31, 2020 included $30 million related to a trade receivable from a customer that was refinanced into a collateral-backed note receivable. This note was repaid in full with interest during 2021.
Note 13.14. Property, Plant and Equipment
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||
(In millions) |
| Owned |
|
| Finance |
|
| Total |
|
| Owned |
|
| Finance |
|
| Total |
| ||||||
Property, plant and equipment:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Land |
| $ | 552 |
|
| $ | 1 |
|
| $ | 553 |
|
| $ | 436 |
|
| $ | 1 |
|
| $ | 437 |
|
Buildings |
|
| 2,681 |
|
|
| 232 |
|
|
| 2,913 |
|
|
| 2,467 |
|
|
| 232 |
|
|
| 2,699 |
|
Machinery and equipment |
|
| 14,893 |
|
|
| 31 |
|
|
| 14,924 |
|
|
| 13,893 |
|
|
| 29 |
|
|
| 13,922 |
|
Construction in progress |
|
| 785 |
|
|
| 0 |
|
|
| 785 |
|
|
| 737 |
|
|
| 0 |
|
|
| 737 |
|
|
|
| 18,911 |
|
|
| 264 |
|
|
| 19,175 |
|
|
| 17,533 |
|
|
| 262 |
|
|
| 17,795 |
|
Accumulated depreciation |
|
| (11,066 | ) |
|
| (64 | ) |
|
| (11,130 | ) |
|
| (10,931 | ) |
|
| (60 | ) |
|
| (10,991 | ) |
|
|
| 7,845 |
|
|
| 200 |
|
|
| 8,045 |
|
|
| 6,602 |
|
|
| 202 |
|
|
| 6,804 |
|
Spare parts(1) |
|
| 300 |
|
|
| 0 |
|
|
| 300 |
|
|
| 269 |
|
|
| 0 |
|
|
| 269 |
|
|
| $ | 8,145 |
|
| $ | 200 |
|
| $ | 8,345 |
|
| $ | 6,871 |
|
| $ | 202 |
|
| $ | 7,073 |
|
| 2019 | 2018 | ||||||||||||||||||||||
| (In millions) | Owned | Finance Leases | Total | Owned | Capital Leases | Total | |||||||||||||||||
| Property, plant and equipment, at cost: | |||||||||||||||||||||||
| Land | $ | 425 | $ | 1 | $ | 426 | $ | 427 | $ | — | $ | 427 | |||||||||||
Buildings(1) | 2,431 | 227 | 2,658 | 2,564 | 29 | 2,593 | |||||||||||||||||
| Machinery and equipment | 13,624 | 30 | 13,654 | 13,440 | 43 | 13,483 | |||||||||||||||||
| Construction in progress | 681 | 1 | 682 | 654 | 1 | 655 | |||||||||||||||||
| 17,161 | 259 | 17,420 | 17,085 | 73 | 17,158 | ||||||||||||||||||
| Accumulated depreciation | (10,438 | ) | (50 | ) | (10,488 | ) | (10,128 | ) | (33 | ) | (10,161 | ) | |||||||||||
| 6,723 | 209 | 6,932 | 6,957 | 40 | 6,997 | ||||||||||||||||||
| Spare parts | 276 | — | 276 | 262 | — | 262 | |||||||||||||||||
| $ | 6,999 | $ | 209 | $ | 7,208 | $ | 7,219 | $ | 40 | $ | 7,259 | ||||||||||||
The range of useful lives of property used in arriving at the annual amount of depreciation areis as follows: buildings and improvements, 3 to 45 years;years; and machinery and equipment, 3 to 40 years.years.
Note 14.15. Leases
| (In millions) | 2019 | ||
| Operating Lease Expense | $ | 292 | |
| Finance Lease Expense: | |||
| Amortization of ROU assets | 11 | ||
| Interest on lease liabilities | 21 | ||
| Short Term Lease Expense | 6 | ||
| Variable Lease Expense | 7 | ||
| Sublease Income | (15 | ) | |
| Total Lease Expense | $ | 322 | |
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Operating Lease Expense |
| $ | 295 |
|
| $ | 286 |
|
| $ | 292 |
|
Finance Lease Expense: |
|
|
|
|
|
|
|
|
| |||
Amortization of ROU assets |
|
| 9 |
|
|
| 11 |
|
|
| 11 |
|
Interest on lease liabilities |
|
| 21 |
|
|
| 21 |
|
|
| 21 |
|
Short Term Lease Expense |
|
| 11 |
|
|
| 6 |
|
|
| 6 |
|
Variable Lease Expense |
|
| 8 |
|
|
| 3 |
|
|
| 7 |
|
Sublease Income |
|
| (11 | ) |
|
| (11 | ) |
|
| (15 | ) |
Total Lease Expense |
| $ | 333 |
|
| $ | 316 |
|
| $ | 322 |
|
87
| (In millions) | 2018 | 2017 | ||||||
| Gross rental expense | $ | 333 | $ | 332 | ||||
| Sublease rental income | (16 | ) | (17 | ) | ||||
| $ | 317 | $ | 315 | |||||
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cash Paid for Amounts Included in the Measurement of Lease Liabilities |
|
|
|
|
|
|
|
|
| |||
Operating Cash Flows for Operating Leases |
| $ | 278 |
|
| $ | 268 |
|
| $ | 267 |
|
Operating Cash Flows for Finance Leases |
|
| 21 |
|
|
| 21 |
|
|
| 21 |
|
Financing Cash Flows for Finance Leases |
|
| 6 |
|
|
| 7 |
|
|
| 7 |
|
ROU Assets Obtained in Exchange for Lease Obligations |
|
|
|
|
|
|
|
|
| |||
Operating Leases |
|
| 378 |
|
|
| 202 |
|
|
| 197 |
|
Finance Leases |
|
| 14 |
|
|
| 3 |
|
|
| 34 |
|
| (In millions) | |||
| Cash Paid for Amounts Included in the Measurement of Lease Liabilities | |||
| Operating Cash Flows for Operating Leases | $ | 267 | |
| Operating Cash Flows for Finance Leases | 21 | ||
| Financing Cash Flows for Finance Leases | 7 | ||
| ROU Assets Obtained in Exchange for Lease Obligations | |||
| Operating Leases | 197 | ||
| Finance Leases | 34 | ||
|
|
|
|
|
|
|
|
| ||
(In millions, except lease term and discount rate) |
|
|
| 2021 |
|
| 2020 |
| ||
Operating Leases |
|
|
|
|
|
|
|
| ||
Operating Lease ROU Assets |
|
|
| $ | 981 |
|
| $ | 851 |
|
|
|
|
|
|
|
|
|
| ||
Operating Lease Liabilities due Within One Year |
|
|
| $ | 204 |
|
| $ | 198 |
|
Operating Lease Liabilities |
|
|
|
| 819 |
|
|
| 684 |
|
Total Operating Lease Liabilities |
|
|
| $ | 1,023 |
|
| $ | 882 |
|
|
|
|
|
|
|
|
|
| ||
Finance Leases |
|
|
|
|
|
|
|
| ||
Property, Plant and Equipment, at cost |
|
|
| $ | 264 |
|
| $ | 262 |
|
Accumulated Depreciation |
|
|
|
| (64 | ) |
|
| (60 | ) |
Property, Plant and Equipment, net |
|
|
| $ | 200 |
|
| $ | 202 |
|
|
|
|
|
|
|
|
|
| ||
Long Term Debt and Finance Leases due Within One Year |
|
|
| $ | 18 |
|
| $ | 18 |
|
Long Term Debt and Finance Leases |
|
|
|
| 237 |
|
|
| 232 |
|
Total Finance Lease Liabilities |
|
|
| $ | 255 |
|
| $ | 250 |
|
Weighted Average Remaining Lease Term (years) |
|
|
|
|
|
|
|
| ||
Operating Leases |
|
|
|
| 7.5 |
|
| 7.3 |
| |
Finance Leases |
|
|
|
| 30.1 |
|
| 30.9 |
| |
|
|
|
|
|
|
|
|
| ||
Weighted Average Discount Rate |
|
|
|
|
|
|
|
| ||
Operating Leases |
|
|
|
| 6.30 | % |
|
| 6.85 | % |
Finance Leases |
|
|
|
| 8.40 | % |
|
| 8.48 | % |
| (In millions, except lease term and discount rate) | |||
| Operating Leases | |||
| Operating Lease ROU Assets | $ | 855 | |
| Operating Lease Liabilities due Within One Year | $ | 199 | |
| Operating Lease Liabilities | 668 | ||
| Total Operating Lease Liabilities | $ | 867 | |
| Finance Leases | |||
| Property, Plant and Equipment, at cost | $ | 259 | |
| Accumulated Depreciation | (50 | ) | |
| Property, Plant and Equipment, net | $ | 209 | |
| Long Term Debt and Finance Leases due Within One Year | $ | 6 | |
| Long Term Debt and Finance Leases | 243 | ||
| Total Finance Lease Liabilities | $ | 249 | |
| Weighted Average Remaining Lease Term | |||
| Operating Leases | 7.2 years | ||
| Finance Leases | 31.6 years | ||
| Weighted Average Discount Rate | |||
| Operating Leases | 6.69 | % | |
| Finance Leases | 8.46 | % | |
|
|
|
|
|
|
|
|
| ||
(In millions) |
|
|
| Operating Leases |
|
| Finance Leases |
| ||
2022 |
|
|
| $ | 255 |
|
| $ | 37 |
|
2023 |
|
|
|
| 212 |
|
|
| 24 |
|
2024 |
|
|
|
| 171 |
|
|
| 23 |
|
2025 |
|
|
|
| 137 |
|
|
| 22 |
|
2026 |
|
|
|
| 110 |
|
|
| 22 |
|
Thereafter |
|
|
|
| 428 |
|
|
| 652 |
|
Total Lease Payments |
|
|
|
| 1,313 |
|
|
| 780 |
|
Less: Imputed Interest |
|
|
|
| 290 |
|
|
| 525 |
|
Total |
|
|
| $ | 1,023 |
|
| $ | 255 |
|
| (In millions) | Operating Leases | Finance Leases | |||||
| 2020 | $ | 242 | $ | 25 | |||
| 2021 | 192 | 35 | |||||
| 2022 | 141 | 22 | |||||
| 2023 | 109 | 21 | |||||
| 2024 | 81 | 20 | |||||
| Thereafter | 359 | 690 | |||||
| Total Lease Payments | 1,124 | 813 | |||||
| Less: Imputed Interest | 257 | 564 | |||||
| Total | $ | 867 | $ | 249 | |||
88
Note 15.16. Financing Arrangements and Derivative Financial Instruments
At December 31, 2019,2021, we had total credit arrangements of $9,078 $11,628 million, of which $3,578$4,345 million were unused. At that date, 32%15% of our debt was at variable interest rates averaging 3.81%4.01%.
Notes Payable and Overdrafts, Long Term Debt and Finance Leases due Within One Year and Short Term Financing Arrangements
At December 31, 2019,2021, we had short term committed and uncommitted credit arrangements totaling $758totaling $1,004 million, of which $389$560 million were unused. These arrangements are available primarily to certain of our foreign subsidiaries through various banks at quoted market interest rates.
|
| December 31, |
|
| December 31, |
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Chinese credit facilities |
| $ | 37 |
|
| $ | 163 |
|
Other foreign and domestic debt |
|
| 369 |
|
|
| 243 |
|
Notes Payable and Overdrafts |
| $ | 406 |
|
| $ | 406 |
|
Weighted average interest rate |
|
| 2.78 | % |
|
| 4.52 | % |
|
|
|
|
|
|
| ||
Chinese credit facilities |
| $ | 124 |
|
| $ | 13 |
|
Other foreign and domestic debt (including finance leases) |
|
| 219 |
|
|
| 139 |
|
Long Term Debt and Finance Leases due Within One Year |
| $ | 343 |
|
| $ | 152 |
|
Weighted average interest rate |
|
| 5.25 | % |
|
| 4.43 | % |
Total obligations due within one year |
| $ | 749 |
|
| $ | 558 |
|
| December 31, | December 31, | ||||||
| (In millions) | 2019 | 2018 | |||||
| Chinese credit facilities | $ | 118 | $ | 122 | |||
| Other domestic and foreign debt | 230 | 288 | |||||
| Notes Payable and Overdrafts | $ | 348 | $ | 410 | |||
| Weighted average interest rate | 4.92 | % | 8.03 | % | |||
| Chinese credit facilities | $ | 95 | $ | 32 | |||
| 8.75% note due 2020 | 280 | — | |||||
| Other domestic and foreign debt (including finance leases) | 187 | 211 | |||||
| Long Term Debt and Finance Leases due Within One Year | $ | 562 | $ | 243 | |||
| Weighted average interest rate | 6.58 | % | 4.57 | % | |||
| Total obligations due within one year | $ | 910 | $ | 653 | |||
Long Term Debt and Finance Leases and Financing Arrangements
At December 31, 2019,2021, we had long term credit arrangements totaling $8,320$10,624 million, of which $3,189$3,785 million werewere unused.
89
The following table presents long term debt and finance leases, net of unamortized discounts, and interest rates:
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||||||||||
(In millions) |
| Amount |
|
| Interest Rate |
|
| Amount |
|
| Interest Rate |
| ||||
Notes: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
5.125% due 2023 |
| $ | 0 |
|
|
|
|
| $ | 1,000 |
|
|
|
| ||
3.75% Euro Notes due 2023 |
|
| 0 |
|
|
|
|
|
| 307 |
|
|
|
| ||
9.5% due 2025 |
|
| 802 |
|
|
|
|
|
| 803 |
|
|
|
| ||
5% due 2026 |
|
| 900 |
|
|
|
|
|
| 900 |
|
|
|
| ||
4.875% due 2027 |
|
| 700 |
|
|
|
|
|
| 700 |
|
|
|
| ||
7.625% due 2027 |
|
| 135 |
|
|
|
|
|
| 0 |
|
|
|
| ||
7% due 2028 |
|
| 150 |
|
|
|
|
|
| 150 |
|
|
|
| ||
2.75% Euro Notes due 2028 |
|
| 454 |
|
|
|
|
|
| 0 |
|
|
|
| ||
5% due 2029 |
|
| 850 |
|
|
|
|
|
| 0 |
|
|
|
| ||
5.25% due April 2031 |
|
| 550 |
|
|
|
|
|
| 0 |
|
|
|
| ||
5.25% due July 2031 |
|
| 600 |
|
|
|
|
|
| 0 |
|
|
|
| ||
5.625% due 2033 |
|
| 450 |
|
|
|
|
|
| 0 |
|
|
|
| ||
Credit Facilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
First lien revolving credit facility due 2026 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Second lien term loan facility due 2025 |
|
| 0 |
|
|
| 0 |
|
|
| 400 |
|
|
| 2.15 | % |
European revolving credit facility due 2024 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Pan-European accounts receivable facility |
|
| 279 |
|
|
| 1.08 | % |
|
| 291 |
|
|
| 1.18 | % |
Mexican credit facility |
|
| 158 |
|
|
| 1.85 | % |
|
| 152 |
|
|
| 1.87 | % |
Chinese credit facilities |
|
| 333 |
|
|
| 4.34 | % |
|
| 212 |
|
|
| 4.49 | % |
Other foreign and domestic debt(1) |
|
| 430 |
|
|
| 6.05 | % |
|
| 451 |
|
|
| 3.22 | % |
|
|
| 6,791 |
|
|
|
|
|
| 5,366 |
|
|
|
| ||
Unamortized deferred financing fees |
|
| (55 | ) |
|
|
|
|
| (32 | ) |
|
|
| ||
|
|
| 6,736 |
|
|
|
|
|
| 5,334 |
|
|
|
| ||
Finance lease obligations(2) |
|
| 255 |
|
|
|
|
|
| 250 |
|
|
|
| ||
|
|
| 6,991 |
|
|
|
|
|
| 5,584 |
|
|
|
| ||
Less portion due within one year |
|
| (343 | ) |
|
|
|
|
| (152 | ) |
|
|
| ||
|
| $ | 6,648 |
|
|
|
|
| $ | 5,432 |
|
|
|
| ||
| December 31, 2019 | December 31, 2018 | ||||||||||||
| (In millions) | Amount | Interest Rate | Amount | Interest Rate | |||||||||
| Notes: | |||||||||||||
| 8.75% due 2020 | $ | 280 | $ | 278 | |||||||||
| 5.125% due 2023 | 1,000 | 1,000 | |||||||||||
| 3.75% Euro Notes due 2023 | 281 | 286 | |||||||||||
| 5% due 2026 | 900 | 900 | |||||||||||
| 4.875% due 2027 | 700 | 700 | |||||||||||
| 7% due 2028 | 150 | 150 | |||||||||||
| Credit Facilities: | |||||||||||||
| First lien revolving credit facility due 2021 | — | — | — | — | |||||||||
| Second lien term loan facility due 2025 | 400 | 3.97 | % | 400 | 4.46 | % | |||||||
| European revolving credit facility due 2024 | — | — | — | — | |||||||||
| Pan-European accounts receivable facility | 327 | 0.98 | % | 335 | 1.01 | % | |||||||
| Mexican credit facilities | 200 | 3.44 | % | 200 | 4.30 | % | |||||||
| Chinese credit facilities | 195 | 4.87 | % | 219 | 5.03 | % | |||||||
Other foreign and domestic debt(1) | 661 | 4.02 | % | 884 | 5.35 | % | |||||||
| 5,094 | 5,352 | ||||||||||||
| Unamortized deferred financing fees | (28 | ) | (36 | ) | |||||||||
| 5,066 | 5,316 | ||||||||||||
Finance lease obligations(2) | 249 | 37 | |||||||||||
| 5,315 | 5,353 | ||||||||||||
| Less portion due within one year | (562 | ) | (243 | ) | |||||||||
| $ | 4,753 | $ | 5,110 | ||||||||||
$282 million 8.75%1.0 billion 5.125% Senior Notes due 2020
On May 6, 2021, we repaid in full our $1.0 billion 5.125% senior notes due 2020 were outstanding. These notes had an effective yield of 9.20% at issuance. These notes are unsecured senior obligations, are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior secured credit facilities described below, and will mature on August 15, 2020.
The terms of the indenture for these notes, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur secured debt, (ii) engage in sale and leaseback transactions, and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications.€250
On October 28, 2021, we repaid in full GEBV's €250 million 3.75% senior notes due 2023 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest to the redemption date.
$800 million 9.5% Senior Notes due 2025
At December 31, 2019, $1.0 billion2021, $800 million aggregate principal amount of 5.125%9.5% senior notes due 20232025 were outstanding. These$600 million of these notes were sold at 100%100% of the principal amount and $200 million of these notes were sold at 101.75% of the principal amount at an effective yield of 9.056%. These notes will mature on November 15, 2023.May 31, 2025. These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior securedfirst lien revolving credit facilitiesfacility described below.
We have the option to redeem these notes, in whole or in part, at any time on or after May 31, 2022 at a redemption price of 101.281%104.75%, 102.375% and 100%100% during the 12-month periods commencing on November 15, 2019May 31, 2022, 2023 and 20202024 and thereafter, respectively, plus accrued and unpaid interest to the redemption date.
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whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date. In addition, prior to May 31, 2022, we may redeem up to 35% of the original aggregate principal amount of these notes from the net cash proceeds of certain equity offerings at a redemption price equal to 109.5% of the principal amount plus accrued and unpaid interest to the redemption date.
The terms of the indenture for these notes, among other things, limit the ability of the Company and certain of its subsidiaries, including Goodyear Europe B.V. ("GEBV"),GEBV, to (i) incur additional debt or issue redeemable preferred stock, (ii) pay dividends, repurchase shares or make certain other restricted payments or investments, (iii) incur liens, (iv) sell assets, (v) incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, (vi) enter into affiliate transactions, (vii) engage in sale and leaseback transactions, and (viii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. For example, if these notes are assigned an investment grade rating byfrom at least two of Moody's, and Standard and Poor's and Fitch and no default has occurred and is continuing, certain covenants will be suspended and we may elect to suspend the subsidiary guarantees. The indenture has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
$900 million 5% Senior Notes due 2026
At December 31, 2019, $9002021, $900 million aggregate principal amount of 5%5% senior notes due 2026 were outstanding. These notes were sold at 100%100% of the principal amount and will mature on May 31, 2026.2026. These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior securedfirst lien revolving credit facilitiesfacility described below.
