# EDGAR Filing Document

**Accession Number:** 0000042582
**File Stem:** 0001193125-23-068595
**Filing Date:** 2023-3
**Character Count:** 196455
**Document Hash:** 38921862683ab89a698ad8818cf5fb7e
**Contains OCR:** False
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## Filing Content

## Filing Summary
**0001193125-23-068595.hdr.sgml**: 20230313

**ACCESSION NUMBER**: 0001193125-23-068595

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230313

**DATE AS OF CHANGE**: 20230313

**EFFECTIVENESS DATE**: 20230313

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** GOODYEAR TIRE & RUBBER CO /OH/
- **CENTRAL INDEX KEY:** 0000042582
- **STANDARD INDUSTRIAL CLASSIFICATION:** TIRES AND INNER TUBES [3011]
- **IRS NUMBER:** 340253240
- **STATE OF INCORPORATION:** OH
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-01927
- **FILM NUMBER:** 23726002

**BUSINESS ADDRESS:**
- **STREET 1:** 1144 E MARKET ST
- **CITY:** AKRON
- **STATE:** OH
- **ZIP:** 44316
- **BUSINESS PHONE:** 2167962121

**MAIL ADDRESS:**
- **STREET 1:** 1144 E MARKET ST
- **CITY:** AKRON
- **STATE:** OH
- **ZIP:** 44316

### Attached PDF Documents

**Attachment 1:** `d434309dars.pdf`

![img-0.jpeg](img-0.jpeg)

# 2022 ANNUAL REPORT

THE GOODYEAR TIRE & RUBBER COMPANY

**GOOD**$^{®}$^{}[] **YEAR**

Goodyear is one of the world's leading tire companies, with one of the most recognizable brand names. It develops, manufactures, markets and distributes tires for most applications and manufactures and markets rubber-related chemicals for various uses. The company also has established itself as a leader in providing services, tools, analytics and products for evolving modes of transportation, including electric vehicles, autonomous vehicles and fleets of shared and connected consumer vehicles. Goodyear was the first major tire manufacturer to offer direct-to-consumer tire sales online and offers a proprietary service and maintenance platform for fleets of shared passenger vehicles. Through its worldwide network of aligned dealers and wholesale distributors and its own retail outlets and commercial truck centers, Goodyear offers its products for sale to consumer and commercial customers, along with repair and other services. It is one of the world's largest operators of commercial truck service and tire retreading centers and offers a leading service and maintenance platform for commercial fleets. Goodyear is annually recognized as a top place to work and is guided by its corporate responsibility framework, Goodyear Better Future, which articulates the company's commitment to sustainability. Goodyear manufactures its products in 57 facilities in 23 countries and has operations in most regions of the world. Its two Innovation Centers in Akron, Ohio, and Colmar-Berg, Luxembourg, strive to develop state-of-the-art products and services that set the technology and performance standard for the industry.

## **THE GOODYEAR TIRE & RUBBER COMPANY**

200 Innovation Way  
Akron, Ohio 44316-0001  
www.goodyear.com

## **ON THE COVER**

In 2022, the Goodyear Blimp toured Europe for the third consecutive year, flying over five major racing events including the 24 Hours of Le Mans and soaring above major cities, giving fans a chance to spot the Blimp in the sky.

Pictured on the cover is the Goodyear Blimp flying over the mountains of Slovenia on its way to the 6 Hours of Monza race.

GOODYEAR

# FINANCIAL OVERVIEW

| (in millions, except per share and associates) | YEAR ENDED DEC. 31 2022 | YEAR ENDED DEC. 31 2021 |
| --- | --- | --- |
| Net Sales | $20,805 | $17,478 |
| Gross Profit | $3,852 | $3,786 |
| Goodyear Net Income | $202 | $764 |
| - Per Diluted Share | $0.71 | $2.89 |
| Weighted Average Shares Outstanding - Basic | 284 | 261 |
| - Diluted | 286 | 264 |
| Segment Operating Income | $1,276 | $1,288 |
| Segment Operating Margin | 6.1% | 7.4% |
| Gross Margin | 18.5% | 21.7% |
| Return on Sales | 1.0% | 4.4% |
| Capital Expenditures | $1,061 | $981 |
| Research and Development Expenditures | $501 | $473 |
| Tire Units Sold | 184.5 | 169.3 |
| Total Assets | $22,431 | $21,402 |
| Total Debt* | $7,890 | $7,397 |
| Goodyear Shareholders' Equity | $5,300 | $4,999 |
| Total Shareholders' Equity | $5,466 | $5,184 |
| Debt to Debt and Equity | 59.1% | 58.8% |
| Number of Associates | 74,000 | 72,000 |
| Price Range of Common Stock: - High | $24.17 | $24.89 |
| - Low | $9.66 | $10.02 |

* Total debt includes Notes payable and overdrafts, Long term debt and finance leases due within one year, and Long term debt and finance leases.

## CONTENTS

| To Our Shareholders | 2 |
| --- | --- |
| Management's Discussion and Analysis of Financial Condition and Results of Operations | 6 |
| Forward-Looking Information | 31 |
| Quantitative and Qualitative Disclosures about Market Risk | 33 |
| Consolidated Financial Statements | 34 |
| Notes to Consolidated Financial Statements | 41 |
| Management's Report on Internal Control Over Financial Reporting | 88 |
| Report of Independent Registered Public Accounting Firm | 89 |
| General Information Regarding Our Segments | 91 |
| Performance Graph | 92 |
| Directors and Officers | 94 |
| Facilities | 95 |
| Shareholder Information | 96 |

This Annual Report contains a number of forward-looking statements. For more information, please see page 31.

