Goodyear reports second quarter, first half 2021 results 06.08.2021: – Second quarter Goodyear net income of $67 million; adjusted net income of $79 million – Second quarter merger-adjusted segment operating income of $349 million – Global consumer replacement volume continued

– Second quarter Goodyear net income of $67 million; adjusted net income of $79 million


– Second quarter merger-adjusted segment operating income of $349 million


– Global consumer replacement volume continued to exceed industry, driven by large-rim diameter volume


– Global consumer OE volume outpaced market, with electric vehicle tire deliveries more than doubling


– Second quarter price/mix exceeds raw materials by nearly $130 million





The Goodyear Tire & Rubber Company today reported results for the second quarter and first half of 2021.



“We delivered merger-adjusted segment operating income significantly above last year and nearly 60 percent higher than second quarter 2019. Our strong results reflect continued recovery in demand, including above-market growth across many of our businesses. In addition, the execution of our strategies helped deliver the highest quarterly contribution of price / mix in nine years,” said Richard J. Kramer, chairman, chief executive officer and president.



“Broad economic recovery remains robust, particularly in the U.S. and China,” continued Kramer. “Our second quarter results demonstrate our ability to capture value in the marketplace with innovative products and services while overcoming inflationary cost pressure.”



“The addition of Cooper Tire in early June also contributed to our strong merger-adjusted earnings growth, and we welcome all of our new colleagues to the Goodyear family. Our teams are now focused on integrating our businesses and leveraging the combination to provide enhanced service for our customers and consumers.”



Goodyear’s second quarter 2021 sales were $4.0 billion, up 86% from a year ago. The increase was driven by higher volume, the Cooper Tire merger, increased sales from other tire-related businesses and favorable foreign currency translation.



Tire unit volumes totaled 37.5 million, up 84% from the prior year’s period. The impact of the COVID-19 pandemic on industry demand moderated significantly relative to the prior year. Replacement tire volume increased 78%, reflecting both continuing industry recovery and market share gains.



Original equipment unit volume increased 109%, driven by higher vehicle production and increased market share.  Volume growth also benefited from the Cooper Tire merger, which closed on June 7, 2021.



Goodyear’s second quarter 2021 net income was $67 million (27 cents per share) compared to a net loss of $696 million ($2.97 per share) a year ago.


The 2021 period included several significant items, including, on a pre-tax basis, a $117 million benefit related to a Brazilian Supreme Court ruling with respect to indirect taxes, transaction and other expenses of $48 million and amortization of Cooper Tire inventory step-up adjustments of $38 million both in connection with the Cooper Tire merger, a negative carryover impact of $27 million related to a winter storm in the U.S., and rationalization charges of $18 million, primarily associated with the closure of a manufacturing facility in Gadsden, Alabama.



Goodyear’s second quarter 2020 net loss included, on a pre-tax basis, a non-cash asset impairment charge of $148 million to reduce the carrying value of an equity interest in TireHub, and rationalization charges of $99 million, primarily associated with the closure of a manufacturing facility in Gadsden, Alabama. Second quarter 2021 adjusted net income was $79 million (32 cents per share) compared to an adjusted net loss of $437 million ($1.87 per share) in the prior year’s quarter. Per share amounts are diluted.




The company reported segment operating income of $299 million in the second quarter of 2021, up $730 million from a year ago. The company also reported merger-adjusted segment operating income of $349 million, which excludes certain costs triggered by the Cooper Tire merger.



The increase in segment operating income primarily reflects the impacts of higher volume, including increased factory utilization, improvements in price/mix, higher earnings from other tire-related businesses and the benefits of cost saving actions.


These factors were partially offset by higher selling, administrative and general expenses (SAG), reflecting the impact of payroll and advertising expenses returning to more normal levels after last year’s COVID-19 response actions, and higher raw material costs.


Segment operating income also benefitted from $69 million related to a Brazilian Supreme Court ruling with respect to indirect taxes, which was partly offset by the adverse carryover effects of a winter storm in the U.S., which are estimated at $24 million.  