We have the option to redeem these notes, in whole or in part, at any time on or after May 31, 2021 at a redemption price of 102.5%102.5%, 101.667%101.667%, 100.833%100.833% and 100%100% during the 12-month periods commencing on May 31, 2021, 2022, 2023 and 2024 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to May 31, 2021, we may redeem these notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date.
$700 million 4.875% Senior Notes due 2027
At December 31, 2019, $7002021, $700 million aggregate principal amount of 4.875%4.875% senior notes due 2027 were outstanding. These notes were sold at 100%100% of the principal amount and will mature on March 15, 2027.2027. These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. senior securedfirst lien revolving credit facilitiesfacility described below.
We have the option to redeem these notes, in whole or in part, at any time prior to their maturity. If we elect to redeem the notes prior to December 15, 2026, we will pay a redemption price equal to the greater of 100%100% of the principal amount of the notes redeemed or the sum of the present values of the remaining scheduled payments on the notes redeemed, discounted using a defined treasury rate plus 50 basis points, plus in either case accrued and unpaid interest to the redemption date. If we elect to redeem the notes on or after December 15, 2026, we will pay a redemption price equal to 100%100% of the principal amount of the notes redeemed plus accrued and unpaid interest to the redemption date.
The terms of the indenture for these notes, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur certain liens, (ii) engage in sale and leaseback transactions, and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications.
$117 million 7.625% Senior Notes due 2027 of Cooper Tire
Following the Cooper Tire acquisition and at December 31, 2021, $117 million aggregate principal amount of Cooper Tire's 7.625% senior notes due 2027 were outstanding. These notes also included a $19 million fair value step-up, which is being amortized against interest expense over the remaining life of the notes. Amortization since the Closing Date was approximately $1 million. These notes will mature on March 15, 2027 and are unsecured senior obligations of Cooper Tire. These notes are not redeemable prior to maturity.
The terms of the indenture for these notes, among other things, limit the ability of Cooper Tire and certain of its subsidiaries to (i) incur certain liens, (ii) enter into certain sale/leaseback transactions and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets. These covenants are subject to significant exceptions and qualifications.
$150 million 7% Senior Notes due 2028
At December 31, 2019, $1502021, $150 million aggregate principal amount of 7%7% notes due 2028 were outstanding. These notes are unsecured senior obligations and will mature on March 15, 2028.
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We have the option to redeem these notes, in whole or in part, at any time at a redemption price equal to the greater of 100%100% of the principal amount thereof or the sum of the present values of the remaining scheduled payments thereon, discounted using a defined treasury rate plus 15 basis points, plus in either case accrued and unpaid interest to the redemption date.
The terms of the indenture for these notes, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur secured debt, (ii) engage in sale and leaseback transactions, and (iii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications.
€400 million 2.75% Senior Notes due 2028 of GEBV
On September 28, 2021, we issued €400 million in aggregate principal amount of GEBV 2.75% senior notes due 2028. A portion of the net proceeds from these notes were used to redeem GEBV's €250 million 3.75% senior notes due 2023 on October 28, 2021. The notes were sold at 100% of the principal amount and will mature on August 15, 2028. These notes are unsecured senior obligations of GEBV and are guaranteed, on an unsecured senior basis, by the Company and our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. first lien revolving credit facility described below.
We have the option to redeem these notes, in whole or in part, at any time on or after August 15, 2024 at a redemption price of 101.375%, 100.688%, and 100% during the 12-month periods commencing on August 15, 2024, 2025, and 2026 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to August 15, 2024, we may redeem these notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date. In addition, prior to August 15, 2024, we may redeem up to 35% of the original aggregate principal amount of these notes from the net cash proceeds of certain equity offerings at a redemption price equal to 102.75% of the principal amount plus accrued and unpaid interest to the redemption date.
The indenture for these notes includes covenants that are substantially similar to those contained in the indenture governing our 4.875% senior notes due 2027, described above.
$850 million 5% Senior Notes due 2029 and $600 million 5.25% Senior Notes due July 2031
On May 18, 2021, we issued $850 million in aggregate principal amount of 5% senior notes due 2029 and $600 million in aggregate principal amount of 5.25% senior notes due 2031. The net proceeds from these notes, together with cash and cash equivalents and borrowings under our first lien revolving credit facility, were used to fund the cash portion of the Merger Consideration for the acquisition of Cooper Tire and related transaction costs. These notes were sold at 100% of the principal amount and will mature on July 15, 2029 and 2031, respectively. These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. first lien revolving credit facility described below.
We have the option to redeem these notes, in whole or in part, at any time prior to their maturity. If we elect to redeem these notes prior to three months before their maturity date, we will pay a redemption price equal to the greater of 100% of the principal amount of the notes redeemed or the sum of the present values of the remaining scheduled payments on the notes redeemed, discounted using a defined treasury rate plus 50 basis points, plus in either case accrued and unpaid interest to the redemption date. If we elect to redeem these notes on or after three months before their maturity date, we will pay a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to the redemption date.
The indenture for these notes includes covenants that are substantially similar to those contained in the indenture governing our 4.875% senior notes due 2027, described above.
$550 million 5.25% Senior Notes due April 2031 and $450 million 5.625% Senior Notes due 2033
On April 6, 2021, we issued $550 million in aggregate principal amount of 5.25% senior notes due 2031 and $450 million in aggregate principal amount of 5.625% senior notes due 2033. The proceeds from these notes, together with cash and cash equivalents, were used to redeem our $1.0 billion 5.125% senior notes due 2023 on May 6, 2021. These notes were sold at 100% of the principal amount and will mature on April 30, 2031 and 2033, respectively. These notes are unsecured senior obligations and are guaranteed by our U.S. and Canadian subsidiaries that also guarantee our obligations under our U.S. first lien revolving credit facility described below.
We have the option to redeem these notes, in whole or in part, at any time prior to their maturity. If we elect to redeem these notes prior to three months before their maturity date, we will pay a redemption price equal to the greater of 100% of the principal amount of the notes redeemed or the sum of the present values of the remaining scheduled payments on the notes redeemed, discounted using a defined treasury rate plus 50 basis points, plus in either case accrued and unpaid interest to the redemption date. If we elect to redeem these notes on or after three months before their maturity date, we will pay a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to the redemption date.
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The indenture for these notes includes covenants that are substantially similar to those contained in the indenture governing our 4.875% senior notes due 2027, described above.
CREDIT FACILITIES
$2.02.75 billion Amended and Restated First Lien Revolving Credit Facility due 2026
On June 7, 2021,
Our amended and restated first lien revolving credit facility is available in the form of loans or letters of credit, with lettercredit. Up to $800 million in letters of credit availability limited to and $$80050 million. of swingline loans are available for issuance under the facility. Subject to the consent of the lenders whose commitments are to be increased, we may request that the facility be increased by up to $$250 million. Amounts drawn under this facility bear interest at LIBOR plus 125 basis points, based on our current liquidity as described below. million.
Our obligations under the facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries, including Cooper Tire and certain of its subsidiaries. Our obligations under the facility and our subsidiaries' obligations under the related guarantees are secured by first priority security interests in collateral that includes, subject to certain exceptions:
Availability under the facility is subject to a borrowing base, which is based primarily on (i) eligible accounts receivable and inventory of The Goodyear Tire & Rubber Company and certain of its U.S. and Canadian subsidiaries, after adjusting for customary factors that are subject to modification from time to time by the administrative agent or the majority lenders at their discretion (not to be exercised unreasonably), (ii) the value of our principal trademarks in an amount not to exceed $400 million, (iii) the value of eligible machinery and (iii)equipment, and (iv) certain cash in an amount not to exceed $200$275 million. Modifications are based on the results of periodic collateral and borrowing base evaluations and appraisals. 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 $2.0$2.75 billion. In addition, if the amount of outstanding borrowings and letters of credit under the facility exceeds the borrowing base, we are required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess. As of December 31, 2019,2021, our borrowing base, and therefore our availability, under this facility was $301$417 million below the facility's stated amount of $2.0$2.75 billion.
The facility which matures on April 7, 2021, contains certain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to (i) incur additional debt or issue redeemable preferred stock, (ii) pay dividends, repurchase shares or make certain other restricted payments or investments, (iii) incur liens, (iv) sell assets, (v) incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, (vi) enter into affiliate transactions, (vii) engage in sale and leaseback transactions, and (viii) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. In addition, in the event that the availability under the facility plus the aggregate amount of our Available Cash is less than $200275 million,, we will not be permitted to allow our ratio of EBITDA to Consolidated Interest Expense to be less than 2.0 to 1.0 for any period of four consecutive fiscal quarters. “Available Cash,” “EBITDA” and “Consolidated Interest Expense” have the meanings given them in 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, 2015.2020. 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 $1.0 billion,$750 million, amounts drawn under the facility will bear interest, at our option, at (i) 125 basis points over LIBOR or (ii) 25 basis points over an alternative base rate (the higher of (a) the prime rate, (b) the federal funds effective rate or the overnight bank funding rate plus 50 basis points or (c) LIBOR plus 100 basis points), and undrawn amounts under the facility will be subject to an annual commitment fee of 30 basis points.. If Available Cash plus the availability under the facility is equal to or less than $1.0 billion,$750 million, then amounts drawn under the facility will bear interest, at our option, at (i) 150 basis points over LIBOR or (ii) 50 basis points over an alternative base rate, and undrawnrate. Undrawn amounts under the facility will be subject to an annual commitment fee of 25 basis points.
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At December 31, 2019 and 2018,2021, we had 0 borrowings and $37$19 million of letters of credit issued under the revolving credit facility.
Amended and Restated Second Lien Term Loan Facility due 2025
On December 15, 2021, we repaid in full our $400 million second lien term loan facility matures on March 7,due 2025. The term loan bears interest, at our option, at (i) 200 basis points over LIBOR or (ii) 100 basis points over an alternative base rate (the higher of (a) the prime rate, (b) the federal funds effective rate or the overnight bank funding rate plus 50 basis points or (c) LIBOR plus 100 basis points). In addition, if the Total Leverage Ratio is equal to or less than 1.25 to 1.00, we have the option to further reduce the spreads described above by 25 basis points. "Total Leverage Ratio" has the meaning given it in the facility.
€800 million Amended and Restated Senior Secured European Revolving Credit Facility due 2024
Our amended and restated our European revolving credit facility. Significant changes to the European revolving credit facility include extending the maturity to March 27, 2024, increasing the available commitments thereunder from €550 million to €800 million, decreasing the interest rate margin by 25 basis points and decreasing the annual commitment fee by 5 basis points to 25 basis points. Loans will now bear interest at LIBOR plus 150 basis points for loans denominated in U.S. dollars or pounds sterling and EURIBOR plus 150 basis points for loans denominated in euros.
GEBV and certain of its subsidiaries in the United Kingdom, Luxembourg, France and Germany provide guarantees to support the facility. GEBV’s obligations under the facility and the obligations of its subsidiaries under the related guarantees are secured by security interests in collateral that includes, subject to certain exceptions:
The German guarantors secure the German tranche on a first-lien basis and the all-borrower tranche on a second-lien basis. GEBV and its other subsidiaries that provide guarantees secure the all-borrower tranche on a first-lien basis and generally do not provide collateral support for the German tranche. The Company and its U.S. and Canadian subsidiaries that guarantee our U.S. senior securedfirst lien revolving credit facilitiesfacility described above also provide unsecured guarantees in support of the facility.
The facility contains covenants similar to those in our first lien revolving credit facility, with additional limitations applicable to GEBV and its subsidiaries. In addition, under the facility, GEBV’s ratio of Consolidated Net GEBV Indebtedness to Consolidated GEBV EBITDA for a period of four consecutive fiscal quarters is not permitted to be greater than 3.0 to 1.0 at the end of any fiscal quarter. “Consolidated Net GEBV Indebtedness” and “Consolidated GEBV EBITDA” have the meanings given them in the facility.
The facility has customary representations and warranties including, as a condition to borrowing, that all such representations and warranties are true and correct, in all material respects, on the date of the borrowing, including representations as to no material adverse change in our business or financial condition since December 31, 2018. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
At December 31, 20192021 and 2018,2020, there were0 borrowings and no letters0 letters of credit outstanding under the European revolving credit facility.
Accounts Receivable Securitization Facilities (On-Balance Sheet)
On October 11, 2021, GEBV and certain other of our European subsidiaries are parties to aamended and restated the definitive agreements for our pan-European accounts receivable securitization facility, that expires in 2023.extending the term through 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€30 million and not more than €450€450 million. For the period from October 18, 201816, 2020 through October 15, 2020,18, 2021, the designated maximum amount of the facility is €320was €280 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.
94
The funding commitments under the facility will expire upon the earliest to occur of: (a) September 26, 2023,October 19, 2027, (b) the non-renewal and expiration (without substitution) of all of the back-up liquidity commitments, (c) the early termination of the facility according to its terms (generally upon an Early Amortisation Event (as defined in the facility), which includes, among other things, events similar to the events of default under our senior securedfirst lien revolving credit facilities;facility; certain tax law changes; or certain changes to law, regulation or accounting standards), or (d) our request for early termination of the facility. The facility’s current back-up liquidity commitments will expire on October 15, 2020.
At December 31, 2019,2021, the amounts available and utilized under this program totaled $327$279 million (€291246 million). At December 31, 2018,2020, the amounts available and utilized under this program totaled $335$291 million (€293237 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 December 31, 2019 and 2018,2021, the gross amount of receivables sold was $548$605 million, compared to $451 million at December 31, 2020. The increase from December 31, 2020 is primarily due to the increase in our accounts receivable base as a result of the Cooper Tire acquisition and $568 million, respectively.
Other Foreign Credit Facilities
A Mexican subsidiary and a U.S. subsidiary have a revolving credit facility in Mexico. At December 31, 2019,2021, the amounts available and utilized under this facility was $200 million.were $200 million and $158 million, respectively. At December 31, 2020, the amounts available and utilized under this facility were $200 million and $152 million, respectively. The facility ultimately matures in 2022, has covenants relating to the Mexican and U.S. subsidiary, and has customary representations and warranties and default provisions relating to the Mexican and U.S. subsidiary’s ability to perform its respective obligations under the facility. At December 31, 2018,The facility matures in 2022; however, our subsidiaries have received a commitment to renew and extend the subsidiaries had several financing arrangementsfacility under substantially the same customary representations, warranties and default provisions with a maturity in Mexico, and the amounts available and utilized under these facilities were $340 million and $200 million, respectively.
Debt Maturities
The annual aggregate maturities of our debt (excluding the impact of deferred financing fees and unamortized discounts) and finance leases for the five years subsequent to December 31, 20192021 are presented below. Maturities of debt credit agreements have been reported on the basis that the commitments to lend under these agreements will be terminated effective at the end of their current terms.
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(In millions) |
| 2022 |
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| 2023 |
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| 2024 |
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| 2025 |
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| 2026 |
| |||||
U.S. |
| $ | 3 |
|
| $ | 2 |
|
| $ | 160 |
|
| $ | 800 |
|
| $ | 899 |
|
Foreign |
|
| 744 |
|
|
| 234 |
|
|
| 172 |
|
|
| 26 |
|
|
| 6 |
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|
| $ | 747 |
|
| $ | 236 |
|
| $ | 332 |
|
| $ | 826 |
|
| $ | 905 |
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| (In millions) | 2020 | 2021 | 2022 | 2023 | 2024 | ||||||||||||||
| U.S. | $ | 283 | $ | 1 | $ | 166 | $ | 998 | $ | — | |||||||||
| Foreign | 628 | 264 | 227 | 651 | 87 | ||||||||||||||
| $ | 911 | $ | 265 | $ | 393 | $ | 1,649 | $ | 87 | ||||||||||
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.
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:
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| December 31, |
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| December 31, |
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(In millions) |
| 2021 |
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| 2020 |
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Fair Values — Current asset (liability): |
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Accounts receivable |
| $ | 9 |
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| $ | 1 |
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Other current liabilities |
|
| (4 | ) |
|
| (27 | ) |
| December 31, | December 31, | ||||||
| (In millions) | 2019 | 2018 | |||||
| Fair Values — Current asset (liability): | |||||||
| Accounts Receivable | $ | 1 | $ | 7 | |||
| Other Current Liabilities | (15 | ) | (6 | ) | |||
At December 31, 20192021 and 2018,2020, these outstanding foreign currency derivatives had notional amounts of $1,707$993 million and $1,240$1,664 million, respectively, and were primarily related to intercompany loans. Other (Income) Expense included net transaction gains on derivatives of $22$35 million in 2021 and $80net transaction losses on derivatives of $87 million in 2019 and 2018, respectively.2020. These amounts were substantially offset in Other (Income) Expense by the effect of changing exchange rates on the underlying currency exposures.
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| December 31, |
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(In millions) |
| 2021 |
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| 2020 |
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Fair Values — Current asset (liability): |
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Accounts receivable |
| $ | 1 |
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| $ | 0 |
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Other current liabilities |
|
| (1 | ) |
|
| (7 | ) |
| December 31, | December 31, | ||||||
| (In millions) | 2019 | 2018 | |||||
| Fair Values — Current asset (liability): | |||||||
| Accounts Receivable | $ | 9 | $ | 9 | |||
| Other Current Liabilities | (3 | ) | (1 | ) | |||
| Fair Values — Long term asset (liability): | |||||||
| Other Assets | $ | 1 | $ | 2 | |||
| Other Long Term Liabilities | (1 | ) | — | ||||
At December 31, 20192021 and 2018,2020, these outstanding foreign currency derivatives had notional amounts of $365$63 million and $347and $50 million, respectively, and primarily related to U.S. dollar denominated intercompany transactions.
We enter into master netting agreements with counterparties. The amounts eligible for offset under the master netting agreements are not material and we have elected a gross presentation of foreign currency contracts in the Consolidated Balance Sheets.
The following table presents the classification of changes in fair values of foreign currency contracts that meet the criteria to be accounted for as cash flow hedging instruments (before tax and minority):
| Year Ended | |||||||
| December 31, | |||||||
| (In millions) | 2019 | 2018 | |||||
Amount of gains (losses) deferred to AOCL(1) | $ | 10 | $ | 12 | |||
Reclassification adjustment for amounts recognized in CGS(1) | (14 | ) | 7 | ||||
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| Year Ended December 31, |
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(In millions) |
| 2021 |
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| 2020 |
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| 2019 |
| |||
Amount of gains (losses) deferred to AOCL |
| $ | 1 |
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| $ | 15 |
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| $ | 10 |
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Reclassification adjustment for amounts recognized in CGS |
|
| (2 | ) |
|
| (13 | ) |
|
| (14 | ) |
The estimated net amount of the deferred gains at December 31, 20192021 that is expected to be reclassified to earnings within the next twelve months is $3$2 million.
The counterparties to our foreign currency contracts were considered by us to be substantial and creditworthy financial institutions that were recognized market makers at the time we entered into those contracts. We seek to control our credit exposure to these counterparties by diversifying across multiple counterparties, by setting counterparty credit limits based on long term credit ratings and other indicators of counterparty credit risk such as credit default swap spreads, and by monitoring the financial strength of these counterparties on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to counterparties in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a counterparty. However, the inability of a counterparty to fulfill its contractual obligations to us could have a material adverse effect on our liquidity, financial position or results of operations in the period in which it occurs.
