NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared by The Goodyear Tire & Rubber Company (the “Company,” “Goodyear,” “we,” “us” or “our”) in accordance with Securities and Exchange Commission rules and regulations and generally accepted accounting principles in the United States of America ("US GAAP") and in the opinion of management contain all adjustments (including normal recurring adjustments) necessary to fairly state the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended
December 31, 2018
(the “
2018
Form 10-K”).
Operating results for the
three
months ended
March 31, 2019
are not necessarily indicative of the results expected in subsequent quarters or for the year ending
December 31, 2019
.
Recently Adopted Accounting Standards
Effective January 1, 2019, we adopted an accounting standards update with new guidance intended to increase transparency 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.
The adoption of this standards update had a material impact on our Consolidated Balance Sheets and related disclosures. In addition to recognizing right-of-use assets and lease liabilities for our operating leases, we recorded
$23 million
as a cumulative effect adjustment to decrease Retained Earnings as a result of using the modified retrospective adoption approach. The adoption of this standards update did not have a material impact on our results of operations or cash flows.
The cumulative effect of the changes made to our January 1, 2019 balance sheet for the adoption of the standards update was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Effective January 1, 2019, we adopted an accounting standards update with new guidance intended to reduce complexity in hedge accounting and make hedge results easier to understand. This includes simplifying how hedge results are presented and disclosed in the financial statements, expanding the types of hedge strategies allowed and providing relief around the documentation and assessment requirements. The adoption of this standards update did not have a material impact our consolidated financial statements.
Effective January 1, 2019, we adopted an accounting standards update that allows an optional one-time reclassification from Accumulated Other Comprehensive Income (Loss) ("AOCL") to Retained Earnings for the stranded tax effects resulting from the new corporate tax rate under the Tax Cuts and Jobs Act (the "Tax Act") that was enacted on December 22, 2017 in the United
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
States. We have elected not to reclassify the income tax effects of the Tax Act from AOCL to Retained Earnings. As such, the adoption of this standards update did not impact our consolidated financial statements. Our policy is to utilize an item-by-item approach to release stranded income tax effects from AOCL. Under this approach, the stranded income tax effects are released from AOCL when the related item ceases to exist.
Recently Issued Accounting Standards
In August 2018, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update with new guidance requiring a customer in a cloud computing arrangement that is a service contract to follow existing internal-use software guidance to determine which implementation costs to capitalize as an asset. The standards update is effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted, and may be applied retrospectively or as of the beginning of the period of adoption. The adoption of this accounting standards update is not expected to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued an accounting standards update with new guidance intended to simplify the subsequent measurement of goodwill. The standards update eliminates the requirement for an entity to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, an entity will perform its annual, or interim, goodwill impairment testing by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount by which the carrying amount exceeds the fair value. The standards update is effective prospectively for annual and interim goodwill impairment testing performed in fiscal years beginning after December 15, 2019, with early adoption permitted. The adoption of this standards update is not expected to impact 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.
Restricted Cash
The following table provides a reconciliation of Cash, Cash Equivalents and Restricted Cash as reported within the Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
March 31,
|
(In millions)
|
2019
|
|
2018
|
Cash and Cash Equivalents
|
$
|
860
|
|
|
$
|
837
|
|
Restricted Cash
|
50
|
|
|
51
|
|
Total Cash, Cash Equivalents and Restricted Cash
|
$
|
910
|
|
|
$
|
888
|
|
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 with accounts receivable factoring programs. The restrictions lapse when cash from factored accounts receivable is remitted to the purchaser of those receivables.
Reclassifications and Adjustments
Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2. NET SALES
The following tables show disaggregated net sales from contracts with customers by major source:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
|
Europe, Middle East
|
|
|
|
|
(In millions)
|
Americas
|
|
and Africa
|
|
Asia Pacific
|
|
Total
|
Tire unit sales
|
$
|
1,493
|
|
|
$
|
1,143
|
|
|
$
|
453
|
|
|
$
|
3,089
|
|
Other tire and related sales
|
137
|
|
|
72
|
|
|
32
|
|
|
241
|
|
Retail services and service related sales
|
132
|
|
|
4
|
|
|
15
|
|
|
151
|
|
Chemical
|
109
|
|
|
—
|
|
|
—
|
|
|
109
|
|
Other
|
5
|
|
|
2
|
|
|
1
|
|
|
8
|
|
Net Sales by reportable segment
|
$
|
1,876
|
|
|
$
|
1,221
|
|
|
$
|
501
|
|
|
$
|
3,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
|
Europe, Middle East
|
|
|
|
|
(In millions)
|
Americas
|
|
and Africa
|
|
Asia Pacific
|
|
Total
|
Tire unit sales
|
$
|
1,506
|
|
|
$
|
1,209
|
|
|
$
|
518
|
|
|
$
|
3,233
|
|
Other tire and related sales
|
135
|
|
|
105
|
|
|
30
|
|
|
270
|
|
Retail services and service related sales
|
137
|
|
|
15
|
|
|
22
|
|
|
174
|
|
Chemical
|
148
|
|
|
—
|
|
|
—
|
|
|
148
|
|
Other
|
3
|
|
|
1
|
|
|
1
|
|
|
5
|
|
Net Sales by reportable segment
|
$
|
1,929
|
|
|
$
|
1,330
|
|
|
$
|
571
|
|
|
$
|
3,830
|
|
Tire unit sales consist of consumer, commercial, farm and off-the-road tire sales, including the sale of new Company-branded tires through Company-owned retail channels. Other tire and related sales consist of aviation, race, motorcycle and all-terrain vehicle tire sales, retread sales and other tire related sales. Sales of tires in this category are not included in reported tire unit information. Retail services and service related sales consist of automotive services performed for customers through our Company-owned retail channels, and includes service related products. Chemical sales relate to the sale of synthetic rubber and other chemicals to third-parties, and exclude intercompany sales. Other sales include items such as franchise fees and ancillary tire parts, such as tire rims, tire valves and valve stems.
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
$37 million
and
$39 million
at
March 31, 2019
and
December 31, 2018
, respectively. Deferred revenue included in Other Long Term Liabilities in the Consolidated Balance Sheets totaled
$35 million
and
$39 million
at
March 31, 2019
and December 31, 2018, 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 balance of deferred revenue related to contracts with customers, and changes during the three months ended
March 31, 2019
:
|
|
|
|
|
|
|
(In millions)
|
|
Balance at December 31, 2018
|
$
|
78
|
|
Revenue deferred during period
|
34
|
|
Revenue recognized during period
|
(40
|
)
|
Impact of foreign currency translation
|
—
|
|
Balance at March 31, 2019
|
$
|
72
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3. 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 shows the roll-forward of our liability between periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Associate-
|
|
|
|
|
(In millions)
|
Related Costs
|
|
Other Exit Costs
|
|
Total
|
Balance at December 31, 2018
|
$
|
80
|
|
|
$
|
1
|
|
|
$
|
81
|
|
2019 Charges
(1)
|
100
|
|
|
4
|
|
|
104
|
|
Incurred, including net Foreign Currency Translation of $(3) million and $0 million, respectively
|
(17
|
)
|
|
(4
|
)
|
|
(21
|
)
|
Reversed to the Statement of Operations
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
Balance at March 31, 2019
|
$
|
161
|
|
|
$
|
1
|
|
|
$
|
162
|
|
|
|
(1)
|
Charges of
$104 million
in 2019, exclude
$1 million
of benefit plan termination benefits recorded in Rationalizations in the Statement of Operations.
|
On March 18, 2019, we approved a plan that proposes to modernize
two
of our tire manufacturing facilities in Germany. The plan is in furtherance of our strategy to strengthen the competitiveness of our manufacturing footprint and increase production of premium, large-rim diameter consumer tires. The plan, which remains subject to consultation with relevant employee representative bodies, would 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. We accrued
$93 million
in charges related to the plan in the first quarter of 2019, which are expected to be substantially paid through 2023.