The reported results also include Cooper Tire operating loss of $16 million, which includes $40 million of amortization of Cooper Tire inventory step-up, $6 million of other transaction-related items, and $4 million incremental amortization of Cooper Tire intangible assets.






Year-to-Date Results



Goodyear’s sales for the first six months of 2021 were $7.5 billion, a 44% increase from the 2020 period, primarily due to higher volume, the Cooper Tire merger, increased sales from other tire-related businesses and favorable foreign currency translation.


Tire unit volumes totaled 72.5 million, up 40% from 2020. Replacement tire shipments increased 41%, reflecting stronger industry demand and market share gains. Original equipment volume increased 39%, driven by higher global vehicle production and increased market share.



Goodyear’s net income was $79 million for the first six months of 2021 (32 cents per share) compared to a net loss of $1.3 billion ($5.62 per share) in the prior year’s period.


The first half of 2021 included several significant items, including, on a pre-tax basis, rationalization charges of $68 million, primarily associated with the modernization of two manufacturing facilities in Germany and a plan to reduce SAG in EMEA, transaction and other expenses of $55 million and amortization of Cooper Tire inventory step-up adjustments of $38 million both in connection with the Cooper Tire merger, a negative impact of $50 million related to a severe winter storm in the U.S. and a $117 million benefit related to a Brazilian Supreme Court ruling with respect to indirect taxes.



Goodyear’s net income for the comparable period in 2020 included, on a pre-tax basis, a non-cash charge of $295 million related to a valuation allowance on certain deferred tax assets for foreign tax credits, a non-cash impairment charge of $182 million to reduce the carrying value of goodwill in the EMEA business, a non-cash asset impairment charge of $148 million to reduce the carrying value of an equity interest in TireHub, and rationalization charges of $108 million, primarily associated with the closure of a manufacturing facility in Gadsden, Alabama.



Goodyear’s adjusted net income for the first six months of 2021 was $184 million (76 cents per share), compared to a net loss of $575 million ($2.46 per share) in the prior year’s period. Per share amounts are diluted.



The company reported segment operating income of $525 million for the first six months of 2021, up $1.0 billion from a year ago. The company also reported merger-adjusted segment operating income of $575 million, which excludes certain costs triggered by the Cooper Tire merger. The increase in segment operating income primarily reflects the impacts of higher volume, including increased factory utilization, improvements in price/mix, higher earnings from other tire-related businesses, and the benefits of cost saving actions.  


These factors were partially offset by higher SAG, reflecting the impact of payroll and advertising expenses returning to more normal levels after last year’s COVID-19 response actions, and higher raw material costs. Segment operating income also benefitted from $69 million related to a Brazilian Supreme Court ruling with respect to indirect taxes, which was partly offset by the adverse effects of a severe winter storm in the U.S., which are estimated at $50 million.  



The reported results also include Cooper Tire operating loss of $16 million, which includes $40 million of amortization of Cooper Tire inventory step-up, $6 million of other transaction-related items, and $4 million incremental amortization of Cooper Tire intangible assets.




Reconciliation of Non-GAAP Financial Measures


See the note at the end of this release for further explanation and reconciliation tables for Total Segment Operating Income (Loss) and Margin; Merger-Adjusted Segment Operating Income (Loss) and Margin; Adjusted Net Income (Loss); and Adjusted Diluted Earnings (Loss) per Share, reflecting the impact of certain significant items on the 2021 and 2020 periods.





Business Segment Results


Americas


      Second Quarter     Six Months

(in millions)     2021     2020     2021     2020
Tire Units     19.0     8.5     34.5     23.0
Net Sales     $2,256     $1,134     $4,043     $2,807
Segment Operating Income (Loss)     233     (287)     347     (287)
Segment Operating Margin     10.3%     (25.3)%     8.6%     (10.2)%




Americas’ second quarter 2021 sales of $2.3 billion were 99% higher than in 2020, driven by higher volume, the Cooper Tire merger, and increased sales from other tire-related businesses.