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Note 16.17. Fair Value Measurements
The following table presents information about assets and liabilities recorded at fair value on the Consolidated Balance Sheet at December 31:
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| Quoted Prices in |
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| Significant Other |
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| Significant |
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(In millions) |
| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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| 2020 |
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Assets: |
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Investments |
| $ | 10 |
|
| $ | 11 |
|
| $ | 10 |
|
| $ | 11 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Foreign Exchange Contracts |
|
| 10 |
|
|
| 1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10 |
|
|
| 1 |
|
|
| 0 |
|
|
| 0 |
|
Total Assets at Fair Value |
| $ | 20 |
|
| $ | 12 |
|
| $ | 10 |
|
| $ | 11 |
|
| $ | 10 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 0 |
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Liabilities: |
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|
| ||||||||
Foreign Exchange Contracts |
| $ | 5 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
Total Liabilities at Fair Value |
| $ | 5 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
Total Carrying Value in the Consolidated Balance Sheet | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
| (In millions) | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||
| Investments | $ | 11 | $ | 10 | $ | 11 | $ | 10 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Foreign Exchange Contracts | 11 | 18 | — | — | 11 | 18 | — | — | |||||||||||||||||||||||
| Total Assets at Fair Value | $ | 22 | $ | 28 | $ | 11 | $ | 10 | $ | 11 | $ | 18 | $ | — | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||
| Foreign Exchange Contracts | $ | 19 | $ | 7 | $ | — | $ | — | $ | 19 | $ | 7 | $ | — | $ | — | |||||||||||||||
| Total Liabilities at Fair Value | $ | 19 | $ | 7 | $ | — | $ | — | $ | 19 | $ | 7 | $ | — | $ | — | |||||||||||||||
The following table presents supplemental fair value information about long term fixed rate and variable rate debt, excluding finance leases, at December 31:
|
| December 31, |
|
| December 31, |
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Fixed Rate Debt(1): |
|
|
|
|
|
| ||
Carrying amount — liability |
| $ | 5,781 |
|
| $ | 4,094 |
|
Fair value — liability |
|
| 6,149 |
|
|
| 4,283 |
|
Variable Rate Debt(1): |
|
|
|
|
|
| ||
Carrying amount — liability |
| $ | 955 |
|
| $ | 1,240 |
|
Fair value — liability |
|
| 955 |
|
|
| 1,197 |
|
| December 31, | December 31, | ||||||
| (In millions) | 2019 | 2018 | |||||
Fixed Rate Debt(1): | |||||||
| Carrying amount — liability | $ | 3,434 | $ | 3,609 | |||
| Fair value — liability | 3,558 | 3,443 | |||||
Variable Rate Debt(1): | |||||||
| Carrying amount — liability | $ | 1,632 | $ | 1,707 | |||
| Fair value — liability | 1,632 | 1,689 | |||||
Long term debt with fair values of $3,808$5,905 million and $3,496$4,391 million at December 31, 20192021 and 2018,2020, respectively, were estimated using quoted Level 1 market prices. The carrying value of the remaining long term debt approximateswas based upon internal estimates of fair value since the terms of the financing arrangements arederived from market prices for similar to terms that could be obtained under current lending market conditionsdebt..
Note 17.18. Pension, Other Postretirement Benefits and Savings Plans
We provide employees with defined benefit pension or defined contribution savings plans. Our hourly U.S. pension plans are frozen, except for certain grandfathered participants in the Cooper Tire hourly pension plans who continue to accrue benefits, and provide benefits based on length of service. The principal salaried U.S. pension plans are frozen and provide benefits based on final five-year average earnings formulas.compensation and length of service. Salaried employees who made voluntary contributions to these plans receive higher benefits. 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. Substantial portions of theretiree health care benefits for U.S. salaried retirees are not insured and are funded from operations.
During 2021, we recognized settlement charges of $43 million in Other (Income) Expense, primarily related to our salaried U.S pension plan. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans.
During 2020, we recognized settlement charges of $28 million, primarily related to certain of our salaried U.S. pension plans, of which $24 million was recognized in Other (Income) Expense and $4 million in Rationalizations, related to the exit of employees under approved rationalization plans. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans. In addition, we recognized a curtailment credit of $6 million in Other (Income) Expense during 2020, related to a freeze of one of our non-U.S. defined benefit pension plans.
During 2020, we also recognized a curtailment credit of $4 million related to one of our Other Postretirement Benefits plans and a termination benefits charge of $5 million related to our hourly U.S. pension plan in Rationalizations, related to the exit of employees under approved rationalization plans.
During 2019, we recognized settlement charges of $6$6 million in Other (Income) Expense primarily related to certain of our U.S. pension plans. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost
97
of the applicable plans. During 2019, we also recognized curtailment and special termination benefit charges of $5$5 million in Rationalizations, primarily related to the acceptance of voluntary buy-outs at our tire manufacturing facility in Gadsden, Alabama.
Total benefits cost (credit) and amounts recognized in other comprehensive (income) loss follows:
|
| Pension Plans |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| U.S. |
|
| Non-U.S. |
|
| Other Postretirement Benefits |
| |||||||||||||||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||||||||
Benefits cost (credit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Service cost |
| $ | 9 |
|
| $ | 4 |
|
| $ | 3 |
|
| $ | 30 |
|
| $ | 30 |
|
| $ | 26 |
|
| $ | 3 |
|
| $ | 2 |
|
| $ | 2 |
|
Interest cost |
|
| 94 |
|
|
| 126 |
|
|
| 173 |
|
|
| 47 |
|
|
| 56 |
|
|
| 69 |
|
|
| 9 |
|
|
| 8 |
|
|
| 11 |
|
Expected return on plan assets |
|
| (196 | ) |
|
| (193 | ) |
|
| (223 | ) |
|
| (48 | ) |
|
| (54 | ) |
|
| (59 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Amortization of prior service cost (credit) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| (6 | ) |
|
| (9 | ) |
|
| (9 | ) |
Amortization of net losses |
|
| 107 |
|
|
| 109 |
|
|
| 112 |
|
|
| 33 |
|
|
| 38 |
|
|
| 29 |
|
|
| 3 |
|
|
| 4 |
|
|
| 3 |
|
Net periodic cost |
| $ | 14 |
|
| $ | 46 |
|
| $ | 65 |
|
| $ | 63 |
|
| $ | 71 |
|
| $ | 67 |
|
| $ | 9 |
|
| $ | 5 |
|
| $ | 7 |
|
Net curtailments/settlements /termination benefits |
|
| 41 |
|
|
| 31 |
|
|
| 8 |
|
|
| 2 |
|
|
| (4 | ) |
|
| 3 |
|
|
| 0 |
|
|
| (4 | ) |
|
| 0 |
|
Total benefits cost |
| $ | 55 |
|
| $ | 77 |
|
| $ | 73 |
|
| $ | 65 |
|
| $ | 67 |
|
| $ | 70 |
|
| $ | 9 |
|
| $ | 1 |
|
| $ | 7 |
|
Recognized in other comprehensive (income) loss before tax and minority: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Prior service cost (credit) from plan amendments |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3 |
|
| $ | 3 |
|
| $ | (2 | ) |
| $ | (4 | ) |
| $ | 0 |
|
| $ | 0 |
|
(Decrease) increase in net actuarial losses |
|
| (45 | ) |
|
| 108 |
|
|
| 4 |
|
|
| (136 | ) |
|
| (100 | ) |
|
| 201 |
|
|
| (20 | ) |
|
| 5 |
|
|
| 6 |
|
Amortization of prior service (cost) credit in net periodic cost |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (2 | ) |
|
| (2 | ) |
|
| (2 | ) |
|
| 6 |
|
|
| 9 |
|
|
| 9 |
|
Amortization of net losses in net periodic cost |
|
| (107 | ) |
|
| (109 | ) |
|
| (112 | ) |
|
| (33 | ) |
|
| (38 | ) |
|
| (29 | ) |
|
| (3 | ) |
|
| (4 | ) |
|
| (3 | ) |
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments and settlements |
|
| (41 | ) |
|
| (26 | ) |
|
| (5 | ) |
|
| (2 | ) |
|
| (9 | ) |
|
| (3 | ) |
|
| 0 |
|
|
| 6 |
|
|
| 2 |
|
Total recognized in other comprehensive (income) loss before tax and minority |
| $ | (193 | ) |
| $ | (27 | ) |
| $ | (113 | ) |
| $ | (170 | ) |
| $ | (146 | ) |
| $ | 165 |
|
| $ | (21 | ) |
| $ | 16 |
|
| $ | 14 |
|
Total recognized in total benefits cost and other comprehensive (income) loss before tax and minority |
| $ | (138 | ) |
| $ | 50 |
|
| $ | (40 | ) |
| $ | (105 | ) |
| $ | (79 | ) |
| $ | 235 |
|
| $ | (12 | ) |
| $ | 17 |
|
| $ | 21 |
|
| Pension Plans | |||||||||||||||||||||||||||||||||||
| U.S. | Non-U.S. | Other Postretirement Benefits | |||||||||||||||||||||||||||||||||
| (In millions) | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||
| Benefits cost (credit): | |||||||||||||||||||||||||||||||||||
| Service cost | $ | 3 | $ | 4 | $ | 4 | $ | 26 | $ | 28 | $ | 31 | $ | 2 | $ | 3 | $ | 4 | |||||||||||||||||
| Interest cost | 173 | 157 | 160 | 69 | 69 | 71 | 11 | 12 | 13 | ||||||||||||||||||||||||||
| Expected return on plan assets | (223 | ) | (219 | ) | (241 | ) | (59 | ) | (70 | ) | (80 | ) | — | — | (1 | ) | |||||||||||||||||||
| Amortization of prior service cost (credit) | — | — | — | 2 | — | — | (9 | ) | (8 | ) | (29 | ) | |||||||||||||||||||||||
| Amortization of net losses | 112 | 112 | 111 | 29 | 29 | 32 | 3 | 4 | 6 | ||||||||||||||||||||||||||
| Net periodic cost (credit) | $ | 65 | $ | 54 | $ | 34 | $ | 67 | $ | 56 | $ | 54 | $ | 7 | $ | 11 | $ | (7 | ) | ||||||||||||||||
| Net curtailments/settlements/termination benefits | 8 | 8 | 29 | 3 | 13 | 3 | — | — | — | ||||||||||||||||||||||||||
| Total benefits cost (credit) | $ | 73 | $ | 62 | $ | 63 | $ | 70 | $ | 69 | $ | 57 | $ | 7 | $ | 11 | $ | (7 | ) | ||||||||||||||||
| Recognized in other comprehensive (income) loss before tax and minority: | |||||||||||||||||||||||||||||||||||
| Prior service cost (credit) from plan amendments | $ | — | $ | — | $ | — | $ | (2 | ) | $ | 31 | $ | 3 | $ | — | $ | (16 | ) | $ | 3 | |||||||||||||||
| Increase (decrease) in net actuarial losses | 4 | 14 | 128 | 201 | (18 | ) | 25 | 6 | (14 | ) | (15 | ) | |||||||||||||||||||||||
| Amortization of prior service (cost) credit in net periodic cost | — | — | — | (2 | ) | — | — | 9 | 8 | 29 | |||||||||||||||||||||||||
| Amortization of net losses in net periodic cost | (112 | ) | (112 | ) | (111 | ) | (29 | ) | (30 | ) | (29 | ) | (3 | ) | (5 | ) | (6 | ) | |||||||||||||||||
| Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements, and divestitures | (5 | ) | (11 | ) | (29 | ) | (3 | ) | (14 | ) | (12 | ) | 2 | — | — | ||||||||||||||||||||
| Total recognized in other comprehensive (income) loss before tax and minority | (113 | ) | (109 | ) | (12 | ) | 165 | (31 | ) | (13 | ) | 14 | (27 | ) | 11 | ||||||||||||||||||||
| Total recognized in total benefits cost (credit) and other comprehensive (income) loss before tax and minority | $ | (40 | ) | $ | (47 | ) | $ | 51 | $ | 235 | $ | 38 | $ | 44 | $ | 21 | $ | (16 | ) | $ | 4 | ||||||||||||||
Service cost is recorded in CGS or SAG. Other components of net periodic cost (credit) are recorded in Other (Income) Expense. Net curtailments, settlements and termination benefits are recorded in Other (Income) Expense or Rationalizations if related to a rationalization plan.
We use the fair value of pension assets in the calculation of pension expense for all plans.
The Medicare Prescription Drug Improvement and Modernization Act provides plan sponsors a federal subsidy for certain qualifying prescription drug benefits covered under the sponsor’s postretirement health care plans. Our other postretirement benefits cost is presented net of this subsidy, which is less than $1$1 million annually.
98
The change in benefit obligation and plan assets for 20192021 and 20182020 and the amounts recognized in our Consolidated Balance SheetSheets at December 31, 20192021 and 20182020 are as follows:
|
| Pension Plans |
|
|
|
|
|
|
| |||||||||||||||
|
| U.S. |
|
| Non-U.S. |
|
| Other Postretirement Benefits |
| |||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
Change in benefit obligation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning balance |
| $ | (5,235 | ) |
| $ | (5,009 | ) |
| $ | (3,382 | ) |
| $ | (3,195 | ) |
| $ | (236 | ) |
| $ | (241 | ) |
Service cost — benefits earned |
|
| (9 | ) |
|
| (4 | ) |
|
| (30 | ) |
|
| (30 | ) |
|
| (3 | ) |
|
| (2 | ) |
Interest cost |
|
| (94 | ) |
|
| (126 | ) |
|
| (47 | ) |
|
| (56 | ) |
|
| (9 | ) |
|
| (8 | ) |
Plan amendments |
|
| 0 |
|
|
| 0 |
|
|
| (3 | ) |
|
| (3 | ) |
|
| 4 |
|
|
| 0 |
|
Actuarial gain (loss) |
|
| 153 |
|
|
| (520 | ) |
|
| 168 |
|
|
| (123 | ) |
|
| 21 |
|
|
| (4 | ) |
Participant contributions |
|
| 0 |
|
|
| 0 |
|
|
| (1 | ) |
|
| (3 | ) |
|
| (8 | ) |
|
| (8 | ) |
Curtailments/settlements/ |
|
| 90 |
|
|
| 51 |
|
|
| 10 |
|
|
| 21 |
|
|
| 0 |
|
|
| 0 |
|
Acquisition of Cooper Tire (1) |
|
| (1,088 | ) |
|
| 0 |
|
|
| (450 | ) |
|
| 0 |
|
|
| (205 | ) |
|
| 0 |
|
Foreign currency translation |
|
| 0 |
|
|
| 0 |
|
|
| 118 |
|
|
| (133 | ) |
|
| 2 |
|
|
| 4 |
|
Benefit payments |
|
| 385 |
|
|
| 373 |
|
|
| 153 |
|
|
| 140 |
|
|
| 28 |
|
|
| 23 |
|
Ending balance |
| $ | (5,798 | ) |
| $ | (5,235 | ) |
| $ | (3,464 | ) |
| $ | (3,382 | ) |
| $ | (406 | ) |
| $ | (236 | ) |
Change in plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning balance |
| $ | 4,970 |
|
| $ | 4,780 |
|
| $ | 3,041 |
|
| $ | 2,740 |
|
| $ | 0 |
|
| $ | 0 |
|
Actual return on plan assets |
|
| 86 |
|
|
| 605 |
|
|
| (9 | ) |
|
| 305 |
|
|
| 0 |
|
|
| 0 |
|
Company contributions to plan assets |
|
| 29 |
|
|
| 0 |
|
|
| 30 |
|
|
| 20 |
|
|
| 0 |
|
|
| 0 |
|
Cash funding of direct participant payments |
|
| 10 |
|
|
| 14 |
|
|
| 22 |
|
|
| 22 |
|
|
| 20 |
|
|
| 15 |
|
Participant contributions |
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
|
| 3 |
|
|
| 8 |
|
|
| 8 |
|
Settlements |
|
| (90 | ) |
|
| (56 | ) |
|
| (10 | ) |
|
| (8 | ) |
|
| 0 |
|
|
| 0 |
|
Acquisition of Cooper Tire (1) |
|
| 1,100 |
|
|
| 0 |
|
|
| 412 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Foreign currency translation |
|
| 0 |
|
|
| 0 |
|
|
| (62 | ) |
|
| 99 |
|
|
| 0 |
|
|
| 0 |
|
Benefit payments |
|
| (385 | ) |
|
| (373 | ) |
|
| (153 | ) |
|
| (140 | ) |
|
| (28 | ) |
|
| (23 | ) |
Ending balance |
| $ | 5,720 |
|
| $ | 4,970 |
|
| $ | 3,272 |
|
| $ | 3,041 |
|
| $ | 0 |
|
| $ | 0 |
|
Funded status at end of year |
| $ | (78 | ) |
| $ | (265 | ) |
| $ | (192 | ) |
| $ | (341 | ) |
| $ | (406 | ) |
| $ | (236 | ) |
| Pension Plans | |||||||||||||||||||||||
| U.S. | Non-U.S. | Other Postretirement Benefits | |||||||||||||||||||||
| (In millions) | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
| Change in benefit obligation: | |||||||||||||||||||||||
| Beginning balance | $ | (4,734 | ) | $ | (5,331 | ) | $ | (2,774 | ) | $ | (3,109 | ) | $ | (234 | ) | $ | (286 | ) | |||||
| Newly adopted plans | — | — | (19 | ) | — | — | — | ||||||||||||||||
| Service cost — benefits earned | (3 | ) | (4 | ) | (26 | ) | (28 | ) | (2 | ) | (3 | ) | |||||||||||
| Interest cost | (173 | ) | (157 | ) | (69 | ) | (69 | ) | (11 | ) | (12 | ) | |||||||||||
| Plan amendments | — | — | 2 | (29 | ) | — | 14 | ||||||||||||||||
| Actuarial (loss) gain | (477 | ) | 315 | (381 | ) | 40 | (6 | ) | 19 | ||||||||||||||
| Participant contributions | — | — | (2 | ) | (2 | ) | (12 | ) | (13 | ) | |||||||||||||
| Curtailments/settlements/termination benefits | 12 | 25 | 5 | 113 | (2 | ) | — | ||||||||||||||||
| Foreign currency translation | — | — | (62 | ) | 177 | (5 | ) | 15 | |||||||||||||||
| Benefit payments | 366 | 418 | 131 | 133 | 31 | 32 | |||||||||||||||||
| Ending balance | $ | (5,009 | ) | $ | (4,734 | ) | $ | (3,195 | ) | $ | (2,774 | ) | $ | (241 | ) | $ | (234 | ) | |||||
| Change in plan assets: | |||||||||||||||||||||||
| Beginning balance | $ | 4,445 | $ | 4,978 | $ | 2,464 | $ | 2,806 | $ | 3 | $ | 4 | |||||||||||
| Newly adopted plans | — | — | 19 | — | — | — | |||||||||||||||||
| Actual return on plan assets | 696 | (110 | ) | 252 | 4 | — | — | ||||||||||||||||
| Company contributions to plan assets | — | — | 39 | 36 | — | 2 | |||||||||||||||||
| Cash funding of direct participant payments | 20 | 17 | 20 | 21 | 16 | 16 | |||||||||||||||||
| Participant contributions | — | — | 2 | 2 | 12 | 13 | |||||||||||||||||
| Settlements | (15 | ) | (22 | ) | (5 | ) | (112 | ) | — | — | |||||||||||||
| Foreign currency translation | — | — | 80 | (160 | ) | — | — | ||||||||||||||||
| Benefit payments | (366 | ) | (418 | ) | (131 | ) | (133 | ) | (31 | ) | (32 | ) | |||||||||||
| Ending balance | $ | 4,780 | $ | 4,445 | $ | 2,740 | $ | 2,464 | $ | — | $ | 3 | |||||||||||
| Funded status at end of year | $ | (229 | ) | $ | (289 | ) | $ | (455 | ) | $ | (310 | ) | $ | (241 | ) | $ | (231 | ) | |||||
Significant actuarial gains or losses related to changes in benefit obligations for 2021 and 2020 primarily resulted from changes in discount rates.