The remainder of the accrual balance at
March 31, 2019
is expected to be substantially utilized in the next 12 months and includes
$35 million
related to plans to reduce manufacturing headcount and improve operating efficiency in Europe, Middle East and Africa ("EMEA"),
$24 million
related to global plans to reduce Selling, Administrative and General Expense ("SAG") headcount and
$6 million
related to a plan to reduce manufacturing headcount and improve operating efficiency in Americas.
The following table shows net rationalization charges included in Income (Loss) before Income Taxes:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
(In millions)
|
2019
|
|
2018
|
Current Year Plans
|
|
|
|
Associate Severance and Other Related Costs
|
$
|
98
|
|
|
$
|
31
|
|
Benefit Plan Termination Benefits
|
1
|
|
|
—
|
|
Other Exit Costs
|
1
|
|
|
—
|
|
Current Year Plans - Net Charges
|
$
|
100
|
|
|
$
|
31
|
|
|
|
|
|
Prior Year Plans
|
|
|
|
Associate Severance and Other Related Costs
|
$
|
—
|
|
|
$
|
(2
|
)
|
Other Exit Costs
|
3
|
|
|
8
|
|
Prior Year Plans - Net Charges
|
3
|
|
|
6
|
|
Total Net Charges
|
$
|
103
|
|
|
$
|
37
|
|
|
|
|
|
Asset Write-off and Accelerated Depreciation Charges
|
$
|
—
|
|
|
$
|
1
|
|
Substantially all of the new charges for the
three
months ended
March 31, 2019
and
2018
related to future cash outflows. Net current year plan charges for the
three
months ended
March 31, 2019
include
$93 million
related to a proposed plan to modernize
two
of our tire manufacturing facilities in Germany and
$7 million
related to a plan to reduce manufacturing headcount and improve operating efficiency in Americas. Net current year plan charges for the
three
months ended
March 31, 2018
include
$25 million
related to a global plan to reduce SAG headcount and
$6 million
related to a plan to improve operating efficiency in EMEA.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Net prior year plan charges for the
three
months ended
March 31, 2019
were
$3 million
, primarily related to EMEA manufacturing plans. Net prior year plan charges for the
three
months ended
March 31, 2019
also include reversals of
$2 million
for actions no longer needed for their originally intended purposes. Net prior year plan charges for the three months ended
March 31, 2018
include
$7 million
related to the closure of our tire manufacturing facility in Philippsburg, Germany. Net prior year plan charges for the
three
months ended
March 31, 2018
also include reversals of
$5 million
for actions no longer needed for their originally intended purposes.
Ongoing rationalization plans had approximately
$720 million
in charges incurred prior to 2019 and approximately
$45 million
is expected to be incurred in future periods.
Approximately
1,050
associates will be released under new plans initiated in 2019, of which approximately
50
were released through
March 31, 2019
. In the first three months of
2019
, approximately
100
associates were released under plans initiated in prior years. Approximately
1,450
associates remain to be released under all ongoing rationalization plans.
Approximately
850
former associates of the closed Amiens, France manufacturing facility have asserted wrongful termination or other claims against us. Refer to Note to the Consolidated Financial Statements No. 13, Commitments and Contingent Liabilities, in this Form 10-Q.
NOTE 4. OTHER (INCOME) EXPENSE
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
(In millions)
|
2019
|
|
2018
|
Non-service related pension and other postretirement benefits cost
|
$
|
30
|
|
|
$
|
34
|
|
Financing fees and financial instruments expense
|
8
|
|
|
9
|
|
Net foreign currency exchange (gains) losses
|
(7
|
)
|
|
(7
|
)
|
General and product liability expense (income) - discontinued products
|
6
|
|
|
1
|
|
Royalty income
|
(5
|
)
|
|
(5
|
)
|
Net (gains) losses on asset sales
|
(5
|
)
|
|
2
|
|
Interest income
|
(3
|
)
|
|
(4
|
)
|
Miscellaneous (income) expense
|
(2
|
)
|
|
7
|
|
|
$
|
22
|
|
|
$
|
37
|
|
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 for the three months ended March 31, 2018 includes expense of
$9 million
related to the adoption 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 Note to the Consolidated Financial Statements No. 11, Pension, Savings and Other Postretirement Benefit Plans, in this Form 10-Q.
Other (Income) Expense also includes financing fees and financial instruments expense which consists of commitment fees and charges incurred in connection with financing transactions; net foreign currency exchange (gains) and losses; general and product liability expense (income) - discontinued products, which consists of charges for claims against us related primarily to asbestos personal injury claims, net of probable insurance recoveries; royalty income which is derived primarily from licensing arrangements; net (gains) losses on asset sales; interest income; and miscellaneous (income) expense.
NOTE 5. INCOME TAXES
For the first quarter of
2019
, we recorded tax expense of
$6 million
on a loss before income taxes of
$38 million
. Income tax expense for the three months ended March 31, 2019 includes net discrete charges of
$7 million
.
In the first quarter of 2018, we recorded tax expense of
$33 million
on income before income taxes of
$113 million
. Income tax expense for the
three
months ended March 31, 2018 included a charge of
$7 million
to increase our provisional tax obligation for the one-time transition tax imposed by the Tax Act.
We record taxes based on overall estimated annual effective tax rates. The difference between our effective tax rate and the U.S. statutory rate of 21% for the three months ended March 31, 2019 and March 31, 2018, primarily relates to the discrete items noted
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
above and an overall higher effective tax rate in the foreign jurisdictions in which we operate, partially offset by a benefit from our foreign derived intangible income deduction provided for in the Tax Act.
At March 31, 2019, our valuation allowance on certain of our U.S. federal, state and local deferred tax assets was
$113 million
,
primarily related to deferred tax assets for foreign tax credits, and our valuation allowance on our foreign deferred tax assets was
$222 million
. At December 31, 2018, our valuation allowance on certain U.S. federal, state and local deferred tax assets was
$113 million
, and our valuation allowance on our foreign deferred tax assets was
$204 million
.
Our net deferred tax assets include approximately
$637 million
of foreign tax credits, net of valuation allowances of
$103 million
, generated primarily from the receipt of foreign dividends. Our earnings and forecasts of future profitability along with three significant sources of foreign income provide us sufficient positive evidence to utilize these credits, despite the negative evidence of their limited carryforward periods. Those 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) if necessary, we can enact tax planning strategies, including the ability to capitalize research and development costs annually, accelerate income on cross border sales of inventory or raw materials to our subsidiaries and reduce 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.
We considered our current forecasts of future profitability in assessing our ability to realize our foreign tax credits. These forecasts include the impact of recent trends, including various macroeconomic factors such as raw material prices, on our profitability, as well as the impact of tax planning strategies. Macroeconomic factors, including raw material prices, possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future foreign source income will not be sufficient to fully utilize these 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 evidence to conclude that it is more likely than not that the remaining foreign tax credits will be fully utilized prior to their various expiration dates.
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 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 all or a significant portion of these valuation allowances will exist within the next twelve months.
For the three months ending March 31, 2019, changes to our unrecognized tax benefits did not, and for the full year of 2019 are not expected to, have a significant impact on our financial position or results of operations.
We are open to examination in the United States for 2018 and in Germany from 2013 onward. Generally, for our remaining tax jurisdictions, years from 2013 onward are still open to examination.
NOTE 6. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are computed based on the weighted average number of common shares outstanding. Diluted earnings (loss) per share are calculated to reflect the potential dilution that could occur if securities or other contracts were exercised or converted into common stock.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basic and diluted earnings (loss) per common share are calculated as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
(In millions, except per share amounts)
|
2019
|
|
2018
|
Earnings (loss) per share — basic:
|
|
|
|
Goodyear net income (loss)
|
$
|
(61
|
)
|
|
$
|
75
|
|
Weighted average shares outstanding
|
232
|
|
|
240
|
|
Earnings (loss) per common share — basic
|
$
|
(0.26
|
)
|
|
$
|
0.31
|
|
|
|
|
|
Earnings (loss) per share — diluted:
|
|
|
|
Goodyear net income (loss)
|
$
|
(61
|
)
|
|
$
|
75
|
|
Weighted average shares outstanding
|
232
|
|
|
240
|
|
Dilutive effect of stock options and other dilutive securities
|
—
|
|
|
4
|
|
Weighted average shares outstanding — diluted
|
232
|
|
|
244
|
|
Earnings (loss) per common share — diluted
|
$
|
(0.26
|
)
|
|
$
|
0.31
|
|
Weighted average shares outstanding - diluted for the three months ended
March 31, 2019
excludes the dilutive effect of approximately
3 million
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 the three months ended
March 31, 2019
and 2018 exclude approximately
2 million
and
1 million
equivalent shares, respectively, related to options with exercise prices greater than the average market price of our common shares (i.e., "underwater" options).
