2020 Annual Report
Total Page:16
File Type:pdf, Size:1020Kb
2020 ANNUAL REPORT THE GOODYEAR TIRE & RUBBER COMPANY Goodyear is one of the world’s leading tire companies, with one of the most recognizable brand names. It develops, manufactures, markets and distributes tires for most applications and manufactures and markets rubber-related chemicals for various uses. The company also has established itself as a leader in providing services, tools, analytics and products for evolving modes of transportation, including electric vehicles, autonomous vehicles and fleets of shared and connected consumer vehicles. Goodyear was the first major tire manufacturer to offer direct-to-consumer tire sales on-line and offers a proprietary service and maintenance platform for fleets of shared passenger vehicles. Within its global retail presence, Goodyear operates approximately 1,000 company-owned outlets around the world where it offers its products for sale to consumer and commercial customers and provides repair and other services. It is one of the world’s largest operators of commercial truck service and tire retreading centers and offers a leading service and maintenance platform for commercial fleets. Goodyear is annually recognized as a top place to work and is guided by its corporate responsibility framework, Goodyear Better Future, which articulates the company’s commitment to sustainability. The company manufactures its products in 46 facilities in 21 countries and has operations in most regions of 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. THE GOODYEAR TIRE & RUBBER COMPANY 200 Innovation Way Akron, Ohio 44316-0001 www.goodyear.com ON THE COVER Top: In 2020, Goodyear became the first tire manufacturer to install a dynamic driving simulator. This system replicates real-world driving conditions, allowing tires to be tested in a virtual environment before they are built, improving the speed and efficiency of the product development process. Lower left: The award-winning Goodyear Vector 4Seasons Gen-3 helped the company earn All-Season “Manufacturer of Year” honors from Germany’s leading automotive magazine. Lower right: Among the components used in many Goodyear tires is rice husk ash silica, shown here in its stages of processing. The husks are stripped from rice (far left), burned to ash and converted to a silica substitute (far right). Rice husk ash silica is a bio-based replacement that can deliver performance like traditional silica yet is more environmentally friendly and helps reduce waste going to landfill. In 2020, Goodyear returned to the 24 Hours of LeMans, marking the brand’s first appearance at the world’s most prestigious endurance race since 2006. The event was a solid success, as two racing teams outfitted with Goodyear tires earned spots on the podium in their category. In addition, the Goodyear blimp made its first appearance in Europe in almost a decade and provided aerial coverage for more than 30 television networks around the world. FINANCIAL OVERVIEW YEAR ENDED DEC. 31 YEAR ENDED DEC. 31 (in millions, except per share and associates) 2020 2019 Net Sales $ 12,321 $ 14,745 Gross Profit $ 1,984 $ 3,143 Goodyear Net Income (Loss) $ (1,254) $ (311) – Per Diluted Share $ (5.35) $ (1.33) Weighted Average Shares Outstanding – Basic 234 233 – Diluted 234 233 Segment Operating Income (Loss) $ (14) $ 945 Segment Operating Margin (0.1%) 6.4% Gross Margin 16.1% 21.3% Return on Sales (10.2%) (2.1%) Capital Expenditures $ 647 $ 770 Research and Development Expenditures $ 390 $ 430 Tire Units Sold 126.0 155.3 Total Assets $ 16,506 $ 17,185 Total Debt* $ 5,990 $ 5,663 Goodyear Shareholders’ Equity $ 3,078 $ 4,351 Total Shareholders’ Equity $ 3,259 $ 4,545 Debt to Debt and Equity 64.8% 55.5% Common Stock Dividends Paid $ 37 $ 148 Number of Associates 62,000 63,000 Price Range of Common Stock: – High $ 15.69 $ 22.17 – Low $ 4.09 $ 10.74 * Total debt includes Notes payable and overdrafts, Long term debt and finance leases due within one year, and Long term debt and finance leases. CONTENTS To Our Shareholders 2 Management’s Discussion and Analysis of Financial Condition and 6 Results of Operations Forward-Looking Information 30 Quantitative and Qualitative Disclosures about Market Risk 31 Consolidated Financial Statements 33 Notes to Consolidated Financial Statements 40 Management’s Report on Internal Control Over Financial Reporting 89 Report of Independent Registered Public Accounting Firm 90 Supplementary Data (Unaudited) 93 Selected Financial Data 95 General Information Regarding Our Segments 96 Performance Graph 97 Directors and Officers 98 Facilities 99 Shareholder Information 100 1 This Annual Report contains a number of forward-looking statements. For