Tire unit volume increased 125%. Replacement tire volume increased 120%, reflecting stronger industry demand, U.S. consumer replacement market share gains and the addition of Cooper Tire. Original equipment unit volume increased 155%, reflecting higher industry demand and market share gains in Latin America.



Second quarter 2021 segment operating income of $233 million was up $520 million from the prior year’s quarter. The increase was driven by the impacts of higher volume, including increased factory utilization, improvements in price/mix, higher earnings from other tire-related businesses, and the benefits of cost saving actions.


These factors were partially offset by higher SAG, reflecting the impact of payroll and advertising expenses returning to more normal levels after last year’s COVID-19 response actions, and higher raw material costs. Segment operating income also benefitted from a $69 million favorable indirect tax ruling in Brazil, partly offset by the adverse carryover effects of a severe winter storm in the U.S., which are estimated at $24 million.  



The reported results also include Cooper Tire operating loss of $14 million, which includes $45 million of costs triggered by the combination, including amortization of Cooper Tire inventory step-up of $35 million, other transaction-related items of $6 million, and incremental amortization of Cooper Tire intangible assets of $4 million.





Europe, Middle East and Africa


      Second Quarter     Six Months

(in millions)     2021     2020     2021     2020
Tire Units     12.0     7.3     24.7     18.9
Net Sales     $1,230     $676     $2,461     $1,671
Segment Operating Income (Loss)     43     (110)     117     (163)
Segment Operating Margin     3.5%     (16.3)%     4.8%     (9.8)%




Europe, Middle East and Africa’s second quarter 2021 sales increased 82% from last year to $1.2 billion due to higher volume, favorable foreign currency translation and increased sales from other tire-related businesses. Tire unit volume increased 63%.



Replacement tire volume rose 52%, reflecting stronger industry demand and consumer and commercial replacement market share gains. Original equipment unit volume increased 112%, reflecting higher industry demand and significant share gains driven by new consumer fitments and the addition of new fleet customers.



Second quarter 2021 segment operating income of $43 million was up $153 million from the prior year’s quarter, driven by the impacts of higher volume, including increased factory utilization, and improvements in price/mix. These factors were partially offset by higher SAG, reflecting the impact of payroll and advertising expenses returning to more normal levels after last year’s COVID-19 response actions, and higher raw material costs.  




Asia Pacific


      Second Quarter     Six Months


(in millions)     2021     2020     2021     2020
Tire Units     6.5     4.6     13.3     9.8
Net Sales     $493     $334     $986     $722
Segment Operating Income (Loss)     23     (34)     61     (28)
Segment Operating Margin     4.7%     (10.2)%     6.2%     (3.9)%




Asia Pacific’s second quarter 2021 sales increased 48% to $493 million, driven by higher volume, favorable foreign currency translation, and the Cooper Tire merger. Tire unit volume increased 43%. Replacement tire volume increased 35%, reflecting stronger industry demand and expanded distribution.  Original equipment unit volume increased 63%, driven by market share gains and a recovery in vehicle production.



Second quarter 2021 segment operating income of $23 million was up $57 million from the prior year’s quarter. The increase was driven by the impacts of higher volume, including improved factory utilization, and improvements in price/mix. These factors were partially offset by higher SAG, reflecting the impact of payroll and advertising expenses returning to more normal levels after last year’s COVID-19 response actions.



Cooper Tire


On June 7, Goodyear completed its announced Cooper Tire transaction.  Second quarter results incorporate the operating results of Cooper from June 7 through June 30.  Cooper sales during this period totaled $256 million.  Inventory and other assets of Cooper were recorded based on their fair market value on June 7 and the cost of goods sold of tires sold after that date reflect the “step-up” to fair market value.  



Merger-adjusted segment operating income excludes the impact of this “step-up” and certain other costs triggered by the combination, which totaled $50 million in the second quarter, including $40 million of amortization of Cooper Tire inventory step-up, $6 million of other transaction-related items, and $4 million incremental amortization of Cooper Tire intangible assets.



- Goodyear also photo