NOTE 7. BUSINESS SEGMENTS
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
(In millions)
|
2019
|
|
2018
|
Sales:
|
|
|
|
Americas
|
$
|
1,876
|
|
|
$
|
1,929
|
|
Europe, Middle East and Africa
|
1,221
|
|
|
1,330
|
|
Asia Pacific
|
501
|
|
|
571
|
|
Net Sales
|
$
|
3,598
|
|
|
$
|
3,830
|
|
Segment Operating Income:
|
|
|
|
Americas
|
$
|
89
|
|
|
$
|
127
|
|
Europe, Middle East and Africa
|
54
|
|
|
78
|
|
Asia Pacific
|
47
|
|
|
76
|
|
Total Segment Operating Income
|
$
|
190
|
|
|
$
|
281
|
|
Less:
|
|
|
|
Rationalizations
|
$
|
103
|
|
|
$
|
37
|
|
Interest expense
|
85
|
|
|
76
|
|
Other (income) expense (Note 4)
|
22
|
|
|
37
|
|
Asset write-offs and accelerated depreciation
|
—
|
|
|
1
|
|
Corporate incentive compensation plans
|
1
|
|
|
4
|
|
Intercompany profit elimination
|
(4
|
)
|
|
(3
|
)
|
Retained expenses of divested operations
|
3
|
|
|
3
|
|
Other
|
18
|
|
|
13
|
|
Income (Loss) before Income Taxes
|
$
|
(38
|
)
|
|
$
|
113
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Rationalizations, as described in Note to the Consolidated Financial Statements No. 3, Costs Associated with Rationalization Programs, in this Form 10-Q, net (gains) losses on asset sales, as described in Note to the Consolidated Financial Statements No. 4, Other (Income) Expense, in this Form 10-Q, and asset write-offs and accelerated depreciation were not charged (credited) to the strategic business units ("SBUs") for performance evaluation purposes but were attributable to the SBUs as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
(In millions)
|
2019
|
|
2018
|
Rationalizations:
|
|
|
|
Americas
|
$
|
7
|
|
|
$
|
3
|
|
Europe, Middle East and Africa
|
96
|
|
|
27
|
|
Asia Pacific
|
—
|
|
|
3
|
|
Total Segment Rationalizations
|
$
|
103
|
|
|
$
|
33
|
|
Corporate
|
—
|
|
|
4
|
|
Total Rationalizations
|
$
|
103
|
|
|
$
|
37
|
|
|
|
|
|
Net (Gains) Losses on Asset Sales:
|
|
|
|
Europe, Middle East and Africa
|
$
|
(5
|
)
|
|
$
|
2
|
|
Total Net (Gains) Losses on Asset Sales
|
$
|
(5
|
)
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Asset Write-offs and Accelerated Depreciation:
|
|
|
|
Europe, Middle East and Africa
|
$
|
—
|
|
|
$
|
1
|
|
Total Asset Write-offs and Accelerated Depreciation
|
$
|
—
|
|
|
$
|
1
|
|
NOTE 8. LEASES
We determine if an arrangement is or contains a lease at inception. We enter into leases primarily for our wholesale 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 at inception. 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 determining the present value of lease payments, unless there is a rate implicit in the lease agreement. Operating lease cost is recognized on a straight-line basis over the lease term.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The components of lease expense included in Income (Loss) before Income Taxes are as follows:
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
(In millions)
|
2019
|
Operating Lease Cost
|
$
|
74
|
|
Finance Lease Cost
|
|
Amortization of ROU Assets
|
2
|
|
Interest on Lease Liabilities
|
5
|
|
Short Term Lease Cost
|
1
|
|
Variable Lease Cost
|
2
|
|
Sublease Income
|
(4
|
)
|
Total Lease Cost
|
$
|
80
|
|
Supplemental cash flow information related to leases is as follows:
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
(In millions)
|
2019
|
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
|
|
Operating Cash Flows for Operating Leases
|
$
|
71
|
|
Operating Cash Flows for Finance Leases
|
5
|
|
Financing Cash Flows for Finance Leases
|
2
|
|
ROU Assets Obtained in Exchange for Lease Obligations
|
|
Operating Leases
|
37
|
|
Finance Leases
|
28
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Supplemental balance sheet information related to leases is as follows:
|
|
|
|
|
|
March 31,
|
(In millions, except lease term and discount rate)
|
2019
|
Operating Leases
|
|
Operating Lease ROU Assets
|
$
|
862
|
|
|
|
Operating Lease Liabilities due Within One Year
|
$
|
203
|
|
Operating Lease Liabilities
|
667
|
|
Total Operating Lease Liabilities
|
$
|
870
|
|
|
|
|
Finance Leases
|
|
Property, Plant and Equipment, at cost
|
$
|
263
|
|
Accumulated Depreciation
|
52
|
|
Property, Plant and Equipment, net
|
$
|
211
|
|
|
|
Long Term Debt and Finance Leases due Within One Year
|
$
|
5
|
|
Long Term Debt and Finance Leases
|
240
|
|
Total Finance Lease Liabilities
|
$
|
245
|
|
|
|
Weighted Average Remaining Lease Term
|
|
Operating Leases
|
6.9 years
|
|
Finance Leases
|
32.4 years
|
|
|
|
Weighted Average Discount Rate
|
|
Operating Leases
|
6.71
|
%
|
Finance Leases
|
8.44
|
%
|
Future maturities of our lease liabilities, excluding subleases, as of March 31, 2019 are as follows:
|
|
|
|
|
|
|
|
|
(In millions)
|
Operating Leases
|
|
Finance Leases
|
|
|
|
|
2019 (excluding the three months ended March 31)
|
$
|
190
|
|
|
$
|
19
|
|
2020
|
213
|
|
|
23
|
|
2021
|
162
|
|
|
34
|
|
2022
|
113
|
|
|
21
|
|
2023
|
86
|
|
|
20
|
|
Thereafter
|
359
|
|
|
706
|
|
Total Lease Payments
|
1,123
|
|
|
823
|
|
Less: Imputed Interest
|
253
|
|
|
578
|
|
Total
|
$
|
870
|
|
|
$
|
245
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Future maturities of our lease liabilities as of December 31, 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 and
|
|
|
(In millions)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Beyond
|
|
Total
|
Capital Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum lease payments
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
18
|
|
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
23
|
|
|
$
|
61
|
|
Imputed interest
|
(3
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(13
|
)
|
|
(24
|
)
|
Present value
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
15
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
10
|
|
|
$
|
37
|
|
Operating Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum lease payments
|
$
|
266
|
|
|
$
|
214
|
|
|
$
|
161
|
|
|
$
|
110
|
|
|
$
|
84
|
|
|
$
|
391
|
|
|
$
|
1,226
|
|
Minimum sublease rentals
|
(15
|
)
|
|
(12
|
)
|
|
(8
|
)
|
|
(5
|
)
|
|
(3
|
)
|
|
(6
|
)
|
|
(49
|
)
|
|
$
|
251
|
|
|
$
|
202
|
|
|
$
|
153
|
|
|
$
|
105
|
|
|
$
|
81
|
|
|
$
|
385
|
|
|
$
|
1,177
|
|
Imputed interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(263
|
)
|
Present value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
914
|
|
As of March 31, 2019, we have additional operating leases that have not yet commenced for which the present value of lease payments over the respective lease terms totals
$33 million
. Accordingly, these leases are not recorded on the Consolidated Balance Sheet at March 31, 2019. These operating leases will commence between 2019 and 2022 with lease terms of
1 year
to
15 years
.
