AKRON, Ohio, April 16, 2020 /PRNewswire/ -- The Goodyear Tire
& Rubber Company (NASDAQ: GT) today announced preliminary
results for the first quarter of 2020 and provided an update on
several operational and financial actions that the company has
taken in response to the COVID-19 pandemic.
"During this challenging time, our top priority continues to be
the health and wellbeing of our associates. We are working
diligently to ensure we will be prepared to resume our
manufacturing operations safely and efficiently when automotive
production and replacement tire demand recovers. At the same time,
we are proactively taking actions to mitigate the impact of the
sharp decline in industry demand on our profitability and financial
position," said Richard J. Kramer,
chairman, chief executive officer and president. "I am proud of the
courage and resilience of our associates around the world as they
continue to service our customers and consumers during this
unprecedented time. I am confident we will weather this crisis and
that, as we continue to focus on our strategic priorities, we are
positioning the company to win in our markets when the auto
industry and broader economy recovers."
In addition to the update on its operations, the company also
announced the successful refinancing of its primary revolving
credit facility in the U.S. "We are pleased to complete this
action, particularly given the current economic climate," said
Darren R. Wells, executive vice
president and chief financial officer. "The extension of our debt
maturities enhances our financial flexibility and further
strengthens our liquidity position, allowing us to better manage
the challenges we face. This renewal reflects the financial
community's confidence in our business and the quality of our
assets."
Business Update and Preliminary First Quarter
Results
The company's first quarter results were greatly
affected by the economic disruption associated with the COVID-19
pandemic.
Goodyear's first quarter 2020 sales were approximately
$3.0 billion, down from $3.6 billion a year ago. Tire unit volume totaled
approximately 31 million for the first quarter of 2020, down 18%
from the prior year. These results reflect significant declines in
global OE shipments after auto manufacturers halted production and
weak replacement demand following sweeping shelter-in-place
mandates.
The company expects to report a loss before income taxes of
$185 million to $195 million for the first quarter of 2020 and an
adjusted loss before income taxes of $175
million to $185 million, which
excludes approximately $10 million of
rationalization and accelerated depreciation charges incurred
during the quarter. The company's results include an approximately
$65 million unfavorable impact driven
by lower factory utilization and other period costs, both directly
related to shutting down its manufacturing facilities. The company
has not yet calculated its tax rate for the first quarter and,
accordingly, is not able to provide its preliminary net loss or
loss per share.
Given evolving macroeconomic conditions during the first
quarter, the company continues to conduct impairment testing
related to the carrying values of certain assets, including
goodwill of its Europe,
Middle East and Africa business. As a result, the company
could record a non-cash impairment charge during the quarter and
its reported loss before income taxes could be higher by up to
$185 million.
Goodyear continues to evaluate its production plans around the
world in light of the fluid situation. Most of the company's
manufacturing facilities in the Americas and Europe, as well as several of its tire plants
in Asia Pacific, remain
closed.
The company plans a phased restart of production during the
second quarter, beginning in April with some of its commercial
truck tire facilities in the U.S. and Europe. Decisions to resume production will be
based on an evaluation of market demand signals, inventory and
supply levels, as well as the company's ability to safeguard the
health of its associates.
The company's plant in Pulandian, China is operating with 100% of its workforce
and is able to meet customer demand. The facility is expected to
continue ramping up production throughout the second quarter.
The company will provide more details related to the quarter and
its production plans when it reports its first quarter
results.
Operational Response Actions
The company further
announced that it is taking swift action to aggressively reduce
operating costs and capital expenditures in response to rapid
declines in industry volumes. These initiatives follow the
company's previously announced decision to temporarily close its
manufacturing facilities in the Americas and Europe, which will reduce conversion costs,
improve inventory levels and preserve cash.
As a result of current conditions, the company expects 2020
capital expenditures to be no more than $700
million. The company is also implementing actions to reduce
its payroll costs through a combination of furloughs, temporary
salary reductions and salary deferrals covering over 9,000 of its
corporate and business unit associates, including substantial
salary reductions and deferrals for the company's CEO, officers and
directors. In addition, the company is reducing discretionary
spending, including marketing and advertising expenditures.