Other postretirement benefits unfunded status was $106$292 million and $112$106 million for our U.S. plans at December 31, 20192021 and 2018,2020, respectively, and $135$114 million and $119$130 million for our non-U.S. plans at December 31, 20192021 and 2018,2020, respectively.
|
| Pension Plans |
|
| Other Postretirement |
| ||||||||||||||||||
|
| U.S. |
|
| Non-U.S. |
|
| Benefits |
| |||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
Noncurrent assets |
| $ | 96 |
|
| $ | 0 |
|
| $ | 432 |
|
| $ | 408 |
|
| $ | 0 |
|
| $ | 0 |
|
Current liabilities |
|
| (7 | ) |
|
| (11 | ) |
|
| (22 | ) |
|
| (22 | ) |
|
| (25 | ) |
|
| (16 | ) |
Noncurrent liabilities |
|
| (167 | ) |
|
| (254 | ) |
|
| (602 | ) |
|
| (727 | ) |
|
| (381 | ) |
|
| (220 | ) |
Net amount recognized |
| $ | (78 | ) |
| $ | (265 | ) |
| $ | (192 | ) |
| $ | (341 | ) |
| $ | (406 | ) |
| $ | (236 | ) |
99
| Pension Plans | |||||||||||||||||||||||
| U.S. | Non-U.S. | Other Postretirement Benefits | |||||||||||||||||||||
| (In millions) | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
| Noncurrent assets | $ | — | $ | — | $ | 237 | $ | 325 | $ | — | $ | — | |||||||||||
| Current liabilities | (16 | ) | (20 | ) | (20 | ) | (20 | ) | (16 | ) | (17 | ) | |||||||||||
| Noncurrent liabilities | (213 | ) | (269 | ) | (672 | ) | (615 | ) | (225 | ) | (214 | ) | |||||||||||
| Net amount recognized | $ | (229 | ) | $ | (289 | ) | $ | (455 | ) | $ | (310 | ) | $ | (241 | ) | $ | (231 | ) | |||||
|
| Pension Plans |
|
| Other Postretirement |
| ||||||||||||||||||
|
| U.S. |
|
| Non-U.S. |
|
| Benefits |
| |||||||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
Prior service (credit) cost |
| $ | (3 | ) |
| $ | (3 | ) |
| $ | 26 |
|
| $ | 25 |
|
| $ | (5 | ) |
| $ | (7 | ) |
Net actuarial loss |
|
| 2,160 |
|
|
| 2,353 |
|
|
| 465 |
|
|
| 636 |
|
|
| 7 |
|
|
| 30 |
|
Gross amount recognized |
|
| 2,157 |
|
|
| 2,350 |
|
|
| 491 |
|
|
| 661 |
|
|
| 2 |
|
|
| 23 |
|
Deferred income taxes |
|
| 3 |
|
|
| (43 | ) |
|
| (64 | ) |
|
| (104 | ) |
|
| (23 | ) |
|
| (29 | ) |
Minority shareholders’ equity |
|
| 0 |
|
|
| 0 |
|
|
| (1 | ) |
|
| (2 | ) |
|
| 0 |
|
|
| 0 |
|
Net amount recognized |
| $ | 2,160 |
|
| $ | 2,307 |
|
| $ | 426 |
|
| $ | 555 |
|
| $ | (21 | ) |
| $ | (6 | ) |
| Pension Plans | |||||||||||||||||||||||
| U.S. | Non-U.S. | Other Postretirement Benefits | |||||||||||||||||||||
| (In millions) | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
| Prior service (credit) cost | $ | (3 | ) | $ | (3 | ) | $ | 25 | $ | 31 | $ | (23 | ) | $ | (32 | ) | |||||||
| Net actuarial loss | 2,380 | 2,493 | 782 | 611 | 30 | 25 | |||||||||||||||||
| Gross amount recognized | 2,377 | 2,490 | 807 | 642 | 7 | (7 | ) | ||||||||||||||||
| Deferred income taxes | (50 | ) | (77 | ) | (135 | ) | (105 | ) | (22 | ) | (19 | ) | |||||||||||
| Minority shareholders’ equity | — | — | (1 | ) | (1 | ) | — | — | |||||||||||||||
| Net amount recognized | $ | 2,327 | $ | 2,413 | $ | 671 | $ | 536 | $ | (15 | ) | $ | (26 | ) | |||||||||
| Pension Plans | Other Postretirement Benefits | ||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||
| Discount rate: | |||||||||||
| — U.S. | 3.22 | % | 4.24 | % | 3.14 | % | 4.16 | % | |||
| — Non-U.S. | 1.98 | 2.69 | 4.39 | 5.03 | |||||||
| Rate of compensation increase: | |||||||||||
| — U.S. | N/A | N/A | N/A | N/A | |||||||
| — Non-U.S. | 2.92 | 2.91 | N/A | N/A | |||||||
|
| Pension Plans |
|
| Other Postretirement Benefits |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Discount rate: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
—U.S. |
|
| 2.82 | % |
|
| 2.42 | % |
|
| 2.87 | % |
|
| 2.34 | % |
—Non-U.S. |
|
| 2.01 |
|
|
| 1.49 |
|
|
| 4.69 |
|
|
| 4.09 |
|
Rate of compensation increase: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
—U.S. |
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
| ||||
—Non-U.S. |
|
| 2.77 |
|
|
| 2.89 |
|
| N/A |
|
| N/A |
| ||
The following table presents significant weighted average assumptions used to determine benefits cost for the years ended December 31:
|
| Pension Plans |
|
| Other Postretirement Benefits |
| ||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| ||||||
Discount rate for determining interest cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
—U.S. |
|
| 1.72 | % |
|
| 2.66 | % |
|
| 3.85 | % |
|
| 1.97 | % |
|
| 2.68 | % |
|
| 3.79 | % |
—Non-U.S. |
|
| 1.82 |
|
|
| 2.26 |
|
|
| 2.84 |
|
|
| 6.54 |
|
|
| 5.68 |
|
|
| 6.25 |
|
Expected long term return on plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
—U.S. |
|
| 3.74 |
|
|
| 4.22 |
|
|
| 5.25 |
|
| N/A |
|
| N/A |
|
| N/A |
| |||
—Non-U.S. |
|
| 2.27 |
|
|
| 2.52 |
|
|
| 2.95 |
|
| N/A |
|
| N/A |
|
| N/A |
| |||
Rate of compensation increase: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
—U.S. |
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
| ||||||
—Non-U.S. |
|
| 2.89 |
|
|
| 2.92 |
|
|
| 2.91 |
|
| N/A |
|
| N/A |
|
| N/A |
| |||
| Pension Plans | Other Postretirement Benefits | ||||||||||||||||
| 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | ||||||||||||
| Discount rate for determining interest cost: | |||||||||||||||||
| — U.S. | 3.85 | % | 3.09 | % | 3.18 | % | 3.79 | % | 2.99 | % | 3.02 | % | |||||
| — Non-U.S. | 2.84 | 2.56 | 2.70 | 6.25 | 6.13 | 5.98 | |||||||||||
| Expected long term return on plan assets: | |||||||||||||||||
| — U.S. | 5.25 | 4.58 | 5.08 | N/A | N/A | N/A | |||||||||||
| — Non-U.S. | 2.95 | 3.02 | 3.12 | N/A | N/A | N/A | |||||||||||
| Rate of compensation increase: | |||||||||||||||||
| — U.S. | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||||
| — Non-U.S. | 2.91 | 2.91 | 3.18 | N/A | N/A | N/A | |||||||||||
For 2019,2021, an assumed weighted average long term rate of return of 5.25%3.74% was used for the U.S. pension plans. In developing the long term rate of return, we evaluated input from our pension fund consultant on asset class return expectations, including determining the appropriate rate of return for our plans, which are primarilysubstantially invested in fixed income securities. For our non-U.S. locations, an assumed weighted average long term rate of return of 2.95%2.27% was used. Input from local pension fund consultants concerning asset class return expectations and long term inflation form the basis of this assumption.
The U.S. pension plan mortality assumption is based on our actual historical experience or published actuarial tables, and expected future mortality improvements based on published actuarial tables. For our non-U.S. locations, mortality assumptions are based on published actuarial tables which include projections of future mortality improvements.
100
The following table presents estimated future benefit payments from the plans as of December 31, 2019.2021. Benefit payments for other postretirement benefits are presented net of retiree contributions and Medicare Part D Subsidy Receipts:
|
| Pension Plans |
|
| Other |
| ||||||
(In millions) |
| U.S. |
|
| Non-U.S. |
|
| Benefits |
| |||
2022 |
| $ | 476 |
|
| $ | 155 |
|
| $ | 26 |
|
2023 |
|
| 432 |
|
|
| 147 |
|
|
| 26 |
|
2024 |
|
| 421 |
|
|
| 151 |
|
|
| 25 |
|
2025 |
|
| 408 |
|
|
| 153 |
|
|
| 25 |
|
2026 |
|
| 406 |
|
|
| 156 |
|
|
| 25 |
|
2027-2031 |
|
| 1,830 |
|
|
| 831 |
|
|
| 121 |
|
| Pension Plans | Other Postretirement Benefits | ||||||||||
| (In millions) | U.S. | Non-U.S. | |||||||||
| 2020 | $ | 437 | $ | 133 | $ | 17 | |||||
| 2021 | 390 | 124 | 17 | ||||||||
| 2022 | 373 | 128 | 16 | ||||||||
| 2023 | 359 | 130 | 16 | ||||||||
| 2024 | 346 | 138 | 15 | ||||||||
| 2025-2029 | 1,623 | 721 | 72 | ||||||||
|
| U.S. |
|
| Non-U.S. |
| ||||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
All plans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accumulated benefit obligation |
| $ | 5,780 |
|
| $ | 5,220 |
|
| $ | 3,385 |
|
| $ | 3,284 |
|
Plans not fully-funded: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Projected benefit obligation |
| $ | 1,847 |
|
| $ | 5,235 |
|
| $ | 1,273 |
|
| $ | 933 |
|
Accumulated benefit obligation |
|
| 1,829 |
|
|
| 5,220 |
|
|
| 1,216 |
|
|
| 856 |
|
Fair value of plan assets |
|
| 1,674 |
|
|
| 4,970 |
|
|
| 650 |
|
|
| 185 |
|
| U.S. | Non-U.S. | ||||||||||||||
| (In millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
| All plans: | |||||||||||||||
| Accumulated benefit obligation | $ | 4,994 | $ | 4,725 | $ | 3,097 | $ | 2,688 | |||||||
| Plans not fully-funded: | |||||||||||||||
| Projected benefit obligation | $ | 5,009 | $ | 4,732 | $ | 1,059 | $ | 908 | |||||||
| Accumulated benefit obligation | 4,994 | 4,723 | 991 | 852 | |||||||||||
| Fair value of plan assets | 4,780 | 4,443 | 370 | 281 | |||||||||||
Certain non-U.S. subsidiaries maintain unfunded pension plans consistent with local practices and requirements. At December 31, 2019,2021, these plans accounted for $247$226 million of our accumulated pension benefit obligation, $277$253 million of our projected pension benefit obligation, and $82$57 million of our AOCL adjustment. At December 31, 2018,2020, these plans accounted for $218$264 million of our accumulated pension benefit obligation, $244$299 million of our projected pension benefit obligation, and $59$90 million of our AOCL adjustment.
We expect to contribute approximately $25$25 million to $50$50 million to our funded non-U.S. pension plans in 2020.
Assumed health care cost trend rates at December 31 follow:
|
| 2021 |
|
| 2020 |
| ||
Health care cost trend rate assumed for the next year |
|
| 6.5 | % |
|
| 6.0 | % |
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) |
|
| 5.0 |
|
|
| 5.0 |
|
Year that the rate reaches the ultimate trend rate |
|
| 2028 |
|
|
| 2025 |
|
| 2019 | 2018 | ||||
| Health care cost trend rate assumed for the next year | 6.3 | % | 6.5 | % | |
| Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | 5.0 | 5.0 | |||
| Year that the rate reaches the ultimate trend rate | 2025 | 2025 | |||
| (In millions) | 1% Increase | 1% Decrease | |||||
| Accumulated other postretirement benefits obligation | $ | 13 | $ | (10 | ) | ||
| Aggregate service and interest cost | 1 | (1 | ) | ||||
|
| U.S. |
|
| Non-U.S. |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Cash and short term securities |
|
| 1 | % |
|
| 3 | % |
|
| 2 | % |
|
| 2 | % |
Equity securities |
|
| 6 |
|
|
| 4 |
|
|
| 6 |
|
|
| 4 |
|
Debt securities |
|
| 92 |
|
|
| 93 |
|
|
| 90 |
|
|
| 93 |
|
Alternatives |
|
| 1 |
|
|
| 0 |
|
|
| 2 |
|
|
| 1 |
|
Total |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
| U.S. | Non-U.S. | ||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||
| Cash and short term securities | 2 | % | 2 | % | 1 | % | 1 | % | |||
| Equity securities | 6 | 6 | 3 | 4 | |||||||
| Debt securities | 92 | 92 | 96 | 94 | |||||||
| Alternatives | — | — | — | 1 | |||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | |||
Our pension investment policy recognizespolicies recognize the long term nature of pension liabilities, and isare primarily designed to offset the future impact of discount rate movements on the funded status for our plans.plans, with target return-seeking allocations based upon given funded ratio levels. All assets are managed externally according to target asset allocation guidelines we have established. Manager guidelines prohibit the use of any type of investment derivative without our prior approval. Portfolio risk is controlled by having managers comply with guidelines, establishing the maximum size of any single holding in their portfolios, and using managers with different investment styles. We periodically undertake asset and liability modeling studies to determine the appropriateness of the investments.
The portfolio of our U.S. pension plan assets includes holdings of global high quality and high yield fixed income securities, fixed income, equity and real estate collective trust funds, short term interest bearing deposits, and private equities.equity and credit securities. The target asset allocation of our U.S. pension plans is 94%91% in duration-matched fixed income securities, 5% in private equity and 6%credit securities, 3% in equity securities.securities and 1% in real estate funds. Actual U.S. pension fund asset allocations are reviewed on a periodic basis and the pension funds are rebalanced to target ranges on an as needed basis.
101
The portfolios of our non-U.S. pension plans include holdings of U.S. and non-U.S. equities, global high quality and high yield fixed income securities, hedge funds, currency derivatives, insurance contracts, repurchase agreements, and short term interest bearing deposits. The weighted average target asset allocation of the non-U.S. pension funds is approximately 95%95% fixed income and 5%5% equities.
| U.S. | Non-U.S. | ||||||||||||||||||||||||||||||
| (In millions) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||||||||||||
| Cash and Short Term Securities | $ | 47 | $ | 47 | $ | — | $ | — | $ | 33 | $ | 29 | $ | 4 | $ | — | |||||||||||||||
| Equity Securities | |||||||||||||||||||||||||||||||
| Common and Preferred Stock | — | — | — | — | 24 | 24 | — | — | |||||||||||||||||||||||
| Commingled Funds | — | — | — | — | 36 | 36 | — | — | |||||||||||||||||||||||
| Mutual Funds | — | — | — | — | 5 | 5 | — | — | |||||||||||||||||||||||
| Debt Securities | |||||||||||||||||||||||||||||||
| Corporate Bonds | 2,577 | — | 2,576 | 1 | 190 | 10 | 180 | — | |||||||||||||||||||||||
| Government Bonds | 1,120 | — | 1,120 | — | 2,271 | 60 | 2,211 | — | |||||||||||||||||||||||
| Repurchase Agreements | — | — | — | — | (511 | ) | — | (511 | ) | — | |||||||||||||||||||||
| Asset Backed Securities | 283 | — | 282 | 1 | 74 | 5 | 69 | — | |||||||||||||||||||||||
| Mutual Funds | — | — | — | — | 19 | 9 | 10 | — | |||||||||||||||||||||||
| Alternatives | |||||||||||||||||||||||||||||||
| Insurance Contracts | 2 | — | — | 2 | 22 | — | — | 22 | |||||||||||||||||||||||
| Other Investments | 2 | — | 2 | — | (4 | ) | — | (5 | ) | 1 | |||||||||||||||||||||
| Total Investments in the Fair Value Hierarchy | 4,031 | $ | 47 | $ | 3,980 | $ | 4 | 2,159 | $ | 178 | $ | 1,958 | $ | 23 | |||||||||||||||||
| Investments Measured at Net Asset Value, as Practical Expedient: | |||||||||||||||||||||||||||||||
| Equity Securities | |||||||||||||||||||||||||||||||
| Commingled Funds | 9 | 69 | |||||||||||||||||||||||||||||
| Mutual Funds | — | 11 | |||||||||||||||||||||||||||||
| Partnership Interests | 267 | — | |||||||||||||||||||||||||||||
| Debt Securities | |||||||||||||||||||||||||||||||
| Mutual Funds | 141 | 7 | |||||||||||||||||||||||||||||
| Commingled Funds | 310 | 604 | |||||||||||||||||||||||||||||
| Short Term Securities | |||||||||||||||||||||||||||||||
| Commingled Funds | 67 | 4 | |||||||||||||||||||||||||||||
| Alternatives | |||||||||||||||||||||||||||||||
| Commingled Funds | — | 6 | |||||||||||||||||||||||||||||
| Total Investments | 4,825 | 2,860 | |||||||||||||||||||||||||||||
| Other | (45 | ) | (120 | ) | |||||||||||||||||||||||||||
| Total Plan Assets | $ | 4,780 | $ | 2,740 | |||||||||||||||||||||||||||
|
| U.S. |
|
| Non-U.S |
| ||||||||||||||||||||||||||
(In millions) |
| Total |
|
| Quoted |
|
| Significant |
|
| Significant |
|
| Total |
|
| Quoted |
|
| Significant |
|
| Significant |
| ||||||||
Cash and Short Term Securities |
| $ | 71 |
|
| $ | 71 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 56 |
|
| $ | 51 |
|
| $ | 5 |
|
| $ | 0 |
|
Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common and Preferred Stock |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 28 |
|
|
| 28 |
|
|
| 0 |
|
|
| 0 |
|
Commingled Funds |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 20 |
|
|
| 20 |
|
|
| 0 |
|
|
| 0 |
|
Mutual Funds |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 37 |
|
|
| 8 |
|
|
| 29 |
|
|
| 0 |
|
Debt Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Corporate Bonds |
|
| 2,673 |
|
|
| 0 |
|
|
| 2,673 |
|
|
| 0 |
|
|
| 286 |
|
|
| 5 |
|
|
| 281 |
|
|
| 0 |
|
Government Bonds |
|
| 958 |
|
|
| 0 |
|
|
| 958 |
|
|
| 0 |
|
|
| 2,391 |
|
|
| 71 |
|
|
| 2,320 |
|
|
| 0 |
|
Repurchase Agreements |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (570 | ) |
|
| 0 |
|
|
| (570 | ) |
|
| 0 |
|
Asset Backed Securities |
|
| 172 |
|
|
| 0 |
|
|
| 172 |
|
|
| 0 |
|
|
| 26 |
|
|
| 7 |
|
|
| 19 |
|
|
| 0 |
|
Commingled Funds |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 29 |
|
|
| 20 |
|
|
| 9 |
|
|
| 0 |
|
Mutual Funds |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 9 |
|
|
| 9 |
|
|
| 0 |
|
|
| 0 |
|
Alternatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Insurance Contracts |
|
| 1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
|
| 25 |
|
|
| 0 |
|
|
| 0 |
|
|
| 25 |
|
Derivatives |
|
| 4 |
|
|
| 0 |
|
|
| 4 |
|
|
| 0 |
|
|
| 2 |
|
|
| 0 |
|
|
| 2 |
|
|
| 0 |
|
Total Investments in the Fair Value Hierarchy |
|
| 3,879 |
|
| $ | 71 |
|
| $ | 3,807 |
|
| $ | 1 |
|
|
| 2,339 |
|
| $ | 219 |
|
| $ | 2,095 |
|
| $ | 25 |
|
Investments Measured at Net Asset Value, as Practical Expedient: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commingled Funds |
|
| 8 |
|
|
|
|
|
|
|
|
|
|
|
| 102 |
|
|
|
|
|
|
|
|
|
| ||||||
Mutual Funds |
|
| 167 |
|
|
|
|
|
|
|
|
|
|
|
| 2 |
|
|
|
|
|
|
|
|
|
| ||||||
Partnership Interests |
|
| 161 |
|
|
|
|
|
|
|
|
|
|
|
| 13 |
|
|
|
|
|
|
|
|
|
| ||||||
Debt Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mutual Funds |
|
| 877 |
|
|
|
|
|
|
|
|
|
|
|
| 76 |
|
|
|
|
|
|
|
|
|
| ||||||
Commingled Funds |
|
| 388 |
|
|
|
|
|
|
|
|
|
|
|
| 708 |
|
|
|
|
|
|
|
|
|
| ||||||
Partnership Interests |
|
| 143 |
|
|
|
|
|
|
|
|
|
|
|
| 39 |
|
|
|
|
|
|
|
|
|
| ||||||
Short Term Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commingled Funds |
|
| 78 |
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
|
|
|
|
|
|
|
| ||||||
Pooled Separate Accounts |
|
| 10 |
|
|
|
|
|
|
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
| ||||||
Alternatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commingled Funds |
|
| 60 |
|
|
|
|
|
|
|
|
|
|
|
| 39 |
|
|
|
|
|
|
|
|
|
| ||||||
Total Investments |
|
| 5,771 |
|
|
|
|
|
|
|
|
|
|
|
| 3,337 |
|
|
|