NOTE 9. FINANCING ARRANGEMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
At
March 31, 2019
, we had total credit arrangements of
$9,029 million
, of which
$2,683 million
were unused. At that date,
40%
of our debt was at variable interest rates averaging
4.69%
.
Notes Payable and Overdrafts, Long Term Debt and Finance Leases due Within One Year and Short Term Financing Arrangements
At
March 31, 2019
, we had short term committed and uncommitted credit arrangements totaling
$804 million
, of which
$294 million
were unused. These arrangements are available primarily to certain of our foreign subsidiaries through various banks at quoted market interest rates.
The following table presents amounts due within one year:
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
(In millions)
|
2019
|
|
2018
|
Chinese credit facilities
|
$
|
154
|
|
|
$
|
122
|
|
Other domestic and foreign debt
|
341
|
|
|
288
|
|
Notes Payable and Overdrafts
|
$
|
495
|
|
|
$
|
410
|
|
Weighted average interest rate
|
7.90
|
%
|
|
8.03
|
%
|
|
|
|
|
Chinese credit facilities
|
$
|
30
|
|
|
$
|
32
|
|
Mexican credit facilities
|
90
|
|
|
—
|
|
Other foreign and domestic debt (including finance leases)
|
346
|
|
|
211
|
|
Long Term Debt and Finance Leases due Within One Year
|
$
|
466
|
|
|
$
|
243
|
|
Weighted average interest rate
|
3.83
|
%
|
|
4.57
|
%
|
Total obligations due within one year
|
$
|
961
|
|
|
$
|
653
|
|
Long Term Debt and Finance Leases and Financing Arrangements
At
March 31, 2019
, we had long term credit arrangements totaling
$8,225 million
, of which
$2,389 million
were unused.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents long term debt and finance leases, net of unamortized discounts, and interest rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
|
|
Interest
|
|
|
|
Interest
|
(In millions)
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
Notes:
|
|
|
|
|
|
|
|
8.75% due 2020
|
$
|
278
|
|
|
|
|
$
|
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
|
285
|
|
|
3.66
|
%
|
|
—
|
|
|
—
|
|
Second lien term loan facility due 2025
|
400
|
|
|
4.49
|
%
|
|
400
|
|
|
4.46
|
%
|
European revolving credit facility due 2024
|
140
|
|
|
1.50
|
%
|
|
—
|
|
|
—
|
|
Pan-European accounts receivable facility
|
246
|
|
|
1.05
|
%
|
|
335
|
|
|
1.01
|
%
|
Mexican credit facilities
|
290
|
|
|
4.26
|
%
|
|
200
|
|
|
4.30
|
%
|
Chinese credit facilities
|
224
|
|
|
5.00
|
%
|
|
219
|
|
|
5.03
|
%
|
Other foreign and domestic debt
(1)
|
905
|
|
|
4.36
|
%
|
|
884
|
|
|
5.35
|
%
|
|
5,799
|
|
|
|
|
5,352
|
|
|
|
Unamortized deferred financing fees
|
(33
|
)
|
|
|
|
(36
|
)
|
|
|
|
5,766
|
|
|
|
|
5,316
|
|
|
|
Finance lease obligations
(2)
|
245
|
|
|
|
|
37
|
|
|
|
|
6,011
|
|
|
|
|
5,353
|
|
|
|
Less portion due within one year
|
(466
|
)
|
|
|
|
(243
|
)
|
|
|
|
$
|
5,545
|
|
|
|
|
$
|
5,110
|
|
|
|
|
|
(1)
|
Interest rates are weighted average interest rates related to various foreign credit facilities with customary terms and conditions.
|
|
|
(2)
|
Includes finance lease obligations related to our Global and Americas Headquarters.
|
NOTES
At
March 31, 2019
, we had
$3,309 million
of outstanding notes, compared to
$3,314 million
at
December 31, 2018
.
CREDIT FACILITIES
$2.0 billion
Amended and Restated First Lien Revolving Credit Facility due 2021
Our amended and restated first lien revolving credit facility is available in the form of loans or letters of credit, with letter of credit availability limited to
$800 million
. 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
. Our obligations under the facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries. Our obligations under the facility and our subsidiaries' obligations under the related guarantees are secured by first priority security interests in a variety of collateral. Based on our current liquidity, amounts drawn under this facility bear interest at LIBOR plus
125
basis points, and undrawn amounts under the facility will be subject to an annual commitment fee of
30
basis points.
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, (ii) the value of our principal trademarks, and (iii) certain cash in an amount not to exceed $200 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 the facility may decrease below $2.0 billion.
As of
March 31, 2019
, our borrowing base, and therefore our availability, under this facility was
$382 million
below the facility's stated amount of
$2.0 billion
.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. The facility also has customary defaults, including a cross-default to material indebtedness of Goodyear and our subsidiaries.
At
March 31, 2019
, we had
$285 million
of borrowings and
$37 million
of letters of credit issued under the revolving credit facility. At
December 31, 2018
, we had no borrowings and
$37 million
of letters of credit issued under the revolving credit facility.
Amended and Restated Second Lien Term Loan Facility due
2025
Our amended and restated second lien term loan facility matures on March 7, 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.
Our obligations under our second lien term loan facility are guaranteed by most of our wholly-owned U.S. and Canadian subsidiaries and are secured by second priority security interests in the same collateral securing the $2.0 billion first lien revolving credit facility.
At
March 31, 2019
and December 31, 2018, the amounts outstanding under this facility were
$400 million
.
€800 million
Amended and Restated Senior Secured European Revolving Credit Facility due 2024
On March 27, 2019, we 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.
The European revolving credit facility consists of (i) a
€180 million
German tranche that is available only to Goodyear Dunlop Tires Germany GmbH (“GDTG”) and (ii) a
€620 million
all-borrower tranche that is available to Goodyear Europe B.V. (“GEBV”), GDTG and Goodyear Dunlop Tires 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. 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
.
GEBV and certain of its subsidiaries in the United Kingdom, Luxembourg, France and Germany provide guarantees to support the facility. 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 secured credit facilities described above also provide unsecured guarantees in support of 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
March 31, 2019
, there were
no
borrowings outstanding under the German tranche,
$140 million
(
€125 million
) of borrowings outstanding under the all-borrower tranche and
no
letters of credit outstanding under the European revolving credit facility. At
December 31, 2018
, there were
no
borrowings and
no
letters of credit outstanding under the European revolving credit facility.
Accounts Receivable Securitization Facilities (On-Balance Sheet)
GEBV and certain other of our European subsidiaries are parties to a pan-European accounts receivable securitization facility that expires in 2023. 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 18, 2018 through October 17, 2019, the designated maximum amount of the facility is
€320 million
.
The facility involves the 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) September 26, 2023, (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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
similar to the events of default under our senior secured credit facilities; 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 17, 2019.
At
March 31, 2019
, the amounts available and utilized under this program totaled
$246 million
(
€219 million
). At
December 31, 2018
, the amounts available and utilized under this program totaled
$335 million
(
€293 million
). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Finance Leases.
For a description of the collateral securing the credit facilities described above as well as the covenants applicable to them, refer to Note to the Consolidated Financial Statements No. 15, Financing Arrangements and Derivative Financial Instruments, in our
2018
Form 10-K.
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
March 31, 2019
, the gross amount of receivables sold was
$550 million
, compared to
$568 million
at
December 31, 2018
.
Other Foreign Credit Facilities
A Mexican subsidiary and a U.S. subsidiary have several financing arrangements in Mexico. At
March 31, 2019
, the amounts available and utilized under these facilities were
$290 million
, of which
$90 million
is due within a year. At
December 31, 2018
, the amounts available and utilized under these facilities were
$340 million
and
$200 million
, respectively. The facilities ultimately mature in 2020. The facilities contain covenants relating to the Mexican and U.S. subsidiary and have customary representations and warranties and default provisions relating to the Mexican and U.S. subsidiary’s ability to perform its respective obligations under the applicable facilities.