Together, these actions will help to mitigate the financial impact
of lower industry demand as a result of COVID-19.
The company is also evaluating opportunities to accelerate
restructuring actions to further improve its cost structure and
position the company for recovery.
Financial Response Actions
Goodyear maintains a strong
liquidity position, however, in light of the uncertain environment,
the company is taking prudent actions to further strengthen its
balance sheet and enhance its financial flexibility. As one
step, the company announced that it will temporarily suspend its
quarterly dividend, which will preserve approximately $37 million of cash on a quarterly basis. In
addition, the company refinanced its $2.0
billion asset-based revolving credit facility, extending the
maturity to 2025. The refinancing included favorable adjustments to
the calculation of the facility's borrowing base, further
strengthening the company's liquidity position. The covenants in
the amended facility are substantially similar to those in the
prior facility, and do not include any financial covenants unless
the aggregate amount of cash and cash equivalents of Goodyear and
its guarantor subsidiaries and the availability under the facility
is less than $200 million.
As of March 31, 2020, and pro
forma for the refinancing, the company had total liquidity of
approximately $3,600 million,
including approximately $970 million
of cash and cash equivalents compared to $3,543 million in total liquidity, including
$860 million of cash at March 31, 2019. Total debt was approximately
$6,500 million and essentially
unchanged compared to March 31,
2019.
About The Goodyear Tire & Rubber Company
Goodyear
is one of the world's largest tire companies. It employs about
63,000 people and manufactures its products in 47 facilities in 21
countries around the world. Its two Innovation Centers in
Akron, Ohio, and Colmar-Berg,
Luxembourg, strive to develop
state-of-the-art products and services that set the technology and
performance standard for the industry. For more information about
Goodyear and its products, go to
www.goodyear.com/corporate. GT-FN
Certain information contained in this press release
constitutes forward-looking statements for purposes of the safe
harbor provisions of The Private Securities Litigation Reform Act
of 1995. There are a variety of factors, many of which are beyond
our control, that affect our operations, performance, business
strategy and results and could cause our actual results and
experience to differ materially from the assumptions, expectations
and objectives expressed in any forward-looking statements. These
factors include, but are not limited to: the impact on us of the
COVID-19 pandemic; our ability to implement successfully our
strategic initiatives; actions and initiatives taken by both
current and potential competitors; increases in the prices paid for
raw materials and energy; a labor strike, work stoppage or other
similar event; foreign currency translation and transaction risks;
deteriorating economic conditions or an inability to access capital
markets; work stoppages, financial difficulties or supply
disruptions at our suppliers or customers; the adequacy of our
capital expenditures; our failure to comply with a material
covenant in our debt obligations; potential adverse consequences of
litigation involving the company; as well as the effects of more
general factors such as changes in general market, economic or
political conditions or in legislation, regulation or public
policy. Additional factors are discussed in our filings with the
Securities and Exchange Commission, including our annual report on
Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K. In addition, any forward-looking statements represent our
estimates only as of today and should not be relied upon as
representing our estimates as of any subsequent date. While we may
elect to update forward-looking statements at some point in the
future, we specifically disclaim any obligation to do so, even if
our estimates change.
Non-GAAP Financial Measures (unaudited)
This press
release presents Adjusted Loss before Income Taxes, which is an
important financial measure for the company but is not a financial
measure defined by U.S. GAAP, and should not be construed as an
alternative to corresponding financial measures presented in
accordance with U.S. GAAP.
Adjusted Loss before Income Taxes is Loss before Income Taxes
as determined in accordance with U.S. GAAP adjusted for certain
significant items. Management believes that Adjusted Loss before
Income Taxes is useful because it represents how management reviews
the operating results of the company excluding the impacts of
rationalizations, asset write-offs, accelerated depreciation, asset
sales and certain other significant items.
It should be noted that other companies may calculate
similarly-titled non-GAAP financial measures differently and, as a
result, the measures presented herein may not be comparable to such
similarly-titled measures reported by other companies.
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SOURCE The Goodyear Tire & Rubber Company