|
|
|
|
|
|
| ||||||
Other |
|
| (51 | ) |
|
|
|
|
|
|
|
|
|
|
| (65 | ) |
|
|
|
|
|
|
|
|
| ||||||
Total Plan Assets |
| $ | 5,720 |
|
|
|
|
|
|
|
|
|
|
| $ | 3,272 |
|
|
|
|
|
|
|
|
|
| ||||||
102
The fair values of our pension plan assets at December 31, 2018,2020 by asset category are as follows:
|
| U.S. |
|
| Non-U.S |
| ||||||||||||||||||||||||||
(In millions) |
| Total |
|
| Quoted |
|
| Significant |
|
| Significant |
|
| Total |
|
| Quoted |
|
| Significant |
|
| Significant |
| ||||||||
Cash and Short Term Securities |
| $ | 122 |
|
| $ | 122 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 46 |
|
| $ | 42 |
|
| $ | 4 |
|
| $ | 0 |
|
Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common and Preferred Stock |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 24 |
|
|
| 24 |
|
|
| 0 |
|
|
| 0 |
|
Commingled Funds |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 19 |
|
|
| 19 |
|
|
| 0 |
|
|
| 0 |
|
Mutual Funds |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6 |
|
|
| 6 |
|
|
| 0 |
|
|
| 0 |
|
Debt Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Corporate Bonds |
|
| 2,843 |
|
|
| 0 |
|
|
| 2,842 |
|
|
| 1 |
|
|
| 230 |
|
|
| 24 |
|
|
| 206 |
|
|
| 0 |
|
Government Bonds |
|
| 1,038 |
|
|
| 0 |
|
|
| 1,038 |
|
|
| 0 |
|
|
| 2,503 |
|
|
| 42 |
|
|
| 2,461 |
|
|
| 0 |
|
Repurchase Agreements |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (650 | ) |
|
| 0 |
|
|
| (650 | ) |
|
| 0 |
|
Asset Backed Securities |
|
| 280 |
|
|
| 0 |
|
|
| 280 |
|
|
| 0 |
|
|
| 76 |
|
|
| 8 |
|
|
| 68 |
|
|
| 0 |
|
Commingled Funds |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 20 |
|
|
| 20 |
|
|
| 0 |
|
|
| 0 |
|
Mutual Funds |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 19 |
|
|
| 9 |
|
|
| 10 |
|
|
| 0 |
|
Alternatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Insurance Contracts |
|
| 2 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2 |
|
|
| 28 |
|
|
| 0 |
|
|
| 0 |
|
|
| 28 |
|
Other Investments |
|
| 7 |
|
|
| 0 |
|
|
| 7 |
|
|
| 0 |
|
|
| 6 |
|
|
| 0 |
|
|
| 5 |
|
|
| 1 |
|
Total Investments in the Fair Value Hierarchy |
|
| 4,292 |
|
| $ | 122 |
|
| $ | 4,167 |
|
| $ | 3 |
|
|
| 2,327 |
|
| $ | 194 |
|
| $ | 2,104 |
|
| $ | 29 |
|
Investments Measured at Net Asset Value, as Practical Expedient: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commingled Funds |
|
| 23 |
|
|
|
|
|
|
|
|
|
|
|
| 62 |
|
|
|
|
|
|
|
|
|
| ||||||
Mutual Funds |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
| 4 |
|
|
|
|
|
|
|
|
|
| ||||||
Partnership Interests |
|
| 166 |
|
|
|
|
|
|
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
| ||||||
Debt Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Mutual Funds |
|
| 148 |
|
|
|
|
|
|
|
|
|
|
|
| 81 |
|
|
|
|
|
|
|
|
|
| ||||||
Commingled Funds |
|
| 295 |
|
|
|
|
|
|
|
|
|
|
|
| 665 |
|
|
|
|
|
|
|
|
|
| ||||||
Partnership Interests |
|
| 102 |
|
|
|
|
|
|
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
| ||||||
Short Term Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commingled Funds |
|
| 22 |
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
|
|
|
|
|
|
|
| ||||||
Alternatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Commingled Funds |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
| 6 |
|
|
|
|
|
|
|
|
|
| ||||||
Total Investments |
|
| 5,048 |
|
|
|
|
|
|
|
|
|
|
|
| 3,148 |
|
|
|
|
|
|
|
|
|
| ||||||
Other |
|
| (78 | ) |
|
|
|
|
|
|
|
|
|
|
| (107 | ) |
|
|
|
|
|
|
|
|
| ||||||
Total Plan Assets |
| $ | 4,970 |
|
|
|
|
|
|
|
|
|
|
| $ | 3,041 |
|
|
|
|
|
|
|
|
|
| ||||||
| U.S. | Non-U.S. | ||||||||||||||||||||||||||||||
| (In millions) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||||||||||||
| Cash and Short Term Securities | $ | 48 | $ | 48 | $ | — | $ | — | $ | 29 | $ | 26 | $ | 3 | $ | — | |||||||||||||||
| Equity Securities | |||||||||||||||||||||||||||||||
| Common and Preferred Stock | — | — | — | — | 19 | 19 | — | — | |||||||||||||||||||||||
| Commingled Funds | — | — | — | — | 14 | 14 | — | — | |||||||||||||||||||||||
| Mutual Funds | — | — | — | — | 4 | 4 | — | — | |||||||||||||||||||||||
| Debt Securities | |||||||||||||||||||||||||||||||
| Corporate Bonds | 2,344 | — | 2,344 | — | 171 | 17 | 154 | — | |||||||||||||||||||||||
| Government Bonds | 968 | — | 968 | — | 2,158 | 62 | 2,096 | — | |||||||||||||||||||||||
| Repurchase Agreements | — | — | — | — | (641 | ) | — | (641 | ) | — | |||||||||||||||||||||
| Asset Backed Securities | 63 | — | 63 | — | 67 | 5 | 62 | — | |||||||||||||||||||||||
| Mutual Funds | — | — | — | — | 18 | 8 | 10 | — | |||||||||||||||||||||||
| Alternatives | |||||||||||||||||||||||||||||||
| Insurance Contracts | 2 | — | — | 2 | 19 | — | — | 19 | |||||||||||||||||||||||
| Other Investments | — | — | — | — | 6 | — | 4 | 2 | |||||||||||||||||||||||
| Total Investments in the Fair Value Hierarchy | 3,425 | $ | 48 | $ | 3,375 | $ | 2 | 1,864 | $ | 155 | $ | 1,688 | $ | 21 | |||||||||||||||||
| Investments Measured at Net Asset Value, as Practical Expedient: | |||||||||||||||||||||||||||||||
| Equity Securities | |||||||||||||||||||||||||||||||
| Commingled Funds | 11 | 56 | |||||||||||||||||||||||||||||
| Mutual Funds | — | 7 | |||||||||||||||||||||||||||||
| Partnership Interests | 247 | — | |||||||||||||||||||||||||||||
| Debt Securities | |||||||||||||||||||||||||||||||
| Mutual Funds | 90 | 7 | |||||||||||||||||||||||||||||
| Commingled Funds | 603 | 638 | |||||||||||||||||||||||||||||
| Short Term Securities | |||||||||||||||||||||||||||||||
| Commingled Funds | 59 | 7 | |||||||||||||||||||||||||||||
| Alternatives | |||||||||||||||||||||||||||||||
| Commingled Funds | — | 5 | |||||||||||||||||||||||||||||
| Total Investments | 4,435 | 2,584 | |||||||||||||||||||||||||||||
| Other | 10 | (120 | ) | ||||||||||||||||||||||||||||
| Total Plan Assets | $ | 4,445 | $ | 2,464 | |||||||||||||||||||||||||||
103
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. Investments that are measured at Net Asset Value ("NAV") as a practical expedient to estimate fair value are not classified in the fair value hierarchy. Under the practical expedient approach, the NAV is based on the fair value of the underlying investments held by each fund less its liabilities. This practical expedient would not be used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to total plan assets. Valuation methodologies used for assets and liabilities measured at fair value are as follows:
• |
Equity Securities: Common and preferred stock, which are held in non-U.S. companies, are valued at the closing price reported on the active market on which the individual securities are traded. Commingled funds are primarily valued at the NAV of units held at year end, as determined by a pricing vendor or the fund family. Mutual funds are valued at the NAV of shares held at year end, as determined by the closing price reported on the active market on which the individual securities |
• Debt Securities: Corporate and government bonds, including asset backed securities, are valued at the closing price reported on the active market on which the individual securities are traded, or based on institutional bid evaluations using proprietary models if an active market is not available. Repurchase agreements are valued at the contract price plus accrued interest. These secured borrowings are collateralized by government bonds held by the non-U.S. plans and have maturities less than one year. Commingled funds are primarily valued at the NAV of units held at year end, as determined by a pricing vendor or the fund family. Mutual funds are valued at the NAV of shares held at year end, as determined by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the fund family if an active market is not available. Partnership interests in private credit securities are priced based on valuations using the partnership’s latest available financial statements and the plan's percent ownership, adjusted for any cash transactions which occurred between the date of those financial statements and our year end. • Alternatives: Commingled funds, which primarily consist of real estate funds, are valued based on the NAV as determined by the fund manager using the most recent financial information available. Other investments primarily include derivative financial instruments, which are valued using independent pricing sources which utilize industry standard derivative valuation models. Directed insurance contracts are valued as reported by the issuer, based on discounted cash flows using weighted average discount rates of 2.1% and 1.7% at December 31, 2021 and 2020, respectively.
|
The following table sets forth a summary of changes in fair value of the non-U.S. pension plan investmentsinsurance contracts classified as Level 3 for the year ended December 31, 2019:3:
|
|
|
|
|
|
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Balance, beginning of year |
| $ | 28 |
|
| $ | 22 |
|
Unrealized gains relating to instruments still held at the reporting date |
|
| (1 | ) |
|
| 3 |
|
Purchases, sales, issuances and settlements (net) |
|
| 0 |
|
|
| 1 |
|
Foreign currency translation |
|
| (2 | ) |
|
| 2 |
|
Balance, end of year |
| $ | 25 |
|
| $ | 28 |
|
| Non-U.S. | ||||||||
| (In millions) | Insurance Contracts | Other | ||||||
| Balance, beginning of year | $ | 19 | $ | 2 | ||||
| Unrealized (losses) gains relating to instruments still held at the reporting date | 1 | — | ||||||
| Purchases, sales, issuances and settlements (net) | 2 | (1 | ) | |||||
| Balance, end of year | $ | 22 | $ | 1 | ||||
| Non-U.S. | ||||||||||||||||
| (In millions) | Insurance Contracts | Real Estate | Equity Securities - Commingled Funds | Other | ||||||||||||
| Balance, beginning of year | $ | 18 | $ | 4 | $ | 131 | $ | 3 | ||||||||
| Realized gains (losses) | — | — | (1 | ) | — | |||||||||||
| Purchases, sales, issuances and settlements (net) | 2 | (4 | ) | (128 | ) | (1 | ) | |||||||||
| Foreign currency translation | (1 | ) | — | (2 | ) | — | ||||||||||
| Balance, end of year | $ | 19 | $ | — | $ | — | $ | 2 | ||||||||
Savings Plans
Substantially all employees in the U.S. and employees of certain non-U.S. locations are eligible to participate in a defined contribution savings plan. Expenses recognized for contributions to these plans were $110$116 million, $111$100 million and $111$110 million for 2021, 2020 and 2019, 2018 and 2017, respectively.
104
Note 18.19. Stock Compensation Plans
Our stock compensation plans (collectively, the “Plans”) permit the grant of stock options, stock appreciation rights (“SARs”), performance share units, restricted stock, restricted stock units and other stock-based awards to employees and directors. Our current stock compensation plan, the 2017 Performance Plan, was adopted on April 10, 2017 and expires on April 9, 2027.2027. A total of 18 million shares of our common stock may be issued in respect of grants made under the 2017 Performance Plan. Any shares of common stock that are subject to awards of stock options or SARs will be counted as 1 share for each share granted for purposes of the aggregate share limit and any shares of common stock that are subject to any other awards will be counted as 2 shares for each share granted for purposes of the aggregate share limit. In addition, shares of common stock that are subject to awards issued under the 2017 Performance Plan or certain prior stock compensation plansPlans that expire according to their terms or are forfeited, terminated, canceled or surrendered or are settled, or can be paid, only in cash, or are surrendered in payment of taxes associated with such awards (other than stock options or SARs) will be available for issuance pursuant to a new award under the 2017 Performance Plan. Shares issued under our stock compensation plansPlans are usually issued from shares of our common stock held in treasury.
Stock Options
Grants of stock options and SARs (collectively referred to as “options”) under the Plans generally have a graded vesting period of four years whereby one-fourth of the awards vest on each of the first four anniversaries of the grant date, an exercise price equal to the fair market value of 1 share of our common stock on the date of grant (i.e., the closing market price on that date) and a contractual term of ten years.years. The exercise of tandem SARs cancels an equivalent number of stock options and, conversely, the exercise of stock options cancels an equivalent number of tandem SARs. Option grants are cancelled on, or 90 days following, termination of employment unless termination is due to retirement, death or disability under certain circumstances, in which case, all outstanding options vest fully and remain outstanding for a term set forth in the related grant agreement.
The following table summarizes the activity related to options during 2019:2021:
|
| Options |
|
| Weighted |
|
| Weighted |
|
| Aggregate |
| ||||
Outstanding at January 1 |
|
| 8,700,732 |
|
| $ | 15.97 |
|
|
|
|
|
|
| ||
Options granted |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
| ||
Options exercised |
|
| (2,028,083 | ) |
|
| 12.83 |
|
|
|
|
| $ | 11 |
| |
Options expired |
|
| (60,892 | ) |
|
| 14.28 |
|
|
|
|
|
|
| ||
Options cancelled |
|
| (172,956 | ) |
|
| 14.00 |
|
|
|
|
|
|
| ||
Outstanding at December 31 |
|
| 6,438,801 |
|
|
| 17.03 |
|
|
| 6.1 |
|
|
| 46 |
|
Vested and expected to vest at December 31 |
|
| 6,360,051 |
|
|
| 17.11 |
|
|
| 6.1 |
|
|
| 45 |
|
Exercisable at December 31 |
|
| 3,044,514 |
|
|
| 24.73 |
|
|
| 3.9 |
|
|
| 8 |
|
Available for grant at December 31 |
|
| 3,310,039 |
|
|
|
|
|
|
|
|
|
| |||
| Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (In millions) | |||||||||
| Outstanding at January 1 | 5,580,452 | $ | 20.14 | |||||||||
| Options granted | — | — | ||||||||||
| Options exercised | (240,237 | ) | 8.07 | $ | 3 | |||||||
| Options expired | (73,556 | ) | 12.08 | |||||||||
| Options cancelled | (268,638 | ) | 24.11 | |||||||||
| Outstanding at December 31 | 4,998,021 | 20.61 | 3.7 | 7 | ||||||||
| Vested and expected to vest at December 31 | 4,966,300 | 20.53 | 3.7 | 6 | ||||||||
| Exercisable at December 31 | 4,709,647 | 19.83 | 3.5 | 7 | ||||||||
| Available for grant at December 31 | 12,305,582 | |||||||||||
In addition, the aggregate intrinsic value of options exercised in 20182020 and 20172019 was $9$0 million and $18$3 million, respectively.
105
Significant option groups outstanding at December 31, 20192021 and related weighted average exercise price and remaining contractual term information follows:
Grant Date |
| Options |
|
| Options |
|
| Exercise |
|
| Remaining |
| ||||
2/25/2020 |
|
| 3,792,384 |
|
|
| 398,097 |
|
| $ | 10.12 |
|
|
| 8.16 |
|
2/27/2017 |
|
| 556,409 |
|
|
| 556,409 |
|
|
| 35.26 |
|
|
| 5.16 |
|
2/22/2016 |
|
| 537,126 |
|
|
| 537,126 |
|
|
| 29.90 |
|
|
| 4.15 |
|
2/23/2015 |
|
| 483,150 |
|
|
| 483,150 |
|
|
| 27.16 |
|
|
| 3.15 |
|
2/24/2014 |
|
| 371,480 |
|
|
| 371,480 |
|
|
| 26.44 |
|
|
| 2.15 |
|
2/28/2013 |
|
| 244,914 |
|
|
| 244,914 |
|
|
| 12.98 |
|
|
| 1.16 |
|
2/27/2012 |
|
| 101,350 |
|
|
| 101,350 |
|
|
| 12.94 |
|
|
| 0.16 |
|
All Other |
|
| 351,988 |
|
|
| 351,988 |
|
| (1) |
|
| (1) |
| ||
|
|
| 6,438,801 |
|
|
| 3,044,514 |
|
|
|
|
|
|
| ||
| Grant Date | Options Outstanding | Options Exercisable | Exercise Price | Remaining Contractual Term (Years) | |||||||||
| 2/27/2017 | 564,976 | 378,284 | $ | 35.26 | 7.2 | ||||||||
| 2/22/2016 | 549,546 | 459,160 | 29.90 | 6.2 | |||||||||
| 2/23/2015 | 493,730 | 493,730 | 27.16 | 5.2 | |||||||||
| 2/24/2014 | 381,617 | 381,617 | 26.44 | 4.2 | |||||||||
| 2/28/2013 | 913,705 | 913,705 | 12.98 | 3.2 | |||||||||
| 2/27/2012 | 729,530 | 729,530 | 12.94 | 2.2 | |||||||||
| 2/22/2011 | 530,288 | 530,288 | 13.91 | 1.1 | |||||||||
| 2/23/2010 | 322,387 | 322,387 | 12.74 | 0.1 | |||||||||
| All Other | 512,242 | 500,946 | (1 | ) | (1 | ) | |||||||
| 4,998,021 | 4,709,647 | ||||||||||||
Weighted average grant date fair values of stock options and the assumptions used in estimating those fair values are as follows:
|
| 2020 |
| |
Weighted average grant date fair value |
| $ | 10.12 |
|
Black-Scholes model assumptions(1): |
|
|
| |
Expected term (years) |
|
| 7.50 |
|
Interest rate |
|
| 1.29 | % |
Volatility |
|
| 41.28 | % |
Dividend yield |
|
| 6.54 | % |
| 2017 | ||||
| Weighted average grant date fair value | $ | 12.05 | ||
Black-Scholes model assumptions(1): | ||||
| Expected term (years) | 7.20 | |||
| Interest rate | 2.13 | % | ||
| Volatility | 33.63 | % | ||
| Dividend yield | 1.13 | % | ||
Performance Share Units
Performance share units granted under the Plans are earned over a three-year period beginning January 1 of the year of grant. Total units earned for grants made in 2019, 2018 and 20172021 may vary between 0%0% and 200%200%, and grants made during 2020 and 2019 may vary between 0% and 133% and 0% and 200%, respectively, of the units granted based on the attainment of performance targets during the related three-year period and continued service. The performance targets are established by the Board of Directors. All of the units earned will be settled through the issuance of an equivalent number of shares of our common stock and are equity classified.
The following table summarizes the activity related to performance share units during 2019:2021:
|
| Units |
|
| Weighted |
| ||
Unvested at January 1 |
|
| 594,780 |
|
| $ | 15.02 |
|
Units granted |
|
| 911,550 |
|
|
| 19.32 |
|
Units vested |
|
| (250,293 | ) |
|
| 18.43 |
|
Units forfeited |
|
| (7,961 | ) |
|
| 17.71 |
|
Unvested at December 31 |
|
| 1,248,076 |
|
|
| 17.46 |
|
| Units | Weighted Average Grant Date Fair Value | |||||
| Unvested at January 1 | 333,196 | $ | 32.30 | |||
| Units granted | 453,795 | 18.01 | ||||
| Units vested | (123,681 | ) | 36.78 | |||
| Units forfeited | (75,310 | ) | 27.24 | |||
| Unvested at December 31 | 588,000 | 20.98 | ||||
We measure the fair value of grants of performance share units based primarily on the closing market price of a share of our common stock on the date of the grant, modified as appropriate to take into account the features of such grants.