A Chinese subsidiary has several financing arrangements in China. At
March 31, 2019
and
December 31, 2018
, the amounts available under these facilities were
$720 million
and
$672 million
, respectively. At
March 31, 2019
, the amount utilized under these facilities was
$378 million
, of which
$224 million
was long term debt and
$154 million
was notes payable. At
March 31, 2019
,
$30 million
of the long term debt was due within a year. At
December 31, 2018
, the amount utilized under these facilities was
$341 million
, of which
$219 million
was long term debt and
$122 million
was notes payable. At
December 31, 2018
,
$32 million
of the long term debt was due within a year. The facilities contain covenants relating to the Chinese subsidiary and have customary representations and warranties and defaults relating to the Chinese subsidiary’s ability to perform its obligations under the facilities. Certain of the facilities can only be used to finance the expansion of our manufacturing facility in China. At
March 31, 2019
and
December 31, 2018
, the unused amounts available under these facilities were
$107 million
and
$116 million
, respectively. At
March 31, 2019
and
December 31, 2018
, restricted cash related to funds obtained under these credit facilities was
$3 million
and
$0 million
, respectively.
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.
Foreign Currency Contracts
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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:
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
(In millions)
|
2019
|
|
2018
|
Fair Values — Current asset (liability):
|
|
|
|
Accounts receivable
|
$
|
21
|
|
|
$
|
7
|
|
Other current liabilities
|
(2
|
)
|
|
(6
|
)
|
At
March 31, 2019
and
December 31, 2018
, these outstanding foreign currency derivatives had notional amounts of
$1,625 million
and
$1,240 million
, respectively, and were primarily related to intercompany loans. Other (Income) Expense included net transaction gains on derivatives of
$15 million
and
$2 million
for the
three
months ended
March 31, 2019
and 2018, respectively. These amounts were substantially offset in Other (Income) Expense by the effect of changing exchange rates on the underlying currency exposures.
The following table presents fair values for foreign currency hedge contracts that meet the criteria to be accounted for as cash flow hedging instruments:
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
(In millions)
|
2019
|
|
2018
|
Fair Values — Current asset (liability):
|
|
|
|
Accounts receivable
|
$
|
11
|
|
|
$
|
9
|
|
Other current liabilities
|
(1
|
)
|
|
(1
|
)
|
Fair Values — Long term asset (liability):
|
|
|
|
Other assets
|
$
|
3
|
|
|
$
|
2
|
|
Other long term liabilities
|
—
|
|
|
—
|
|
At
March 31, 2019
and
December 31, 2018
, these outstanding foreign currency derivatives had notional amounts of
$344 million
and
$347 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 hedge contracts that meet the criteria to be accounted for as cash flow hedging instruments (before tax and minority):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
(In millions) (Income) Expense
|
2019
|
|
2018
|
Amounts deferred to AOCL
(1)
|
$
|
(5
|
)
|
|
$
|
6
|
|
Amount of deferred (gain) loss reclassified from AOCL into Cost of Goods Sold ("CGS")
(1)
|
(3
|
)
|
|
4
|
|
|
|
(1)
|
Excluded components deferred to AOCL and excluded components reclassified from AOCL to CGS for the three months ended March 31, 2019 were not material.
|
The estimated net amount of deferred gains at
March 31, 2019
that are expected to be reclassified to earnings within the next twelve months is
$6 million
.
The counterparties to our foreign currency contracts were considered by us to be substantial and creditworthy financial institutions that are 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10. FAIR VALUE MEASUREMENTS
The following table presents information about assets and liabilities recorded at fair value on the Consolidated Balance Sheets at
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign Exchange Contracts
|
35
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
18
|
|
|
—
|
|
|
—
|
|
Total Assets at Fair Value
|
$
|
45
|
|
|
$
|
28
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
35
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Contracts
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total Liabilities at Fair Value
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The following table presents supplemental fair value information about long term fixed rate and variable rate debt, excluding finance leases, at
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
(In millions)
|
2019
|
|
2018
|
Fixed Rate Debt:
(1)
|
|
|
|
Carrying amount — liability
|
$
|
3,402
|
|
|
$
|
3,609
|
|
Fair value — liability
|
3,342
|
|
|
3,443
|
|
|
|
|
|
Variable Rate Debt:
(1)
|
|
|
|
Carrying amount — liability
|
$
|
2,364
|
|
|
$
|
1,707
|
|
Fair value — liability
|
2,339
|
|
|
1,689
|
|
|
|
(1)
|
Excludes Notes Payable and Overdrafts of $
495 million
and $
410 million
at
March 31, 2019
and December 31, 2018, respectively, of which $
261 million
and $
230 million
, respectively, are at fixed rates and $
234 million
and $
180 million
, respectively, are at variable rates. The carrying value of Notes Payable and Overdrafts approximates fair value due to the short term nature of the facilities.
|
Long term debt with fair values of
$3,605 million
and
$3,496 million
at
March 31, 2019
and
December 31, 2018
, respectively, were estimated using quoted Level 1 market prices. The carrying value of the remaining long term debt approximates fair value since the terms of the financing arrangements are similar to terms that could be obtained under current lending market conditions
.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 11. PENSION, SAVINGS AND OTHER POSTRETIREMENT BENEFIT PLANS
We provide employees with defined benefit pension or defined contribution savings plans.
Defined benefit pension cost follows:
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Three Months Ended
|
|
March 31,
|
(In millions)
|
2019
|
|
2018
|
Service cost
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
44
|
|
|
40
|
|
Expected return on plan assets
|
(56
|
)
|
|
(55
|
)
|
Amortization of net losses
|
28
|
|
|
28
|
|
Net periodic pension cost
|
$
|
17
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
|
|
Three Months Ended
|
|
March 31,
|
(In millions)
|
2019
|
|
2018
|
Service cost
|
$
|
7
|
|
|
$
|
7
|
|
Interest cost
|
18
|
|
|
18
|
|
Expected return on plan assets
|
(15
|
)
|
|
(18
|
)
|
Amortization of net losses
|
7
|
|
|
7
|
|
Net periodic pension cost
|
$
|
17
|
|
|
$
|
14
|
|
Net curtailments/settlements/termination benefits
|
1
|
|
|
—
|
|
Total defined benefit pension cost
|
$
|
18
|
|
|
$
|
14
|
|
|
|
|
|
Service cost is recorded in CGS or SAG. Other components of net periodic pension cost 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 expect to contribute approximately
$25 million
to
$50 million
to our funded non-U.S. pension plans in 2019. For the
three
months ended
March 31, 2019
, we contributed
$10 million
to our non-U.S. plans.
The expense recognized for our contributions to defined contribution savings plans for the
three
months ended
March 31, 2019
and
2018
was
$28 million
and
$29 million
, respectively.
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. Other postretirement benefits expense for the
three
months ended
March 31, 2019
and
2018
was
$2 million
and
$3 million
, respectively.
NOTE 12. STOCK COMPENSATION PLANS
Our Board of Directors granted
1.5 million
restricted stock units and
0.4 million
performance share units during the
three
months ended
March 31, 2019
under our stock compensation plans.
We measure the fair value of grants of restricted stock units and 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. The weighted average fair value per share was
$20.08
for restricted stock units and
$18.00
for performance share units granted during the
three
months ended
March 31, 2019
.
We recognized stock-based compensation expense of
$3 million
and
$2 million
during the
three
months ended
March 31, 2019
and 2018, respectively. At
March 31, 2019
, unearned compensation cost related to the unvested portion of all stock-based awards was approximately
$56 million
and is expected to be recognized over the remaining vesting period of the respective grants, through
the fourth quarter of 2022
.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 13. COMMITMENTS AND CONTINGENT LIABILITIES
Environmental Matters
We have recorded liabilities totaling
$46 million
and
$45 million
at
March 31, 2019
and
December 31, 2018
, respectively, for anticipated costs related to various environmental matters, primarily the remediation of numerous waste disposal sites and certain properties sold by us. Of these amounts,
$10 million
was included in Other Current Liabilities at both
March 31, 2019
and
December 31, 2018
. 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
$226 million
and
$224 million
for anticipated costs related to workers’ compensation at
March 31, 2019
and
December 31, 2018
, respectively. Of these amounts,
$39 million
and
$42 million
were included in Current Liabilities as part of Compensation and Benefits at
March 31, 2019
and
December 31, 2018
, respectively. 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. At
March 31, 2019
and
December 31, 2018
, the liability was discounted using a risk-free rate of return. At
March 31, 2019
, we estimate that it is reasonably possible that the liability could exceed our recorded amounts by approximately
$30 million
.