more information, please see page 30. TO OUR SHAREHOLDERS INTRODUCTION Throughout our 122-year history, The Goodyear Tire & Rubber Company has faced daunting challenges. Since we were founded, we have continued operations through two World Wars, economic depression and cycles of recession and cultural change around the globe. In every situation, we adjusted to the dynamic conditions and kept moving forward. In 2020, the global coronavirus pandemic caused a Richard J. Kramer disruption unlike anything we’ve experienced in our history. Goodyear Chairman, Chief Executive Officer & President But, as we have done in every other instance, Goodyear responded to the conditions, changed how we worked and remained vital to moving the world forward. I’m pleased to say that despite the challenges, our business continued to make significant progress in critical areas. OUR RESPONSE TO COVID-19 Globally, we enhanced our original equipment pipeline, The top priority of our response to COVID-19 is the health winning fitments representing more than nine million units and wellbeing of our associates. Like the rest of the world, of future volume, with many on electric vehicles. We drove we saw the first signs of outbreak in China and responded greater efficiencies across our manufacturing footprint and by suspending manufacturing at our facility in Pulandian in launched new tire management tools and fuel-efficient February. We followed in early March with a safe and orderly products that allowed us to continue winning with shutdown of nearly all our global tire manufacturing plants, commercial fleets. We strengthened our position in the something never done before in Goodyear’s history. emerging new mobility ecosystem with new product and service offerings. And we reinforced and increased our commitment to sustainability. 2 Though the pandemic had immediate and severe effects on each of our businesses, we did not allow it to derail our Immediately, we took decisive actions to safeguard our momentum. Among the factors that contributed to our business to mitigate the effects of the pandemic. We performance in the face of unprecedented challenges were continued to serve customers from our inventory of tires, several initiatives already in place that gave Goodyear an minimizing the disruption to our business. Goodyear’s advantage as consumer behavior continued to evolve during network of aligned dealers and distributors was essential to the pandemic. the worldwide pandemic response, helping keep first For example, in the Americas, our well-established responders – including police, firefighters and emergency e-commerce platform allowed us to serve consumers as medical providers – commercial fleets and economies on-line purchases increased. Also, we expanded the reach moving forward. Though our customers faced challenges of mobile installation in the U.S., giving us an advantage to their own businesses, their response was pivotal to while stay-at-home directives were in place. sustaining the transportation of critical goods and services. By taking advantage of such industry-leading assets and It is important to acknowledge that our associates continued acting with agility and urgency, Goodyear made it easier for to deliver outstanding performance while in many cases consumers and customers during such a disruptive year. balancing shifting responsibilities and increased challenges Even through the difficult environment, we positioned the in their personal lives. We implemented work-from-home company for strong recovery. protocols for office locations, as Goodyear associates found new ways to work to stay close to consumers, customers and each other. By using digital tools and increasing communication, we stayed attuned to the needs of customers to limit the chance of service interruption. When stay-at-home mandates affected both consumers’ buying options and traditional sales and service operations, Goodyear’s retail and commercial fleet service locations introduced “zero-contact” options to assure safety. We adjusted our goals to focus on maintaining a leading position in the market, reducing cost and strengthening cash flow. We executed cost savings programs while continuing to support our new product development and increased service offerings. As a result, we increased our share of market in several important segments, reduced costs with minimal effect on our operations and exceeded our expectations on cash flow. 3 CONTINUING OUR MOMENTUM Over the past few years, we have focused on the evolution of consumer preferences and behavior as a world of new mobility takes shape. Driven by technology, the changes in We also made strides in our commercial business in the transportation environment