106
Restricted Stock Units
Restricted stock units granted under the Plans typically vest over a three-year period beginning on the date of grant. Restricted stock units will be settled through the issuance of an equivalent number of shares of our common stock and are equity classified.
The following table summarizes the activity related to restricted stock units during 2019:2021:
|
| Units |
|
| Weighted |
| ||
Unvested at January 1 |
|
| 2,927,936 |
|
| $ | 18.80 |
|
Units granted |
|
| 771,038 |
|
|
| 16.63 |
|
Units vested |
|
| (1,137,026 | ) |
|
| 24.34 |
|
Units forfeited |
|
| (114,969 | ) |
|
| 15.98 |
|
Unvested at December 31 |
|
| 2,446,979 |
|
|
| 15.20 |
|
Units vested but not released |
|
| 482,505 |
|
|
| 23.86 |
|
Outstanding at December 31 |
|
| 2,929,484 |
|
|
| 16.63 |
|
| Units | Weighted Average Grant Date Fair Value | |||||
| Unvested at January 1 | 1,388,433 | $ | 29.81 | |||
| Units granted | 1,883,570 | 19.05 | ||||
| Units vested and settled | (280,593 | ) | 29.64 | |||
| Units forfeited | (256,935 | ) | 25.49 | |||
| Unvested at December 31 | 2,734,475 | 23.21 | ||||
We measure the fair value of grants of restricted stock units based on the closing market price of a share of our common stock on the date of the grant.
Other Information
Stock-based compensation expense, cash payments made to settle SARs and cash received from the exercise of stock options follows:
|
|
|
|
|
|
|
|
|
| |||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Stock-based compensation expense recognized |
| $ | 36 |
|
| $ | 31 |
|
| $ | 27 |
|
Tax benefit |
|
| (8 | ) |
|
| (8 | ) |
|
| (7 | ) |
After-tax stock-based compensation expense |
| $ | 28 |
|
| $ | 23 |
|
| $ | 20 |
|
Cash payments to settle SARs |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Cash received from stock option exercises |
| $ | 26 |
|
| $ | 0 |
|
| $ | 2 |
|
| (In millions) | 2019 | 2018 | 2017 | ||||||||
| Stock-based compensation expense recognized | $ | 27 | $ | 16 | $ | 22 | |||||
| Tax benefit | (7 | ) | (4 | ) | (6 | ) | |||||
| After-tax stock-based compensation expense | $ | 20 | $ | 12 | $ | 16 | |||||
| Cash payments to settle SARs | $ | — | $ | 1 | $ | 1 | |||||
| Cash received from stock option exercises | $ | 2 | $ | 9 | $ | 19 | |||||
As of December 31, 2019,2021, unearned compensation cost related to the unvested portion of all stock-based awards was approximately $36$64 million and is expected to be recognized over the remaining vesting period of the respective grants, through the fourth quarter of 2022.2024.
Note 19.20. Commitments and Contingent Liabilities
Environmental Matters
We have recorded liabilities totaling $48$80 million and $45$64 million at December 31, 20192021 and 2018,2020, respectively, for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by us. The increase in our recorded reserve during 2021 was primarily related to the acquisition of Cooper Tire. Of these amounts, $13$21 million and $10$16 million waswere included in Other Current Liabilities at December 31, 20192021 and 2018,2020, respectively. The costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities, and will be paid over several years. The amount of our ultimate liability in respect of these matters may be affected by several uncertainties, primarily the ultimate cost of required remediation and the extent to which other responsible parties contribute. We have limited potential insurance coverage for future environmental claims.
Since many of the remediation activities related to environmental matters vary substantially in duration and cost from site to site and the associated costs for each vary depending on the mix of unique site characteristics, in some cases we cannot reasonably estimate a range of possible losses. Although it is not possible to estimate with certainty the outcome of all of our environmental matters, management believes that potential losses in excess of current reserves for environmental matters, individually and in the aggregate, will not have a material adverse effect on our financial position, cash flows or results of operations.
Workers’ Compensation
We have recorded liabilities, on a discounted basis, totaling $198$194 million and $224$196 million for anticipated costs related to workers’ compensation at December 31, 20192021 and 2018,2020, respectively. Of these amounts, $39$38 million and $42$29 million were included in Current Liabilities as part of Compensation and Benefits at December 31, 20192021 and 2018,2020, respectively. The costs include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not
107
reported. These estimates are based on our assessment of potential liability using an analysis of available information with respect to pending claims, historical experience, and current cost trends. The amount of our ultimate liability in respect of these matters may differ from these estimates. We periodically, and at least annually, update our loss development factors based on actuarial analyses. At
General and Product Liability and Other Litigation
We have recorded liabilities totaling $293$390 million and $322$285 million, including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at December 31, 20192021 and 2018,2020, respectively. The increase from December 31, 2020 was primarily due to the acquisition of Cooper Tire. Of these amounts, $43$41 million and $57$38 million were included in Other Current Liabilities at December 31, 20192021 and 2018,2020, respectively. The amounts recorded were estimated based on an assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and, where available, recent and current trends. Based upon that assessment, at December 31, 2019,2021, we do not believe that estimated reasonably possible losses associated with general and product liability claims in excess of the amounts recorded will have a material adverse effect on our financial position, cash flows or results of operations. However, the amount of our ultimate liability in respect of these matters may differ from these estimates.
We have recorded an indemnification asset within Accounts Receivable of $3$1 million and within Other Assets of $22$20 million for Sumitomo Rubber Industries, Ltd.'s ("SRI") obligation to indemnify us for certain product liability claims related to products manufactured by a formerly consolidated joint venture entity, subject to certain caps and restrictions.
Asbestos. We are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to asbestos in certain products manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in state and federal courts. To date, we have disposed of approximately 152,200155,700 claims by defending, obtaining a dismissal thereof, or entering into a settlement. The sum of our accrued asbestos-related liability and gross payments to date, including legal costs, by us and our insurers totaled approximately $554$560 million and $545$563 million through December 31, 20192021 and 2018,2020, respectively.
A summary of recent approximate asbestos claims activity follows. Because claims are often filed and disposed of by dismissal or settlement in large numbers, the amount and timing of settlements and the number of open claims during a particular period can fluctuate significantly.
|
|
|
|
|
|
|
|
|
| |||
(Dollars in millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Pending claims, beginning of year |
|
| 38,700 |
|
|
| 39,600 |
|
|
| 43,100 |
|
New claims filed during the year |
|
| 1,000 |
|
|
| 1,100 |
|
|
| 1,500 |
|
Claims settled/dismissed |
|
| (1,500 | ) |
|
| (2,000 | ) |
|
| (5,000 | ) |
Pending claims, end of year |
|
| 38,200 |
|
|
| 38,700 |
|
|
| 39,600 |
|
Payments(1) |
| $ | 15 |
|
| $ | 13 |
|
| $ | 22 |
|
| (Dollars in millions) | 2019 | 2018 | 2017 | ||||||||
| Pending claims, beginning of year | 43,100 | 54,300 | 64,400 | ||||||||
| New claims filed during the year | 1,500 | 1,300 | 1,900 | ||||||||
| Claims settled/dismissed | (5,000 | ) | (12,500 | ) | (12,000 | ) | |||||
| Pending claims, end of year | 39,600 | 43,100 | 54,300 | ||||||||
Payments(1) | $ | 22 | $ | 18 | $ | 16 | |||||
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 $153$131 million and $166$149 million at December 31, 20192021 and 2018,2020, respectively. In determining the estimate of our asbestos liability, we evaluated claims over the next ten-year period. Due to the difficulties in making these estimates, analysis based on new data and/or a change in circumstances arising in the future may result in an increase in the recorded obligation, and that increase could be significant.
We maintain certain primary and excess insurance coverage under coverage-in-place agreements, and also have additional excess liability insurance with respect to asbestos liabilities. After consultation with our outside legal counsel and giving consideration to agreements with certain of our insurance carriers, the financial viability and legal obligations of our insurance carriers and other relevant factors, we determine an amount we expect is probable of recovery from such carriers. We record a receivable with respect to such policies when we determine that recovery is probable and we can reasonably estimate the amount of a particular recovery.
We recorded an insurance receivable related to asbestos claims of $95$77 million and $108$90 million at December 31, 20192021 and 2018,2020, respectively. We expect that approximately 60%60% of asbestos claim related losses would be recoverable through insurance during the ten-year period covered by the estimated liability. Of these amounts, $13$12 million wasand $13 million were included in Current Assets as part of Accounts Receivable at both December 31, 20192021 and 2018.December 31, 2020, respectively. The recorded receivable
108
consists of an amount we expect to collect under coverage-in-place agreements with certain primary and excess insurance carriers as well as an amount we believe is probable of recovery from certain of our other excess insurance carriers.
We believe that, at December 31, 2019,2021, we had approximately $555$540 million in excess level policy limits applicable to indemnity and defense costs for asbestos products claims under coverage-in-place agreements. We also had additional unsettled excess level policy limits potentially applicable to such costs. In addition, we had coverage under certain primary policies for indemnity and
We believe that our reserve for asbestos claims, and the receivable for recoveries from insurance carriers recorded in respect of these claims, reflects reasonable and probable estimates of these amounts. The estimate of the liabilities and assets related to pending and expected future asbestos claims and insurance recoveries is subject to numerous uncertainties, including, but not limited to, changes in:
As a result, 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 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
109
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.
Binding Commitments and Guarantees
At December 31, 2019,2021, we had binding commitments for raw materials, capital expenditures, utilities and various other types of contracts. Total commitments on contracts that extend beyond 20202022 are expected to total approximately $1,600 million.1.6 billion. In addition, we have other contractual commitments, the amounts of which cannot be estimated, pursuant to certain long term agreements under which we will purchase varying amounts of certain raw materials and finished goods at agreed upon base prices that may be subject to periodic adjustments for changes in raw material costs and market price adjustments, or in quantities that may be subject to periodic adjustments for changes in our or our suppliers' production levels.
We have off-balance sheet financial guarantees and other commitments totaling approximately $74$34 million and $73$73 million at December 31, 20192021 and 2018,2020, respectively. We issue guarantees to financial institutions or other entities on behalf of certain of our affiliates, lessors or customers. We generally do not receive a separate premium as consideration for, and do not require collateral in connection with, the issuance of these guarantees.
In 2015, as a result of the dissolution of the global alliance with SRI, we issued a guarantee of approximately $46$46 million to an insurance company related to SRI's obligation to pay certain outstanding workers' compensation claims of a formerly consolidated joint venture entity. As of December 31, 2019,2021, this guarantee amount has been reduced to $26$20 million. We have concluded the probability of our performance to be remote and, therefore, have not recorded a liability for this guarantee. While there is no fixed duration of this guarantee, we expect the amount of this guarantee to continue to decrease over time as the formerly consolidated joint venture entity pays its outstanding claims.
If our performance under these guarantees is triggered by non-payment or another specified event, we would be obligated to make payment to the financial institution or the other entity, and would typically have recourse to the affiliate, lessor, customer, or SRI. Except for the workers' compensation guarantee described above, the guarantees expire at various times through 2021. We are unable to estimate the extent to which our affiliates’, lessors’, customers’, or SRI's assets would be adequate to recover any payments made by us under the related guarantees.
At December 31, 2019,2021, we had an agreement to provide a revolving loan commitment to TireHub of $50up to $100 million. NaN amountsAs of December 31, 2021, 0 funds were drawn on that commitment as of December 31, 2019.
Indemnifications
At December 31, 2019,2021, we were a party to various agreements under which we had assumed obligations to indemnify the counterparties from certain potential claims and losses. These agreements typically involve standard commercial activities undertaken by us in the normal course of business; the sale of assets by us; the formation or dissolution of joint venture businesses to which we had contributed assets in exchange for ownership interests; and other financial transactions. Indemnifications provided by us pursuant to these agreements relate to various matters including, among other things, environmental, tax and shareholder matters; intellectual property rights; government regulations; employment-related matters; and dealer, supplier and other commercial matters.
Certain indemnifications expire from time to time, and certain other indemnifications are not subject to an expiration date. In addition, our potential liability under certain indemnifications is subject to maximum caps, while other indemnifications are not subject to caps. Although we have been subject to indemnification claims in the past, we cannot reasonably estimate the number, type and size of indemnification claims that may arise in the future. Due to these and other uncertainties associated with the indemnifications, our maximum exposure to loss under these agreements cannot be estimated.
We have determined that there are no indemnifications or guarantees other than liabilities for which amounts are already recorded or reserved in our consolidated financial statements under which it is probable that we have incurred a liability.
We recorded $22$37 million and $18$22 million for potential claims under warranties offered by us at December 31, 20192021 and 2018,December 31, 2020, respectively, the majority of which are recorded in Other Current Liabilities.
|
|
|
|
|
|
| ||
(In millions) |
| 2021 |
|
| 2020 |
| ||
Balance at January 1 |
| $ | 22 |
|
| $ | 22 |
|
Cooper Tire acquisition |
|
| 15 |
|
|
| 0 |
|
Payments made during the period |
|
| (29 | ) |
|
| (21 | ) |
Expense recorded during the period |
|
| 29 |
|
|
| 21 |
|
Translation adjustment |
|
| 0 |
|
|
| 0 |
|
Balance at December 31 |
| $ | 37 |
|
| $ | 22 |
|
| (In millions) | 2019 | 2018 | ||||||
| Balance at January 1 | $ | 18 | $ | 17 | ||||
| Payments made during the period | (25 | ) | (26 | ) | ||||
| Expense recorded during the period | 29 | 28 | ||||||
| Translation adjustment | — | (1 | ) | |||||
| Balance at December 31 | $ | 22 | $ | 18 | ||||
Dividends
During 2019, 20182020 and 20172019, we paid cash dividends of $148 million, $138$37 million and $110$148 million, respectively, on our common stock. This amount excludes dividends earned on stock based compensation plans of $2$1 million and $2 million for the years 2020 and 2019, and $1 million for 2018.respectively. On January 14,April 16, 2020, we announced that we have suspended the Company’s Board of Directors (or a duly authorized committee thereof) declared cash dividends of $0.16 per sharequarterly dividend on our common stock, or approximately $37 million in the aggregate. The cash dividend will be paid on March 2, 2020 to stockholders of record as of the close of business on February 3, 2020. Future quarterly dividends are subject to Board approval.
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 2021, 2020 and 2019, we did not0t repurchase any shares from employees.
Cooper Tire Acquisition
In connection with the acquisition of Cooper Tire, we issued 46,060,349 shares of common stock. Refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition.