General and Product Liability and Other Litigation
We have recorded liabilities totaling
$329 million
and
$322 million
, including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at
March 31, 2019
and
December 31, 2018
, respectively. Of these amounts,
$59 million
and
$57 million
were included in Other Current Liabilities at
March 31, 2019
and
December 31, 2018
, 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
March 31, 2019
, 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
$5 million
and within Other Assets of
$29 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
147,500
claims by defending, obtaining the 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
$542 million
through
March 31, 2019
and
$541 million
through
December 31, 2018
.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
(Dollars in millions)
|
March 31, 2019
|
|
December 31, 2018
|
Pending claims, beginning of period
|
43,100
|
|
|
54,300
|
|
New claims filed
|
400
|
|
|
1,300
|
|
Claims settled/dismissed
|
(300
|
)
|
|
(12,500
|
)
|
Pending claims, end of period
|
43,200
|
|
|
43,100
|
|
Payments
(1)
|
$
|
2
|
|
|
$
|
13
|
|
|
|
(1)
|
Represents cash payments made during the period by us and our insurers on asbestos litigation defense and claim resolution.
|
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
$164 million
and
$166 million
at
March 31, 2019
and
December 31, 2018
, 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 a receivable related to asbestos claims of
$107 million
and
$108 million
at
March 31, 2019
and
December 31, 2018
, respectively. We expect that approximately
65%
of asbestos claim related losses would be recoverable through insurance during the
ten
-year period covered by the estimated liability. Of these amounts,
$13 million
was included in Current Assets as part of Accounts Receivable at both
March 31, 2019
and December 31, 2018. 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.
We believe that, at December 31, 2018, we had approximately
$565 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. We had coverage under certain primary policies for indemnity and defense costs for asbestos products claims under remaining aggregate limits pursuant to a coverage-in-place agreement, as well as coverage for indemnity and defense costs for asbestos premises claims pursuant to coverage-in-place agreements.
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 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amiens Labor Claims
Approximately
850
former employees of the closed Amiens, France manufacturing facility have asserted wrongful termination or other claims totaling approximately
€120 million
(
$135 million
) against Goodyear Dunlop Tires France. We intend to vigorously defend ourselves against these claims, and any additional claims that may be asserted against us, and cannot estimate the amounts, if any, that we may ultimately pay in respect of such claims.
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 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.
While the Company applies consistent transfer pricing policies and practices globally, supports transfer prices through economic studies, seeks advance pricing agreements and joint audits to the extent possible and believes its 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Guarantees
We have off-balance sheet financial guarantees and other commitments totaling approximately
$73 million
at both
March 31, 2019
and
December 31, 2018
. We issue guarantees to financial institutions or other entities on behalf of certain of our affiliates, lessors or customers. We generally do not require collateral in connection with the issuance of these guarantees. In 2017, we issued a guarantee of approximately
PLN165 million
(
$43 million
) in connection with an indirect tax assessment in EMEA. We have concluded our performance under this guarantee is not probable and, therefore, have not recorded a liability for this guarantee. In 2015, as a result of the dissolution of the global alliance with SRI, we issued a guarantee of approximately
$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
March 31, 2019
, this guarantee amount has been reduced to
$29 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 2020
. 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.
NOTE 14. CAPITAL STOCK
Dividends
In the first
three
months of 2019, we paid cash dividends of
$37 million
on our common stock. This amount excludes dividends earned on stock based compensation plans. On
April 8, 2019
, the Board of Directors (or duly authorized committee thereof) declared cash dividends of
$0.16
per share of common stock, or approximately
$37 million
in the aggregate. The dividend will be paid on
June 3, 2019
, to stockholders of record as of the close of business on
May 1, 2019
. Future quarterly dividends are subject to Board approval.
Common Stock Repurchases
On
September 18, 2013
, the Board of Directors approved our common stock repurchase program. From time to time, the Board of Directors has approved increases in the amount authorized to be purchased under that program. On February 2, 2017, the Board of Directors approved a further increase in that authorization to an aggregate of
$2.1 billion
. This program expires on December 31, 2019, and is intended to be used, subject to our cash flow, to repurchase shares of common stock in open market transactions in order to offset new shares issued under equity compensation programs and to provide for additional shareholder returns. During the
first
quarter of
2019
, we did not repurchase any common stock. Since 2013, we repurchased
52,905,959
shares at an average price, including commissions, of
$28.99
per share, or
$1,534 million
in the aggregate.
In addition, 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 the first quarter of
2019
, we did not repurchase any shares from employees.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 15. RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents changes in AOCL, by component, for the
three
months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2018
|
$
|
(1,160
|
)
|
|
$
|
(2,923
|
)
|
|
$
|
7
|
|
|
$
|
(4,076
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
30
|
|
|
4
|
|
|
5
|
|
|
39
|
|
Amounts reclassified from accumulated other comprehensive loss, net of tax
|
—
|
|
|
26
|
|
|
(3
|
)
|
|
23
|
|
Balance at March 31, 2019
|
$
|
(1,130
|
)
|
|
$
|
(2,893
|
)
|
|
$
|
9
|
|
|
$
|
(4,014
|
)
|
|
|
|
|
|
|
|
|
(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, 2017
|
$
|
(915
|
)
|
|
$
|
(3,052
|
)
|
|
$
|
(9
|
)
|
|
$
|
(3,976
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
80
|
|
|
3
|
|
|
(4
|
)
|
|
79
|
|
Amounts reclassified from accumulated other comprehensive loss, net of tax
|
—
|
|
|
27
|
|
|
3
|
|
|
30
|
|
Balance at March 31, 2018
|
$
|
(835
|
)
|
|
$
|
(3,022
|
)
|
|
$
|
(10
|
)
|
|
$
|
(3,867
|
)
|
The following table presents reclassifications out of AOCL:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2019
|
|
2018
|
|
|
(In millions) (Income) Expense
|
Amount Reclassified
|
|
Affected Line Item in the Consolidated Statements of Operations
|
Component of AOCL
|
from AOCL
|
|
Amortization of prior service cost and unrecognized gains and losses
|
$
|
34
|
|
|
$
|
35
|
|
|
Other (Income) Expense
|
Tax effect
|
(8
|
)
|
|
(8
|
)
|
|
United States and Foreign Taxes
|
Net of tax
|
$
|
26
|
|
|
$
|
27
|
|
|
Goodyear Net Income
|
|
|
|
|
|
|
Deferred Derivative (Gains) Losses, before tax
|
$
|
(3
|
)
|
|
$
|
4
|
|
|
Cost of Goods Sold
|
Tax effect
|
—
|
|
|
(1
|
)
|
|
United States and Foreign Taxes
|
Net of tax
|
$
|
(3
|
)
|
|
$
|
3
|
|
|
Goodyear Net Income
|
Total reclassifications
|
$
|
23
|
|
|
$
|
30
|
|
|
Goodyear Net Income
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 16. CONSOLIDATING FINANCIAL INFORMATION
Certain of our subsidiaries have guaranteed our obligations under the
$282 million
outstanding principal amount of
8.75%
notes due
2020
, the
$1.0 billion
outstanding principal amount of
5.125%
senior notes due
2023
, the
$900 million
outstanding principal amount of
5%
senior notes due
2026
and the
$700 million
outstanding principal amount of
4.875%
senior notes due
2027
(collectively, the “notes”). The following presents the condensed consolidating financial information separately for:
|
|
(i)
|
The Goodyear Tire & Rubber Company (the “Parent Company”), the issuer of the guaranteed obligations;
|
|
|
(ii)
|
Guarantor Subsidiaries, on a combined basis, as specified in the indentures related to Goodyear’s obligations under the notes;
|
|
|
(iii)
|
Non-Guarantor Subsidiaries, on a combined basis;
|
|
|
(iv)
|
Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, (b) eliminate the investments in our subsidiaries, and (c) record consolidating entries; and
|
|
|
(v)
|
The Goodyear Tire & Rubber Company and Subsidiaries on a consolidated basis.
|
Each guarantor subsidiary is
100%
owned by the Parent Company at the date of each balance sheet presented.
The notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary.
The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use by the Parent Company and guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation. Changes in intercompany receivables and payables related to operations, such as intercompany sales or service charges, are included in cash flows from operating activities. Intercompany transactions reported as investing or financing activities include the sale of capital stock, loans and other capital transactions between members of the consolidated group.
Certain Non-Guarantor Subsidiaries of the Parent Company are limited in their ability to remit funds to it 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet
|
|
March 31, 2019
|
(In millions)
|
Parent Company
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Entries and Eliminations
|
|
Consolidated
|
Assets:
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
$
|
189
|
|
|
$
|
26
|
|
|
$
|
645
|
|
|
$
|
—
|
|
|
$
|
860
|
|
Accounts Receivable, net
|
721
|
|
|
123
|
|
|
1,602
|
|
|
—
|
|
|
2,446
|
|
Accounts Receivable From Affiliates
|
337
|
|
|
258
|
|
|
—
|
|
|
(595
|
)
|
|
—
|
|
Inventories
|
1,511
|
|
|
66
|
|
|
1,395
|
|
|
(32
|
)
|
|
2,940
|
|
Prepaid Expenses and Other Current Assets
|
74
|
|
|
2
|
|
|
164
|
|
|
6
|
|
|
246
|
|
Total Current Assets
|
2,832
|
|
|
475
|
|
|
3,806
|
|
|
(621
|
)
|
|
6,492
|
|
Goodwill
|
24
|
|
|
1
|
|
|
416
|
|
|
122
|
|
|
563
|
|
Intangible Assets
|
117
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
136
|
|
Deferred Income Taxes
|
1,452
|
|
|
27
|
|
|
382
|
|
|
3
|
|
|
1,864
|
|
Other Assets
|
515
|
|
|
50
|
|
|
595
|
|
|
—
|
|
|
1,160
|
|
Investments in Subsidiaries
|
3,776
|
|
|
436
|
|
|
—
|
|
|
(4,212
|
)
|
|
—
|
|
Operating Lease Right-of-Use Assets
|
568
|
|
|
14
|
|
|
280
|
|
|
—
|
|
|
862
|
|
Property, Plant and Equipment, net
|
2,459
|
|
|
429
|
|
|
4,333
|
|
|
(25
|
)
|
|
7,196
|
|
Total Assets
|
$
|
11,743
|
|
|
$
|
1,432
|
|
|
$
|
9,831
|
|
|
$
|
(4,733
|
)
|
|
$
|
18,273
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts Payable-Trade
|
$
|
909
|
|
|
$
|
118
|
|
|
$
|
1,710
|
|
|
$
|
—
|
|
|
$
|
2,737
|
|
Accounts Payable to Affiliates
|
—
|
|
|
—
|
|
|
595
|
|
|
(595
|
)
|
|
—
|
|
Compensation and Benefits
|
284
|
|
|
15
|
|
|
193
|
|
|
—
|
|
|
492
|
|
Other Current Liabilities
|
302
|
|
|
(6
|
)
|
|
398
|
|
|
—
|
|
|
694
|
|
Notes Payable and Overdrafts
|
55
|
|
|
—
|
|
|
440
|
|
|
—
|
|
|
495
|
|
Operating Lease Liabilities due Within One Year
|
110
|
|
|
4
|
|
|
89
|
|
|
—
|
|
|
203
|
|
Long Term Debt and Finance Leases due Within One Year
|
1
|
|
|
—
|
|
|
465
|
|
|
—
|
|
|
466
|
|
Total Current Liabilities
|
1,661
|
|
|
131
|
|
|
3,890
|
|
|
(595
|
)
|
|
5,087
|
|
Operating Lease Liabilities
|
466
|
|
|
10
|
|
|
191
|
|
|
—
|
|
|
667
|
|
Long Term Debt and Finance Leases
|
3,918
|
|
|
167
|
|
|
1,460
|
|
|
—
|
|
|
5,545
|
|
Compensation and Benefits
|
541
|
|
|
93
|
|
|
665
|
|
|
—
|
|
|
1,299
|
|
Deferred Income Taxes
|
—
|
|
|
—
|
|
|
94
|
|
|
—
|
|
|
94
|
|
Other Long Term Liabilities
|
349
|
|
|
8
|
|
|
193
|
|
|
—
|
|
|
550
|
|
Total Liabilities
|
6,935
|
|
|
409
|
|
|
6,493
|
|
|
(595
|
)
|
|
13,242
|
|
Commitments and Contingent Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity:
|
|
|
|
|
|
|
|
|
|
Goodyear Shareholders’ Equity:
|
|
|
|
|
|
|
|
|
|
Common Stock
|
232
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
232
|
|
Other Equity
|
4,576
|
|
|
1,023
|
|
|
3,115
|
|
|
(4,138
|
)
|
|
4,576
|
|
Goodyear Shareholders’ Equity
|
4,808
|
|
|
1,023
|
|
|
3,115
|
|
|
(4,138
|
)
|
|
4,808
|
|
Minority Shareholders’ Equity — Nonredeemable
|
—
|
|
|
—
|
|
|
223
|
|
|
—
|
|
|
223
|
|
Total Shareholders’ Equity
|
4,808
|
|
|
1,023
|
|
|
3,338
|
|
|
(4,138
|
)
|
|
5,031
|
|
Total Liabilities and Shareholders’ Equity
|
$
|
11,743
|
|
|
$
|
1,432
|
|
|
$
|
9,831
|
|
|
$
|
(4,733
|
)
|
|
$
|
18,273
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, net
|
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
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statements of Operations
|
|
Three Months Ended March 31, 2019
|
(In millions)
|
Parent Company
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Entries and Eliminations
|
|
Consolidated
|
Net Sales
|
$
|
1,673
|
|
|
$
|
327
|
|
|
$
|
2,299
|
|
|
$
|
(701
|
)
|
|
$
|
3,598
|
|
Cost of Goods Sold
|
1,371
|
|
|
310
|
|
|
1,911
|
|
|
(713
|
)
|
|
2,879
|
|
Selling, Administrative and General Expense
|
253
|
|
|
8
|
|
|
286
|
|
|
—
|
|
|
547
|
|
Rationalizations
|
6
|
|
|
—
|
|
|
97
|
|
|
—
|
|
|
103
|
|
Interest Expense
|
55
|
|
|
6
|
|
|
33
|
|
|
(9
|
)
|
|
85
|
|
Other (Income) Expense
|
74
|
|
|
4
|
|
|
(81
|
)
|
|
25
|
|
|
22
|
|
Income (Loss) before Income Taxes and Equity in Earnings of Subsidiaries
|
(86
|
)
|
|
(1
|
)
|
|
53
|
|
|
(4
|
)
|
|
(38
|
)
|
United States and Foreign Taxes
|
(26
|
)
|
|
—
|
|
|
31
|
|
|
1
|
|
|
6
|
|
Equity in Earnings of Subsidiaries
|
(1
|
)
|
|
(15
|
)
|
|
—
|
|
|
16
|
|
|
—
|
|
Net Income (Loss)
|
(61
|
)
|
|
(16
|
)
|
|
22
|
|
|
11
|
|
|
(44
|
)
|
Less: Minority Shareholders’ Net Income
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
Goodyear Net Income (Loss)
|
$
|
(61
|
)
|
|
$
|
(16
|
)
|
|
$
|
5
|
|
|
$
|
11
|
|
|
$
|
(61
|
)
|
Comprehensive Income (Loss)
|
$
|
1
|
|
|
$
|
(14
|
)
|
|
$
|
57
|
|
|
$
|
(26
|
)
|
|
$
|
18
|
|
Less: Comprehensive Income (Loss) Attributable to Minority Shareholders
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
Goodyear Comprehensive Income (Loss)
|
$
|
1
|
|
|
$
|
(14
|
)
|
|
$
|
40
|
|
|
$
|
(26
|
)
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating Statements of Operations
|
|
Three Months Ended March 31, 2018
|
(In millions)
|
Parent Company
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Entries and Eliminations
|
|
Consolidated
|
Net Sales
|
$
|
1,684
|
|
|
$
|
309
|
|
