EX-99 11 gt-q42015xex_991.htm EX-99.1 Exhibit

EXHIBIT 99.1
THE GOODYEAR TIRE & RUBBER COMPANY
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The Goodyear Tire & Rubber Company's (the "Company") wholly-owned subsidiary, C.A. Goodyear de Venezuela, manufactures, markets and distributes consumer and commercial tires throughout Venezuela. Evolving conditions in Venezuela, including currency exchange control regulations and continued reductions in access to U.S. dollars through official currency exchange mechanisms, have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar fuerte and the U.S. dollar, and have restricted the ability of the Venezuelan subsidiary to pay dividends and royalties and to settle liabilities. These currency exchange regulations, combined with other government regulations such as price and profit margin controls and strict labor laws, have increasingly limited the Company's ability to make and execute operational decisions at the Venezuelan subsidiary. This lack of currency exchangeability, combined with these other operating restrictions, have significantly limited the Venezuelan subsidiary's ability to maintain normal production and control over its operations. The Company expects these conditions to continue for the foreseeable future.
As a result of these conditions, the Company concluded that effective as of December 31, 2015, the Company does not meet the accounting criteria for control over the Venezuelan subsidiary and began reporting the results of the Venezuelan subsidiary using the cost method of accounting. This change resulted in a pre-tax charge of $646 million in the fourth quarter of 2015. The pre-tax charge includes the derecognition of the carrying amounts of the Venezuelan subsidiary's assets and liabilities, including $320 million of Cash and Cash Equivalents, that are no longer reported in the Consolidated Balance Sheet as of December 31, 2015. The pre-tax charge also includes $248 million of foreign currency translation losses and pension losses previously included in Accumulated Other Comprehensive Loss in the Company’s Consolidated Balance Sheet. The Company has determined the fair value of its investment in, and receivables from, the Venezuelan subsidiary to be insignificant based on the expectations of dividend payments and settlements of such receivables in future periods.
The following unaudited pro forma Consolidated Statement of Operations for the year ended December 31, 2015 is based on the Consolidated Statement of Operations of the Company and its consolidated subsidiaries, and is adjusted to reflect the deconsolidation of the Venezuelan subsidiary. The unaudited pro forma Consolidated Statement of Operations gives effect to the deconsolidation of the Venezuelan subsidiary as if it had occurred on January 1, 2015. The deconsolidation was fully reflected in the Consolidated Balance Sheet as of December 31, 2015 as presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and therefore a pro forma balance sheet is not required.
The unaudited pro forma Consolidated Statement of Operations does not necessarily reflect what the Company's results of operations would have been had the deconsolidation occurred on January 1, 2015. It also may not be useful in predicting the future results of the Company. The actual results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The unaudited pro forma Consolidated Statement of Operations should be read in conjunction with the historical consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.



 
The Goodyear Tire & Rubber Company
 
 
Unaudited Pro Forma Consolidated Statement of Operations
 
 
Year Ended December 31, 2015
 
(In millions, except per share amounts)
Historical Goodyear
(a) 
Historical Venezuelan Subsidiary
(b) 
Historical Goodyear less Venezuelan Subsidiary
 
Pro Forma Adjustments
 
Goodyear Pro Forma
(c) 
Net Sales
$
16,443

 
$
531

 
$
15,912

 
$
21

(d) 
$
15,933

 
Cost of Goods Sold
12,164

 
369

 
11,795

 
26

(e) 
11,821

 
Selling, Administrative and General Expense
2,614

 
37

 
2,577

 
—

 
2,577

 
Rationalizations
114

 
—

 
114

 
—

 
114

 
Interest Expense
412

 
—

 
412

 
—

 
412

 
Loss on Deconsolidation of Venezuelan Subsidiary
646

 
—

 
646

 
(646
)
(f) 
—

 
Other (Income) Expense
(115
)
 
24

 
(139
)
 
(8
)
(g) 
(147
)
 
Income before Income Taxes
608

 
101

 
507

 
649

 
1,156

 
United States and Foreign Tax Expense
232

 
—

 
232

 
71

(h) 
303

 
Net Income
376

 
101

 
275

 
578

 
853

 
Less: Minority Shareholders’ Net Income
69

 
—

 
69

 
—

 
69

 
Goodyear Net Income
$
307

 
$
101

 
$
206

 
$
578

 
$
784

 
Goodyear Net Income available to Common Shareholders — Per Share of Common Stock
 
 
 
 
 
 
 
 
 
 
Basic
$
1.14

 
 
 
 
 
 
 
$
2.91

 
Weighted Average Shares Outstanding
269

 
 
 
 
 
 
 
269

 
Diluted
$
1.12

 
 
 
 
 
 
 
$
2.87

 
Weighted Average Shares Outstanding
273

 
 
 
 
 
 
 
273

 
Notes to the unaudited pro forma Consolidated Statement of Operations:
(a)
Represents the Consolidated Statement of Operations of the Company and its consolidated subsidiaries for the year ended December 31, 2015, as filed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
(b)
Represents the results of operations of the Venezuelan subsidiary that did not arise from intercompany transactions with the Company and its consolidated subsidiaries, for the fiscal year ended December 31, 2015. Intercompany transactions between the Company and its consolidated subsidiaries, including its Venezuelan subsidiary, were eliminated from the Consolidated Statement of Operations of the Company referenced in footnote (a) above.
(c)
Represents the pro forma Consolidated Statement of Operations of the Company and its consolidated subsidiaries after giving effect to the deconsolidation of the Venezuelan subsidiary as if it had occurred on January 1, 2015, and excludes the effect of the nonrecurring charge recorded for the loss on deconsolidation of the Venezuelan subsidiary.
(d)
Represents the cash settled in 2015 with the Venezuelan subsidiary for the sale of raw materials from the Company's consolidated subsidiaries that was eliminated in consolidation in the historical financial statements and is recognized in income under the cost method in the Goodyear pro forma results.
(e)
Represents intercompany sales to the Venezuelan subsidiary of raw materials that are expenses in the Goodyear pro forma results.
(f)
Adjustment to remove the effects of the nonrecurring charge for the deconsolidation of the Venezuelan subsidiary.
(g)
Adjustment to remove the effects of foreign currency remeasurement losses on transactions denominated in bolivar fuerte between the Company and the Venezuelan subsidiary.
(h)
Represents the income tax effects of the pre-tax pro forma adjustments.