111
Note 21. Reclassifications out of22. Accumulated Other Comprehensive Loss
The following table presents changes in AOCL by component for the years ended December 31, 2019, 20182021, 2020 and 2017,2019, after tax and minority interest:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(In millions) Income (Loss) |
| Foreign |
|
| Unrecognized |
|
| Deferred |
|
| Total |
| ||||
Balance at December 31, 2018 |
| $ | (1,160 | ) |
| $ | (2,923 | ) |
| $ | 7 |
|
| $ | (4,076 | ) |
Other comprehensive income (loss) before reclassifications(1) |
|
| 4 |
|
|
| (168 | ) |
|
| 10 |
|
|
| (154 | ) |
Amounts reclassified from accumulated other comprehensive loss |
|
| 0 |
|
|
| 108 |
|
|
| (14 | ) |
|
| 94 |
|
Balance at December 31, 2019 |
| $ | (1,156 | ) |
| $ | (2,983 | ) |
| $ | 3 |
|
| $ | (4,136 | ) |
Other comprehensive income (loss) before reclassifications(1) |
|
| (128 | ) |
|
| (4 | ) |
|
| 15 |
|
|
| (117 | ) |
Amounts reclassified from accumulated other comprehensive loss |
|
| 0 |
|
|
| 131 |
|
|
| (13 | ) |
|
| 118 |
|
Balance at December 31, 2020 |
| $ | (1,284 | ) |
| $ | (2,856 | ) |
| $ | 5 |
|
| $ | (4,135 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (118 | ) |
|
| 153 |
|
|
| 1 |
|
|
| 36 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
| 0 |
|
|
| 138 |
|
|
| (2 | ) |
|
| 136 |
|
Balance at December 31, 2021 |
| $ | (1,402 | ) |
| $ | (2,565 | ) |
| $ | 4 |
|
| $ | (3,963 | ) |
| (In millions) Income (Loss) | Foreign Currency Translation Adjustment | Unrecognized Net Actuarial Losses and Prior Service Costs | Deferred Derivative Gains (Losses) | Total | |||||||||||
| Balance at December 31, 2016 | $ | (1,155 | ) | $ | (3,053 | ) | $ | 10 | $ | (4,198 | ) | ||||
| Other comprehensive income (loss) before reclassifications | 240 | (103 | ) | (20 | ) | 117 | |||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | 104 | 1 | 105 | |||||||||||
| Balance at December 31, 2017 | $ | (915 | ) | $ | (3,052 | ) | $ | (9 | ) | $ | (3,976 | ) | |||
| Other comprehensive income (loss) before reclassifications | (245 | ) | 4 | 9 | (232 | ) | |||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | 125 | 7 | 132 | |||||||||||
| Balance at December 31, 2018 | $ | (1,160 | ) | $ | (2,923 | ) | $ | 7 | $ | (4,076 | ) | ||||
Other comprehensive income (loss) before reclassifications(1) | 4 | (168 | ) | 10 | (154 | ) | |||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | 108 | (14 | ) | 94 | ||||||||||
| Balance at December 31, 2019 | $ | (1,156 | ) | $ | (2,983 | ) | $ | 3 | $ | (4,136 | ) | ||||
The following table presents reclassifications out of AOCL for the years ended December 31, 2019, 20182021, 2020 and 2017:2019:
|
| Year Ended |
|
|
| |||||||||
(In millions) (Income) Expense |
| 2021 |
|
| 2020 |
|
| 2019 |
|
|
| |||
Component of AOCL |
| Amount Reclassified from |
|
| Affected Line Item in the Consolidated | |||||||||
Amortization of prior service cost and unrecognized gains and losses |
| $ | 139 |
|
| $ | 144 |
|
| $ | 137 |
|
| Other (Income) Expense |
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures |
|
| 43 |
|
|
| 29 |
|
|
| 6 |
|
| Other (Income) Expense / Rationalizations |
Unrecognized Net Actuarial Losses and Prior Service Costs, before tax |
| $ | 182 |
|
| $ | 173 |
|
| $ | 143 |
|
|
|
Tax effect |
|
| (44 | ) |
|
| (42 | ) |
|
| (35 | ) |
| United States and Foreign Taxes |
Net of tax |
| $ | 138 |
|
| $ | 131 |
|
| $ | 108 |
|
| Goodyear Net Income (Loss) |
Deferred Derivative (Gains) Losses |
| $ | (2 | ) |
| $ | (13 | ) |
| $ | (14 | ) |
| Cost of Goods Sold |
Tax effect |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| United States and Foreign Taxes |
Net of tax |
| $ | (2 | ) |
| $ | (13 | ) |
| $ | (14 | ) |
| Goodyear Net Income (Loss) |
Total reclassifications |
| $ | 136 |
|
| $ | 118 |
|
| $ | 94 |
|
| Goodyear Net Income (Loss) |
Year Ended December 31, | ||||||||||||||
| (In millions) (Income) Expense | 2019 | 2018 | 2017 | |||||||||||
| Component of AOCL | Amount Reclassified from AOCL | Affected Line Item in the Consolidated Statements of Operations | ||||||||||||
| Amortization of prior service cost and unrecognized gains and losses | $ | 137 | $ | 139 | $ | 117 | Other (Income) Expense | |||||||
| Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements and divestitures | 6 | 25 | 41 | Other (Income) Expense / Rationalizations | ||||||||||
| Unrecognized Net Actuarial Losses and Prior Service Costs, before tax | $ | 143 | $ | 164 | $ | 158 | ||||||||
| Tax effect | (35 | ) | (39 | ) | (54 | ) | United States and Foreign Taxes | |||||||
| Net of tax | $ | 108 | $ | 125 | $ | 104 | Goodyear Net Income (Loss) | |||||||
| Deferred Derivative (Gains) Losses, before tax | $ | (14 | ) | $ | 7 | $ | 2 | Cost of Goods Sold | ||||||
| Tax effect | — | — | (1 | ) | United States and Foreign Taxes | |||||||||
| Net of tax | $ | (14 | ) | $ | 7 | $ | 1 | Goodyear Net Income (Loss) | ||||||
| Total reclassifications | $ | 94 | $ | 132 | $ | 105 | Goodyear Net Income (Loss) | |||||||
|
| Year Ended |
| |||||||||
(In millions) |
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Net Income Attributable to Minority Shareholders |
| $ | 16 |
|
| $ | 4 |
|
| $ | 14 |
|
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
| |||
Foreign currency translation |
|
| (21 | ) |
|
| (6 | ) |
|
| 1 |
|
Decrease/Increase in net actuarial losses |
|
| 1 |
|
|
| (1 | ) |
|
| 0 |
|
Other Comprehensive Income (Loss) |
| $ | (20 | ) |
| $ | (7 | ) |
| $ | 1 |
|
Comprehensive Income (Loss) Attributable to Minority Shareholders |
| $ | (4 | ) |
| $ | (3 | ) |
| $ | 15 |
|
112
| Condensed Consolidating Balance Sheet | |||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||
| (In millions) | Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Entries and Eliminations | Consolidated | ||||||||||||||
| Assets: | |||||||||||||||||||
| Current Assets: | |||||||||||||||||||
| Cash and Cash Equivalents | $ | 165 | $ | 46 | $ | 697 | $ | — | $ | 908 | |||||||||
| Accounts Receivable, net | 644 | 105 | 1,192 | — | 1,941 | ||||||||||||||
| Accounts Receivable From Affiliates | 2,176 | — | — | (2,176 | ) | — | |||||||||||||
| Inventories | 1,425 | 59 | 1,398 | (31 | ) | 2,851 | |||||||||||||
| Prepaid Expenses and Other Current Assets | 74 | 321 | 332 | (493 | ) | 234 | |||||||||||||
| Total Current Assets | 4,484 | 531 | 3,619 | (2,700 | ) | 5,934 | |||||||||||||
| Goodwill | 24 | — | 418 | 123 | 565 | ||||||||||||||
| Intangible Assets | 116 | 1 | 20 | — | 137 | ||||||||||||||
| Deferred Income Taxes | 1,736 | 19 | 272 | (500 | ) | 1,527 | |||||||||||||
| Other Assets | 468 | 56 | 2,376 | (1,941 | ) | 959 | |||||||||||||
| Investments in Subsidiaries | 3,564 | 393 | — | (3,957 | ) | — | |||||||||||||
| Operating Lease Right-of-Use Assets | 534 | 11 | 310 | — | 855 | ||||||||||||||
| Property, Plant and Equipment | 2,428 | 443 | 4,358 | (21 | ) | 7,208 | |||||||||||||
| Total Assets | $ | 13,354 | $ | 1,454 | $ | 11,373 | $ | (8,996 | ) | $ | 17,185 | ||||||||
| Liabilities: | |||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||
| Accounts Payable — Trade | $ | 943 | $ | 134 | $ | 1,831 | $ | — | $ | 2,908 | |||||||||
| Accounts Payable to Affiliates | — | 24 | 2,152 | (2,176 | ) | — | |||||||||||||
| Compensation and Benefits | 326 | 14 | 196 | — | 536 | ||||||||||||||
| Other Current Liabilities | 857 | 6 | 365 | (494 | ) | 734 | |||||||||||||
| Notes Payable and Overdrafts | — | — | 348 | — | 348 | ||||||||||||||
| Operating Lease Liabilities due Within One Year | 107 | 5 | 87 | — | 199 | ||||||||||||||
| Long Term Debt and Finance Leases Due Within One Year | 283 | — | 279 | — | 562 | ||||||||||||||
| Total Current Liabilities | 2,516 | 183 | 5,258 | (2,670 | ) | 5,287 | |||||||||||||
| Operating Lease Liabilities | 437 | 7 | 224 | — | 668 | ||||||||||||||
| Long Term Debt and Finance Leases | 3,313 | 167 | 1,273 | — | 4,753 | ||||||||||||||
| Compensation and Benefits | 485 | 98 | 751 | — | 1,334 | ||||||||||||||
| Deferred Income Taxes | — | — | 90 | — | 90 | ||||||||||||||
| Other Long Term Liabilities | 2,252 | 7 | 174 | (1,925 | ) | 508 | |||||||||||||
| Total Liabilities | 9,003 | 462 | 7,770 | (4,595 | ) | 12,640 | |||||||||||||
| Commitments and Contingent Liabilities | |||||||||||||||||||
| Shareholders’ Equity: | |||||||||||||||||||
| Goodyear Shareholders’ Equity: | |||||||||||||||||||
| Common Stock | 233 | — | — | — | 233 | ||||||||||||||
| Other Equity | 4,118 | 992 | 3,409 | (4,401 | ) | 4,118 | |||||||||||||
| Goodyear Shareholders’ Equity | 4,351 | 992 | 3,409 | (4,401 | ) | 4,351 | |||||||||||||
| Minority Shareholders’ Equity — Nonredeemable | — | — | 194 | — | 194 | ||||||||||||||
| Total Shareholders’ Equity | 4,351 | 992 | 3,603 | (4,401 | ) | 4,545 | |||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 13,354 | $ | 1,454 | $ | 11,373 | $ | (8,996 | ) | $ | 17,185 | ||||||||
| Condensed Consolidating Balance Sheet | |||||||||||||||||||
| December 31, 2018 | |||||||||||||||||||
| (In millions) | Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Entries and Eliminations | Consolidated | ||||||||||||||
| Assets: | |||||||||||||||||||
| Current Assets: | |||||||||||||||||||
| Cash and Cash Equivalents | $ | 127 | $ | 30 | $ | 644 | $ | — | $ | 801 | |||||||||
| Accounts Receivable, net | 672 | 110 | 1,248 | — | 2,030 | ||||||||||||||
| Accounts Receivable From Affiliates | 294 | 280 | — | (574 | ) | — | |||||||||||||
| Inventories | 1,425 | 71 | 1,387 | (27 | ) | 2,856 | |||||||||||||
| Prepaid Expenses and Other Current Assets | 76 | 3 | 155 | 4 | 238 | ||||||||||||||
| Total Current Assets | 2,594 | 494 | 3,434 | (597 | ) | 5,925 | |||||||||||||
| Goodwill | 24 | 1 | 420 | 124 | 569 | ||||||||||||||
| Intangible Assets | 117 | — | 19 | — | 136 | ||||||||||||||
| Deferred Income Taxes | 1,422 | 27 | 395 | 3 | 1,847 | ||||||||||||||
| Other Assets | 524 | 48 | 564 | — | 1,136 | ||||||||||||||
| Investments in Subsidiaries | 3,758 | 445 | — | (4,203 | ) | — | |||||||||||||
| Operating Lease Right-of-Use Assets | — | — | — | — | — | ||||||||||||||
| Property, Plant and Equipment | 2,482 | 430 | 4,371 | (24 | ) | 7,259 | |||||||||||||
| Total Assets | $ | 10,921 | $ | 1,445 | $ | 9,203 | $ | (4,697 | ) | $ | 16,872 | ||||||||
| Liabilities: | |||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||
| Accounts Payable — Trade | $ | 960 | $ | 131 | $ | 1,829 | $ | — | $ | 2,920 | |||||||||
| Accounts Payable to Affiliates | — | — | 574 | (574 | ) | — | |||||||||||||
| Compensation and Benefits | 286 | 14 | 171 | — | 471 | ||||||||||||||
| Other Current Liabilities | 310 | (4 | ) | 431 | — | 737 | |||||||||||||
| Notes Payable and Overdrafts | 25 | — | 385 | — | 410 | ||||||||||||||
| Operating Lease Liabilities due Within One Year | — | — | — | — | — | ||||||||||||||
| Long Term Debt and Finance Leases Due Within One Year | 2 | — | 241 | — | 243 | ||||||||||||||
| Total Current Liabilities | 1,583 | 141 | 3,631 | (574 | ) | 4,781 | |||||||||||||
| Operating Lease Liabilities | — | — | — | — | — | ||||||||||||||
| Long Term Debt and Finance Leases | 3,550 | 167 | 1,393 | — | 5,110 | ||||||||||||||
| Compensation and Benefits | 569 | 93 | 683 | — | 1,345 | ||||||||||||||
| Deferred Income Taxes | — | — | 95 | — | 95 | ||||||||||||||
| Other Long Term Liabilities | 355 | 8 | 108 | — | 471 | ||||||||||||||
| Total Liabilities | 6,057 | 409 | 5,910 | (574 | ) | 11,802 | |||||||||||||
| Commitments and Contingent Liabilities | |||||||||||||||||||
| Shareholders’ Equity: | |||||||||||||||||||
| Goodyear Shareholders’ Equity: | |||||||||||||||||||
| Common Stock | 232 | — | — | — | 232 | ||||||||||||||
| Other Equity | 4,632 | 1,036 | 3,087 | (4,123 | ) | 4,632 | |||||||||||||
| Goodyear Shareholders’ Equity | 4,864 | 1,036 | 3,087 | (4,123 | ) | 4,864 | |||||||||||||
| Minority Shareholders’ Equity — Nonredeemable | — | — | 206 | — | 206 | ||||||||||||||
| Total Shareholders’ Equity | 4,864 | 1,036 | 3,293 | (4,123 | ) | 5,070 | |||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 10,921 | $ | 1,445 | $ | 9,203 | $ | (4,697 | ) | $ | 16,872 | ||||||||
| Consolidating Statements of Operations | |||||||||||||||||||
| Year Ended December 31, 2019 | |||||||||||||||||||
| (In millions) | Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Entries and Eliminations | Consolidated | ||||||||||||||
| Net Sales | $ | 7,165 | $ | 1,403 | $ | 9,178 | $ | (3,001 | ) | $ | 14,745 | ||||||||
| Cost of Goods Sold | 5,765 | 1,303 | 7,565 | (3,031 | ) | 11,602 | |||||||||||||
| Selling, Administrative and General Expense | 1,101 | 34 | 1,189 | (1 | ) | 2,323 | |||||||||||||
| Rationalizations | 86 | — | 119 | — | 205 | ||||||||||||||
| Interest Expense | 222 | 28 | 129 | (39 | ) | 340 | |||||||||||||
| Other (Income) Expense | 29 | 15 | (18 | ) | 72 | 98 | |||||||||||||
| Income (Loss) before Income Taxes and Equity in Earnings of Subsidiaries | (38 | ) | 23 | 194 | (2 | ) | 177 | ||||||||||||
| United States and Foreign Taxes | (289 | ) | 6 | 254 | 503 | 474 | |||||||||||||
| Equity in Earnings of Subsidiaries | (562 | ) | (28 | ) | — | 590 | — | ||||||||||||
| Net Income (Loss) | (311 | ) | (11 | ) | (60 | ) | 85 | (297 | ) | ||||||||||
| Less: Minority Shareholders’ Net Income (Loss) | — | — | 14 | — | 14 | ||||||||||||||
| Goodyear Net Income (Loss) | $ | (311 | ) | $ | (11 | ) | $ | (74 | ) | $ | 85 | $ | (311 | ) | |||||
| Comprehensive Income (Loss) | $ | (371 | ) | $ | (43 | ) | $ | (193 | ) | $ | 251 | $ | (356 | ) | |||||
| Less: Comprehensive Income (Loss) Attributable to Minority Shareholders | — | — | 15 | — | 15 | ||||||||||||||
| Goodyear Comprehensive Income (Loss) | $ | (371 | ) | $ | (43 | ) | $ | (208 | ) | $ | 251 | $ | (371 | ) | |||||
| Consolidating Statements of Operations | |||||||||||||||||||
| Year Ended December 31, 2018 | |||||||||||||||||||
| (In millions) | Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Entries and Eliminations | Consolidated | ||||||||||||||
| Net Sales | $ | 7,382 | $ | 1,320 | $ | 9,567 | $ | (2,794 | ) | $ | 15,475 | ||||||||
| Cost of Goods Sold | 5,947 | 1,270 | 7,616 | (2,872 | ) | 11,961 | |||||||||||||
| Selling, Administrative and General Expense | 1,042 | 35 | 1,235 | — | 2,312 | ||||||||||||||
| Rationalizations | 3 | 1 | 40 | — | 44 | ||||||||||||||
| Interest Expense | 221 | 23 | 105 | (28 | ) | 321 | |||||||||||||
| Other (Income) Expense | (320 | ) | 12 | 30 | 104 | (174 | ) | ||||||||||||
| Income (Loss) before Income Taxes and Equity in Earnings of Subsidiaries | 489 | (21 | ) | 541 | 2 | 1,011 | |||||||||||||
| United States and Foreign Taxes | 129 | (6 | ) | 179 | 1 | 303 | |||||||||||||
| Equity in Earnings of Subsidiaries | 333 | 47 | — | (380 | ) | — | |||||||||||||
| Net Income (Loss) | 693 | 32 | 362 | (379 | ) | 708 | |||||||||||||
| Less: Minority Shareholders’ Net Income (Loss) | — | — | 15 | — | 15 | ||||||||||||||
| Goodyear Net Income (Loss) | $ | 693 | $ | 32 | $ | 347 | $ | (379 | ) | $ | 693 | ||||||||
| Comprehensive Income (Loss) | $ | 593 | $ | 28 | $ | 143 | $ | (175 | ) | $ | 589 | ||||||||
| Less: Comprehensive Income (Loss) Attributable to Minority Shareholders | — | — | (4 | ) | — | (4 | ) | ||||||||||||
| Goodyear Comprehensive Income (Loss) | $ | 593 | $ | 28 | $ | 147 | $ | (175 | ) | $ | 593 | ||||||||
| Consolidating Statements of Operations | |||||||||||||||||||
| Year Ended December 31, 2017 | |||||||||||||||||||
| (In millions) | Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Entries and Eliminations | Consolidated | ||||||||||||||
| Net Sales | $ | 7,378 | $ | 1,186 | $ | 9,499 | $ | (2,686 | ) | $ | 15,377 | ||||||||
| Cost of Goods Sold | 5,774 | 1,125 | 7,537 | (2,756 | ) | 11,680 | |||||||||||||
| Selling, Administrative and General Expense | 980 | 34 | 1,265 | — | 2,279 | ||||||||||||||
| Rationalizations | 20 | 1 | 114 | — | 135 | ||||||||||||||
| Interest Expense | 254 | 10 | 122 | (51 | ) | 335 | |||||||||||||
| Other (Income) Expense | (60 | ) | 12 | (12 | ) | 130 | 70 | ||||||||||||
| Income (Loss) before Income Taxes and Equity in Earnings of Subsidiaries | 410 | 4 | 473 | (9 | ) | 878 | |||||||||||||
| United States and Foreign Taxes | 417 | (2 | ) | 101 | (3 | ) | 513 | ||||||||||||
| Equity in Earnings of Subsidiaries | 353 | 39 | — | (392 | ) | — | |||||||||||||
| Net Income (Loss) | 346 | 45 | 372 | (398 | ) | 365 | |||||||||||||
| Less: Minority Shareholders’ Net Income (Loss) | — | — | 19 | — | 19 | ||||||||||||||
| Goodyear Net Income (Loss) | $ | 346 | $ | 45 | $ | 353 | $ | (398 | ) | $ | 346 | ||||||||
| Comprehensive Income (Loss) | $ | 568 | $ | 62 | $ | 656 | $ | (683 | ) | $ | 603 | ||||||||
| Less: Comprehensive Income (Loss) Attributable to Minority Shareholders | — | — | 35 | — | 35 | ||||||||||||||
| Goodyear Comprehensive Income (Loss) | $ | 568 | $ | 62 | $ | 621 | $ | (683 | ) | $ | 568 | ||||||||
| Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||
| Year Ended December 31, 2019 | |||||||||||||||||||
| (In millions) | Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Entries and Eliminations | Consolidated | ||||||||||||||
| Cash Flows from Operating Activities: | |||||||||||||||||||
| Total Cash Flows from Operating Activities | $ | 3,541 | $ | (273 | ) | $ | 82 | $ | (2,143 | ) | $ | 1,207 | |||||||
| Cash Flows from Investing Activities: | |||||||||||||||||||
| Capital Expenditures | (288 | ) | (40 | ) | (442 | ) | — | (770 | ) | ||||||||||
| Asset Dispositions | — | — | 12 | — | 12 | ||||||||||||||
| Short Term Securities Acquired | — | — | (113 | ) | — | (113 | ) | ||||||||||||
| Short Term Securities Redeemed | — | — | 106 | — | 106 | ||||||||||||||
| Capital Contributions and Loans Incurred | (3,286 | ) | — | (320 | ) | 3,606 | — | ||||||||||||
| Capital Redemptions and Loans Paid | 269 | — | — | (269 | ) | — | |||||||||||||
| Notes Receivable | (7 | ) | — | — | — | (7 | ) | ||||||||||||
| Other Transactions | (18 | ) | — | (2,110 | ) | 2,100 | (28 | ) | |||||||||||
| Total Cash Flows from Investing Activities | (3,330 | ) | (40 | ) | (2,867 | ) | 5,437 | (800 | ) | ||||||||||
| Cash Flows from Financing Activities: | |||||||||||||||||||
| Short Term Debt and Overdrafts Incurred | 398 | — | 1,482 | — | 1,880 | ||||||||||||||
| Short Term Debt and Overdrafts Paid | (423 | ) | — | (1,510 | ) | — | (1,933 | ) | |||||||||||
| Long Term Debt Incurred | 2,981 | — | 2,961 | — | 5,942 | ||||||||||||||
| Long Term Debt Paid | (2,983 | ) | — | (3,025 | ) | — | (6,008 | ) | |||||||||||
| Common Stock Issued | 1 | — | — | — | 1 | ||||||||||||||
| Common Stock Repurchased | — | — | — | — | — | ||||||||||||||
| Common Stock Dividends Paid | (148 | ) | — | — | — | (148 | ) | ||||||||||||
| Capital Contributions and Loans Incurred | — | 388 | 3,218 | (3,606 | ) | — | |||||||||||||
| Capital Redemptions and Loans Paid | — | (57 | ) | (212 | ) | 269 | — | ||||||||||||
| Intercompany Dividends Paid | — | (3 | ) | (40 | ) | 43 | — | ||||||||||||
| Transactions with Minority Interests in Subsidiaries | — | — | (26 | ) | — | (26 | ) | ||||||||||||
| Debt Related Costs and Other Transactions | (1 | ) | — | (14 | ) | — | (15 | ) | |||||||||||
| Total Cash Flows from Financing Activities | (175 | ) | 328 | 2,834 | (3,294 | ) | (307 | ) | |||||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | — | 1 | — | — | 1 | ||||||||||||||