|
$
|
2,457
|
|
|
$
|
(620
|
)
|
|
$
|
3,830
|
|
Cost of Goods Sold
|
1,365
|
|
|
273
|
|
|
1,978
|
|
|
(640
|
)
|
|
2,976
|
|
Selling, Administrative and General Expense
|
259
|
|
|
10
|
|
|
322
|
|
|
—
|
|
|
591
|
|
Rationalizations
|
6
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
37
|
|
Interest Expense
|
54
|
|
|
5
|
|
|
23
|
|
|
(6
|
)
|
|
76
|
|
Other (Income) Expense
|
10
|
|
|
7
|
|
|
—
|
|
|
20
|
|
|
37
|
|
Income (Loss) before Income Taxes and Equity in Earnings of Subsidiaries
|
(10
|
)
|
|
14
|
|
|
103
|
|
|
6
|
|
|
113
|
|
United States and Foreign Taxes
|
(3
|
)
|
|
3
|
|
|
30
|
|
|
3
|
|
|
33
|
|
Equity in Earnings of Subsidiaries
|
82
|
|
|
22
|
|
|
—
|
|
|
(104
|
)
|
|
—
|
|
Net Income (Loss)
|
75
|
|
|
33
|
|
|
73
|
|
|
(101
|
)
|
|
80
|
|
Less: Minority Shareholders’ Net Income
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Goodyear Net Income (Loss)
|
$
|
75
|
|
|
$
|
33
|
|
|
$
|
68
|
|
|
$
|
(101
|
)
|
|
$
|
75
|
|
Comprehensive Income (Loss)
|
$
|
184
|
|
|
$
|
55
|
|
|
$
|
155
|
|
|
$
|
(203
|
)
|
|
$
|
191
|
|
Less: Comprehensive Income (Loss) Attributable to Minority Shareholders
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Goodyear Comprehensive Income (Loss)
|
$
|
184
|
|
|
$
|
55
|
|
|
$
|
148
|
|
|
$
|
(203
|
)
|
|
$
|
184
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
Three Months Ended March 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
|
$
|
(75
|
)
|
|
$
|
(26
|
)
|
|
$
|
(253
|
)
|
|
$
|
(10
|
)
|
|
$
|
(364
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
(90
|
)
|
|
(11
|
)
|
|
(120
|
)
|
|
—
|
|
|
(221
|
)
|
Short Term Securities Acquired
|
—
|
|
|
—
|
|
|
(31
|
)
|
|
—
|
|
|
(31
|
)
|
Short Term Securities Redeemed
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
Capital Contributions and Loans Incurred
|
(196
|
)
|
|
—
|
|
|
—
|
|
|
196
|
|
|
—
|
|
Capital Redemptions and Loans Paid
|
104
|
|
|
—
|
|
|
—
|
|
|
(104
|
)
|
|
—
|
|
Notes Receivable
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
Other Transactions
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
—
|
|
|
(16
|
)
|
Total Cash Flows from Investing Activities
|
(189
|
)
|
|
(11
|
)
|
|
(136
|
)
|
|
92
|
|
|
(244
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Short Term Debt and Overdrafts Incurred
|
299
|
|
|
—
|
|
|
272
|
|
|
—
|
|
|
571
|
|
Short Term Debt and Overdrafts Paid
|
(269
|
)
|
|
—
|
|
|
(216
|
)
|
|
—
|
|
|
(485
|
)
|
Long Term Debt Incurred
|
923
|
|
|
—
|
|
|
927
|
|
|
—
|
|
|
1,850
|
|
Long Term Debt Paid
|
(590
|
)
|
|
—
|
|
|
(633
|
)
|
|
—
|
|
|
(1,223
|
)
|
Common Stock Dividends Paid
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
Capital Contributions and Loans Incurred
|
—
|
|
|
34
|
|
|
162
|
|
|
(196
|
)
|
|
—
|
|
Capital Redemptions and Loans Paid
|
—
|
|
|
—
|
|
|
(104
|
)
|
|
104
|
|
|
—
|
|
Intercompany Dividends Paid
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
10
|
|
|
—
|
|
Debt Related Costs and Other Transactions
|
(3
|
)
|
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
(31
|
)
|
Total Cash Flows from Financing Activities
|
323
|
|
|
34
|
|
|
370
|
|
|
(82
|
)
|
|
645
|
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
Net Change in Cash, Cash Equivalents and Restricted Cash
|
59
|
|
|
(4
|
)
|
|
(18
|
)
|
|
—
|
|
|
37
|
|
Cash, Cash Equivalents and Restricted Cash at Beginning of the Period
|
168
|
|
|
30
|
|
|
675
|
|
|
—
|
|
|
873
|
|
Cash, Cash Equivalents and Restricted Cash at End of the Period
|
$
|
227
|
|
|
$
|
26
|
|
|
$
|
657
|
|
|
$
|
—
|
|
|
$
|
910
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
Three Months Ended March 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
|
$
|
266
|
|
|
$
|
—
|
|
|
$
|
(656
|
)
|
|
$
|
1
|
|
|
$
|
(389
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
(101
|
)
|
|
(28
|
)
|
|
(118
|
)
|
|
(1
|
)
|
|
(248
|
)
|
Short Term Securities Acquired
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
Short Term Securities Redeemed
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Capital Contributions and Loans Incurred
|
(91
|
)
|
|
—
|
|
|
(91
|
)
|
|
182
|
|
|
—
|
|
Capital Redemptions and Loans Paid
|
38
|
|
|
—
|
|
|
360
|
|
|
(398
|
)
|
|
—
|
|
Total Cash Flows from Investing Activities
|
(154
|
)
|
|
(28
|
)
|
|
151
|
|
|
(217
|
)
|
|
(248
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Short Term Debt and Overdrafts Incurred
|
325
|
|
|
—
|
|
|
259
|
|
|
—
|
|
|
584
|
|
Short Term Debt and Overdrafts Paid
|
(325
|
)
|
|
—
|
|
|
(193
|
)
|
|
—
|
|
|
(518
|
)
|
Long Term Debt Incurred
|
705
|
|
|
15
|
|
|
932
|
|
|
—
|
|
|
1,652
|
|
Long Term Debt Paid
|
(541
|
)
|
|
—
|
|
|
(685
|
)
|
|
—
|
|
|
(1,226
|
)
|
Common Stock Issued
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Common Stock Repurchased
|
(25
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
Common Stock Dividends Paid
|
(34
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
Capital Contributions and Loans Incurred
|
91
|
|
|
8
|
|
|
83
|
|
|
(182
|
)
|
|
—
|
|
Capital Redemptions and Loans Paid
|
(360
|
)
|
|
—
|
|
|
(38
|
)
|
|
398
|
|
|
—
|
|
Transactions with Minority Interests in Subsidiaries
|
—
|
|
|
—
|
|
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
Debt Related Costs and Other Transactions
|
7
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
(13
|
)
|
Total Cash Flows from Financing Activities
|
(156
|
)
|
|
23
|
|
|
316
|
|
|
216
|
|
|
399
|
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
|
—
|
|
|
(1
|
)
|
|
17
|
|
|
—
|
|
|
16
|
|
Net Change in Cash, Cash Equivalents and Restricted Cash
|
(44
|
)
|
|
(6
|
)
|
|
(172
|
)
|
|
—
|
|
|
(222
|
)
|
Cash, Cash Equivalents and Restricted Cash at Beginning of the Period
|
201
|
|
|
32
|
|
|
877
|
|
|
—
|
|
|
1,110
|
|
Cash, Cash Equivalents and Restricted Cash at End of the Period
|
$
|
157
|
|
|
$
|
26
|
|
|
$
|
705
|
|
|
$
|
—
|
|
|
$
|
888
|
|