| Net Change in Cash, Cash Equivalents and Restricted Cash | 36 | 16 | 49 | — | 101 | ||||||||||||||
| Cash, Cash Equivalents and Restricted Cash at Beginning of the Year | 168 | 30 | 675 | — | 873 | ||||||||||||||
| Cash, Cash Equivalents and Restricted Cash at End of the Year | $ | 204 | $ | 46 | $ | 724 | $ | — | $ | 974 | |||||||||
| Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||
| Year Ended December 31, 2018 | |||||||||||||||||||
| (In millions) | Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Entries and Eliminations | Consolidated | ||||||||||||||
| Cash Flows from Operating Activities: | |||||||||||||||||||
| Total Cash Flows from Operating Activities | $ | 1,771 | $ | 32 | $ | (279 | ) | $ | (608 | ) | $ | 916 | |||||||
| Cash Flows from Investing Activities: | |||||||||||||||||||
| Capital Expenditures | (307 | ) | (61 | ) | (443 | ) | — | (811 | ) | ||||||||||
| Asset Dispositions | — | 2 | — | — | 2 | ||||||||||||||
| Short Term Securities Acquired | — | — | (68 | ) | — | (68 | ) | ||||||||||||
| Short Term Securities Redeemed | — | — | 68 | — | 68 | ||||||||||||||
| Capital Contributions and Loans Incurred | (1,205 | ) | — | (283 | ) | 1,488 | — | ||||||||||||
| Capital Redemptions and Loans Paid | 282 | 88 | 430 | (800 | ) | — | |||||||||||||
| Notes Receivable | (55 | ) | — | — | — | (55 | ) | ||||||||||||
| Other Transactions | 1 | — | (4 | ) | — | (3 | ) | ||||||||||||
| Total Cash Flows from Investing Activities | (1,284 | ) | 29 | (300 | ) | 688 | (867 | ) | |||||||||||
| Cash Flows from Financing Activities: | |||||||||||||||||||
| Short Term Debt and Overdrafts Incurred | 965 | — | 979 | — | 1,944 | ||||||||||||||
| Short Term Debt and Overdrafts Paid | (940 | ) | — | (855 | ) | — | (1,795 | ) | |||||||||||
| Long Term Debt Incurred | 3,200 | 15 | 3,240 | — | 6,455 | ||||||||||||||
| Long Term Debt Paid | (3,260 | ) | — | (3,209 | ) | — | (6,469 | ) | |||||||||||
| Common Stock Issued | 4 | — | — | — | 4 | ||||||||||||||
| Common Stock Repurchased | (220 | ) | — | — | — | (220 | ) | ||||||||||||
| Common Stock Dividends Paid | (138 | ) | — | — | — | (138 | ) | ||||||||||||
| Capital Contributions and Loans Incurred | 283 | 67 | 1,138 | (1,488 | ) | — | |||||||||||||
| Capital Redemptions and Loans Paid | (430 | ) | (77 | ) | (293 | ) | 800 | — | |||||||||||
| Intercompany Dividends Paid | — | (65 | ) | (543 | ) | 608 | — | ||||||||||||
| Transactions with Minority Interests in Subsidiaries | — | — | (31 | ) | — | (31 | ) | ||||||||||||
| Debt Related Costs and Other Transactions | 16 | — | (9 | ) | — | 7 | |||||||||||||
| Total Cash Flows from Financing Activities | (520 | ) | (60 | ) | 417 | (80 | ) | (243 | ) | ||||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | — | (3 | ) | (40 | ) | — | (43 | ) | |||||||||||
| Net Change in Cash, Cash Equivalents and Restricted Cash | (33 | ) | (2 | ) | (202 | ) | — | (237 | ) | ||||||||||
| Cash, Cash Equivalents and Restricted Cash at Beginning of the Year | 201 | 32 | 877 | — | 1,110 | ||||||||||||||
| Cash, Cash Equivalents and Restricted Cash at End of the Year | $ | 168 | $ | 30 | $ | 675 | $ | — | $ | 873 | |||||||||
| Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||
| Year Ended December 31, 2017 | |||||||||||||||||||
| (In millions) | Parent Company | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Entries and Eliminations | Consolidated | ||||||||||||||
| Cash Flows from Operating Activities: | |||||||||||||||||||
| Total Cash Flows from Operating Activities | $ | 1,192 | $ | 67 | $ | 577 | $ | (678 | ) | $ | 1,158 | ||||||||
| Cash Flows from Investing Activities: | |||||||||||||||||||
| Capital Expenditures | (305 | ) | (136 | ) | (442 | ) | 2 | (881 | ) | ||||||||||
| Asset Dispositions | 1 | 1 | 10 | — | 12 | ||||||||||||||
| Short Term Securities Acquired | — | — | (83 | ) | — | (83 | ) | ||||||||||||
| Short Term Securities Redeemed | — | — | 83 | — | 83 | ||||||||||||||
| Capital Contributions and Loans Incurred | (79 | ) | — | (292 | ) | 371 | — | ||||||||||||
| Capital Redemptions and Loans Paid | 76 | — | 563 | (639 | ) | — | |||||||||||||
| Notes Receivable | — | — | — | — | — | ||||||||||||||
| Other Transactions | (3 | ) | — | (7 | ) | — | (10 | ) | |||||||||||
| Total Cash Flows from Investing Activities | (310 | ) | (135 | ) | (168 | ) | (266 | ) | (879 | ) | |||||||||
| Cash Flows from Financing Activities: | |||||||||||||||||||
| Short Term Debt and Overdrafts Incurred | 420 | — | 634 | — | 1,054 | ||||||||||||||
| Short Term Debt and Overdrafts Paid | (420 | ) | — | (626 | ) | — | (1,046 | ) | |||||||||||
| Long Term Debt Incurred | 3,062 | 204 | 3,197 | — | 6,463 | ||||||||||||||
| Long Term Debt Paid | (3,151 | ) | (52 | ) | (3,139 | ) | — | (6,342 | ) | ||||||||||
| Common Stock Issued | 14 | — | — | — | 14 | ||||||||||||||
| Common Stock Repurchased | (400 | ) | — | — | — | (400 | ) | ||||||||||||
| Common Stock Dividends Paid | (110 | ) | — | — | — | (110 | ) | ||||||||||||
| Capital Contributions and Loans Incurred | 292 | 66 | 13 | (371 | ) | — | |||||||||||||
| Capital Redemptions and Loans Paid | (563 | ) | (48 | ) | (28 | ) | 639 | — | |||||||||||
| Intercompany Dividends Paid | — | (128 | ) | (548 | ) | 676 | — | ||||||||||||
| Transactions with Minority Interests in Subsidiaries | — | — | (7 | ) | — | (7 | ) | ||||||||||||
| Debt Related Costs and Other Transactions | (35 | ) | — | (6 | ) | — | (41 | ) | |||||||||||
| Total Cash Flows from Financing Activities | (891 | ) | 42 | (510 | ) | 944 | (415 | ) | |||||||||||
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | — | 3 | 54 | — | 57 | ||||||||||||||
| Net Change in Cash, Cash Equivalents and Restricted Cash | (9 | ) | (23 | ) | (47 | ) | — | (79 | ) | ||||||||||
| Cash, Cash Equivalents and Restricted Cash at Beginning of the Year | 210 | 55 | 924 | — | 1,189 | ||||||||||||||
| Cash, Cash Equivalents and Restricted Cash at End of the Year | $ | 201 | $ | 32 | $ | 877 | $ | — | $ | 1,110 | |||||||||
| Quarter | |||||||||||||||||||
| (In millions, except per share amounts) | First | Second | Third | Fourth | Year | ||||||||||||||
| 2019 | |||||||||||||||||||
| Net Sales | $ | 3,598 | $ | 3,632 | $ | 3,802 | $ | 3,713 | $ | 14,745 | |||||||||
| Gross Profit | 719 | 777 | 837 | 810 | 3,143 | ||||||||||||||
| Net Income (Loss) | (44 | ) | 56 | 90 | (399 | ) | (297 | ) | |||||||||||
| Less: Minority Shareholders’ Net Income (Loss) | 17 | 2 | 2 | (7 | ) | 14 | |||||||||||||
| Goodyear Net Income (Loss) | $ | (61 | ) | $ | 54 | $ | 88 | $ | (392 | ) | $ | (311 | ) | ||||||
| Goodyear Net Income (Loss) - Per Share of Common Stock:* | |||||||||||||||||||
| — Basic | $ | (0.26 | ) | $ | 0.23 | $ | 0.38 | $ | (1.68 | ) | $ | (1.33 | ) | ||||||
| — Diluted | $ | (0.26 | ) | $ | 0.23 | $ | 0.38 | $ | (1.68 | ) | $ | (1.33 | ) | ||||||
| Weighted Average Shares Outstanding — Basic | 232 | 233 | 233 | 234 | 233 | ||||||||||||||
| — Diluted | 232 | 234 | 234 | 234 | 233 | ||||||||||||||
| Dividends Declared per Share of Common Stock | $ | 0.16 | $ | 0.16 | $ | 0.16 | $ | 0.16 | $ | 0.64 | |||||||||
| Selected Balance Sheet Items at Quarter-End: | |||||||||||||||||||
| Total Assets | $ | 18,273 | $ | 18,470 | $ | 18,299 | $ | 17,185 | |||||||||||
| Total Debt and Finance Leases | 6,506 | 6,737 | 6,676 | 5,663 | |||||||||||||||
| Goodyear Shareholders’ Equity | 4,808 | 4,847 | 4,835 | 4,351 | |||||||||||||||
| Total Shareholders’ Equity | 5,031 | 5,049 | 5,035 | 4,545 | |||||||||||||||
| Quarter | |||||||||||||||||||
| (In millions, except per share amounts) | First | Second | Third | Fourth | Year | ||||||||||||||
| 2018 | |||||||||||||||||||
| Net Sales | $ | 3,830 | $ | 3,841 | $ | 3,928 | $ | 3,876 | $ | 15,475 | |||||||||
| Gross Profit | 854 | 892 | 900 | 868 | 3,514 | ||||||||||||||
| Net Income | 80 | 164 | 354 | 110 | 708 | ||||||||||||||
| Less: Minority Shareholders’ Net Income | 5 | 7 | 3 | — | 15 | ||||||||||||||
| Goodyear Net Income | $ | 75 | $ | 157 | $ | 351 | $ | 110 | $ | 693 | |||||||||
| Goodyear Net Income - Per Share of Common Stock:* | |||||||||||||||||||
| — Basic | $ | 0.31 | $ | 0.66 | $ | 1.49 | $ | 0.47 | $ | 2.92 | |||||||||
| — Diluted | $ | 0.31 | $ | 0.65 | $ | 1.48 | $ | 0.47 | $ | 2.89 | |||||||||
| Weighted Average Shares Outstanding — Basic | 240 | 239 | 236 | 233 | 237 | ||||||||||||||
| — Diluted | 244 | 241 | 238 | 235 | 239 | ||||||||||||||
| Dividends Declared per Share of Common Stock | $ | 0.14 | $ | 0.14 | $ | 0.14 | $ | 0.16 | $ | 0.58 | |||||||||
| Selected Balance Sheet Items at Quarter-End: | |||||||||||||||||||
| Total Assets | $ | 17,580 | $ | 17,355 | $ | 17,591 | $ | 16,872 | |||||||||||
| Total Debt and Capital Leases | 6,259 | 6,347 | 6,520 | 5,763 | |||||||||||||||
| Goodyear Shareholders’ Equity | 4,737 | 4,637 | 4,800 | 4,864 | |||||||||||||||
| Total Shareholders’ Equity | 4,962 | 4,844 | 5,000 | 5,070 | |||||||||||||||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Management’s Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” that, consistent with Rule 13a-15(e) under the Securities Exchange Act of 1934, 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 SEC’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 December 31, 20192021 (the end of the period covered by this Annual Report on Form 10-K).
Assessment of Internal Control Over Financial Reporting
Management’s report on our internal control over financial reporting is presented on page 4554 of this Annual Report on Form 10-K. The report of PricewaterhouseCoopers LLP relating to the consolidated financial statements, financial statement schedule, and the effectiveness of internal control over financial reporting is presented on page 4655 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There have beenwere no other changes in our internal control over financial reporting during the year ended December 31, 20192021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this item about Goodyear’s executive officers is included in Part I, “Item 1. Business” of this Annual Report on Form 10-K under the caption “Information About Our Executive Officers.” All other information required by this item is incorporated herein by reference from the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 6, 202011, 2022 to be filed with the SEC pursuant to Regulation 14A (the "Proxy Statement").
Code of Business Conduct and Code of Ethics
Goodyear has adopted a code of business conduct and ethics for directors, officers and employees, known as the Business Conduct Manual. Goodyear also has adopted a conflict of interest policy applicable to directors and executive officers. Both of these documents are available on Goodyear’s website at https://corporate.goodyear.com/en-US/us/en/investors/governance/documents-charters.html. Shareholders may request a free copy of these documents from:
The Goodyear Tire & Rubber Company
Attention: Investor Relations
200 Innovation Way
Akron, Ohio 44316-0001
(330) 796-3751
Goodyear’s Code of Ethics for the Chief Executive Officer and Senior Financial Officers (the “Code of Ethics”) is also posted on Goodyear’s website. Amendments to and waivers of the Code of Ethics will be disclosed on the website.
Corporate Governance Guidelines and Certain Committee Charters
Goodyear has adopted Corporate Governance Guidelines as well as charters for its Audit, Compensation and Governance Committees. These documents are available on Goodyear’s website at https://corporate.goodyear.com/en-US/us/en/investors/governance/documents-charters.html. Shareholders may request a free copy of any of these documents from the address and phone number set forth above under “Code of Business Conduct and Code of Ethics.”
The information on our website is not incorporated by reference in or considered to be a part of this Annual Report on Form 10-K.
ITEM 11.EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by reference from the Proxy Statement.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The other information required by this item is incorporated herein by reference from the Proxy Statement.
The information required by this item is incorporated herein by reference from the Proxy Statement.
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this item is incorporated herein by reference from the Proxy Statement.
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:
ITEM 16. FORM 10-K SUMMARY.
None.
ITEMS 8 AND 15(a)(2) OF FORM 10-K
FOR THE COMPANY'S
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 20192021
INDEX TO FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules:
Schedule No. | Page Number | |||
II | FS-2 |
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Financial statements relating to 50 percent or less owned companies, the investments in which are accounted for by the equity method, have been omitted as permitted because these companies would not constitute a significant subsidiary.
FS-1
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Year Ended December 31,
(In millions) |
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| Additions |
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| |||||||||
Description |
| Balance |
|
| Charged |
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| Charged |
|
| Deductions |
|
| Translation |
|
| Balance |
| ||||||
|
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|
| 2021 |
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|
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|
|
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| |||||||||
Allowance for doubtful accounts |
| $ | 150 |
|
| $ | 5 |
|
| $ | 0 |
|
| $ | (24 | ) |
| $ | (8 | ) |
| $ | 123 |
|
Valuation allowance — deferred tax assets |
|
| 1,469 |
|
|
| (418 | ) |
|
| (7 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 1,044 |
|
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| 2020 |
|
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|
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|
| |||||||||
Allowance for doubtful accounts |
| $ | 126 |
| (a) | $ | 30 |
|
| $ | 0 |
|
| $ | (11 | ) |
| $ | 5 |
|
| $ | 150 |
|
Valuation allowance — deferred tax assets |
|
| 982 |
|
|
| 488 |
|
|
| (1 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 1,469 |
|
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| 2019 |
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|
|
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|
|
|
|
| |||||||||
Allowance for doubtful accounts |
| $ | 113 |
|
| $ | 13 |
|
| $ | 0 |
|
| $ | (14 | ) |
| $ | (1 | ) |
| $ | 111 |
|
Valuation allowance — deferred tax assets |
|
| 317 |
|
|
| 661 |
|
|
| 4 |
|
|
| 0 |
|
|
| 0 |
|
|
| 982 |
|
| (In millions) | |||||||||||||||||||||||
| Additions | |||||||||||||||||||||||
| Description | Balance at beginning of period | Charged (credited) to income | Charged (credited) to AOCL | Deductions from reserves | Translation adjustment during period | Balance at end of period | |||||||||||||||||
| 2019 | |||||||||||||||||||||||
| Allowance for doubtful accounts | $ | 113 | $ | 13 | $ | — | $ | (14 | ) | (a) | $ | (1 | ) | $ | 111 | ||||||||
| Valuation allowance — deferred tax assets | 317 | 661 | 4 | — | — | 982 | |||||||||||||||||
| 2018 | |||||||||||||||||||||||
| Allowance for doubtful accounts | $ | 116 | $ | 21 | $ | — | $ | (19 | ) | (a) | $ | (5 | ) | $ | 113 | ||||||||
| Valuation allowance — deferred tax assets | 318 | 18 | (1 | ) | — | (18 | ) | 317 | |||||||||||||||
| 2017 | |||||||||||||||||||||||
| Allowance for doubtful accounts | $ | 101 | $ | 12 | $ | — | $ | (6 | ) | (a) | $ | 9 | $ | 116 | |||||||||
| Valuation allowance — deferred tax assets | 326 | (19 | ) | — | — | 11 | 318 | ||||||||||||||||
Annual Report on Form 10-K
For the Year Ended December 31, 20192021
INDEX OF EXHIBITS
Exhibit Table Item No. | Description of Exhibit | Exhibit Number | |||
2 | Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession | ||||
(a) | |||||
3 | Articles of Incorporation and By-Laws | ||||
(a) | |||||
(b) | |||||
4 | Instruments Defining the Rights of Security Holders, Including Indentures | ||||
(a) | |||||
(b) | |||||
(c) | |||||
X-1
(e) | Registration Rights Agreement with respect to the Company’s 5% Senior Notes due 2029, dated as of May 18, 2021, among the Company, the subsidiary guarantors party thereto and J.P. Morgan Securities LLC (incorporated by reference, filed as Exhibit 4.6 to the Company’s Current Report on Form 8-K, filed May 18, 2021, File No. 1-1927). | |||
(f) | ||||
(g) | ||||
(h) | ||||
In accordance with Item 601(b)(4)(iii) of Regulation S-K, certain instruments defining the rights of holders of long term debt of the Company and its consolidated subsidiaries pursuant to which the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis are not filed herewith. The Company hereby agrees to furnish a copy of any such instrument to the SEC upon request. | ||||
10 | Material Contracts | |||
(a) | ||||
X-2
(b) | ||||||
(c) | ||||||
10.1 |
X-3
(l)* | ||||
(m)* | ||||
(n)* | ||||
(o)* | ||||
(p)* | ||||
(q)* | ||||
(r)* | ||||
(s)* | ||||
(t)* | ||||
(u)* | ||||
(v)* | ||||
(w)* | ||||
(x)* | ||||
(y)* | ||||
(z)* | 10.3 | |||
X-4
(aa)* | ||||
(bb)* | ||||
(cc)* | ||||
(dd)* | ||||
21 | Subsidiaries | |||
(a) | List of Subsidiaries of the Company at December 31, | 21.1 | ||
22 | Subsidiary Guarantors of Guaranteed Securities | |||
(a) | 22.1 | |||
23 | Consents | |||
(a) | 23.1 | |||
24 | Powers of Attorney | |||
(a) |
| 24.1 | ||
31 | Rule 13a-14(a) Certifications | |||
(a) | 31.1 | |||
(b) | 31.2 | |||
32 | Section 1350 Certifications | |||
(a) | 32.1 | |||
X-5
101 | Interactive Data Files | |||
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | 101.INS | |||
Inline XBRL Taxonomy Extension Schema Document. | 101.SCH | |||
Inline XBRL Taxonomy Extension Calculation Linkbase Document. | 101.CAL | |||
Inline XBRL Taxonomy Extension Definition Linkbase Document. | 101.DEF |
101.LAB | ||||
Inline XBRL Taxonomy Extension Presentation Linkbase Document. | 101.PRE | |||
104 | Cover Page Interactive Data File | |||
The cover page from the Company's Annual Report on | ||||
* Indicates management contract or compensatory plan or arrangement.
** 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.
X-6
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE GOODYEAR TIRE & RUBBER COMPANY
(Registrant)
Date: | February | /s/ RICHARD J. KRAMER | |
Richard J. Kramer, Chairman, Chief Executive Officer | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: | February | /s/ RICHARD J. KRAMER | |
Richard J. Kramer, Chairman, Chief Executive Officer, President and Director (Principal Executive Officer) | |||
Date: | February | /s/ DARREN R. WELLS | |
Darren R. Wells, Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||
Date: | February | /s/ EVAN M. SCOCOS | |
Evan M. Scocos, Vice President and Controller (Principal Accounting Officer) | |||
JAMES A. FIRESTONE, Director WERNER GEISSLER, Director
PRASHANTH MAHENDRA-RAJAH, Director | /s/ DARREN R. WELLS | ||
Date: | February | W. ALAN McCOLLOUGH, Director JOHN E. McGLADE, Director RODERICK A. PALMORE, Director HERA SIU, Director STEPHANIE A. STREETER, Director MICHAEL R. WESSEL, Director THOMAS L. WILLIAMS, Director | Darren R. Wells, Signing as Attorney-in-Fact for the Directors whose names appear opposite. |
S-1