1

GOODYEAR

# TO OUR SHAREHOLDERS

Over the course of 2022, we continued to face challenges driven by historic global events, including the conflict in Ukraine and extraordinary levels of inflation in many of our key markets around the world. In 2023, we will celebrate 125 years as a company and a leader in our industry. And despite the tumultuous macroeconomic environment, it is with this milestone that we find purpose and pride as we look forward with conviction to the future.

During 2022, we grew share and delivered stable earnings on robust revenue growth. Net sales increased 19% to $20.8 billion, driven by strong revenue-per-tire growth from actions taken to combat inflation. Results include replacement volume growth of 7% compared to an industry that declined 2%, reflecting the benefit of a full year of Cooper Tire's operations. We grew original equipment volumes 15% compared to an industry that grew 5%, reflecting continued industry recovery and new fitment wins. Segment operating income was $1.3 billion, in line with prior year results. The benefits of price/mix and volume growth, including the effect of Cooper Tire earnings, offset substantial increases in raw material and other input costs for stable earnings compared to 2021.

While we executed well in 2022, we also continued to deliver on our strategy in ways that prepare us for the long term. I'm pleased to share below some of the many ways we moved our business forward.

## PRODUCT LEADERSHIP

Thanks to our expansive product portfolio and service offerings, made stronger with the Cooper Tire combination, we continued to anticipate and respond to the mobility and sustainability needs of consumers and fleets.

In the original equipment market, we won 60% of the fitments we sought and increased our wins on electric vehicle fitments versus 2021. This fact demonstrates the strength of our ties with automakers to solve their most complex technical problems, making us a tire supplier of choice. Our deep and evolving experience around tire and

![img-1.jpeg](img-1.jpeg)

Goodyear Chairman, Chief Executive Officer & President

vehicle performance will increase the value we bring to original equipment manufacturers as we shape the future of mobility.

The fact that we have one of the best product lineups in Goodyear's history is validated not only by our original equipment win rate, but also by the recognition we receive for our products and services in the replacement market.

In the Americas, we launched three new tires in the Wrangler lineup, including the Steadfast HT, which offers strong wet braking capability. We also continued to add value for our fleets by expanding our commercial truck product line, including debuting the Urban Max BSA EV, which is specifically fitted to electric buses. We also continued to grow our already robust aligned distribution network, including growth in our company-owned outlets. Reflecting our efforts to make Goodyear easy to buy, own and recommend, our Goodyear Auto Service stores were recently recognized by Newsweek for their leading customer service.

2

# GOODYEAR

In Europe, our replacement product portfolio was recognized by both consumers and third parties. Auto Bild named Goodyear the “Summer Tire Manufacturer of the Year.” The Goodyear Eagle F1 Asymmetric 6 won several summer tire tests in the region with its dry performance, wet braking, wet handling and electric vehicle suitability. Among our product launches for commercial customers in Europe was the GP-3E, a tire responding to the needs of wheel loaders, articulated dump trucks and other vehicles crucial to infrastructure development. Our European portfolio also received recognition for sustainability, with the 4Seasons Gen 3 winning “Green Tire 2022” from Auto Bild.

Our product portfolio was recognized by customers and media in Asia Pacific, where we strengthened our aligned distribution to make the tire buying process easier. ElectricDrive won the award for “Best Electric Vehicle Tire Performance” with its wet braking and electric vehicle suitability by Procar. Motor Trend named Assurance ComfortTred as “Comfort Tire of the Year.” To enable evolving mobility needs, our commercial business began providing proactive mobility solutions that allow customers to realize seamless, safe, efficient and high-performance movement.

## SUSTAINABILITY

During 2022, we made notable progress on several of our bold sustainability goals, including our long-term climate ambition of net-zero greenhouse gas emissions by 2050. We developed our decarbonization roadmap and integrated our near- and long-term climate ambitions into key business processes throughout the company, including an interim goal of reducing Scope 1 and 2 emissions by 46% and certain Scope 3 emissions by 28% by 2030 compared to 2019. Toward this end, our operations in Europe achieved 100% renewable electricity by the end of 2022, and we increased the utilization of renewable electricity to 34% across our footprint - up from 3% in 2020.

We continued to develop sustainable-material options that deliver product performance while meeting our high standards of quality and safety. We recently unveiled a 90% sustainable-material demonstration tire approved for road use, leveraging 17 sustainable ingredients across 12 different tire components. The tire delivers improved rolling resistance, which in turn means the potential for better fuel savings and carbon footprint reduction. We continue to make progress on our path to introduce a 100% sustainable-material tire to the market by 2030.

![img-2.jpeg](img-2.jpeg)

We also introduced and increased the size availability of the first electric vehicle replacement tire in North America, the ElectricDrive GT, and introduced the first transit and waste-haul tire replacing petroleum-based oil with soybean oil, as we progress toward our 2040 goal to fully replace petroleum-derived oils in our products. Finally, we initiated a multi-year, multimillion dollar program supported by the U.S. Department of Defense to develop a domestic source of natural rubber from a specific species of dandelion.

3

**GOODYEAR**

## ADVANCING MOBILITY

In 2022, Goodyear continued its leadership in connected products and services. AndGo by Goodyear, our vehicle servicing software that connects service providers with fleets to increase efficiency, continues to expand its capabilities with more than 30 new features in 2022. With key partners like Toyota and a recent partnership with a world leader in last-mile delivery, AndGo is well on its way to become a top player in the mobility space.

We also announced an industry-first breakthrough in tire intelligence through Goodyear SightLine, our global tire intelligence platform. As part of our ongoing partnership with Gatik, a leader in autonomous middle-mile logistics, Goodyear demonstrated that intelligent tires powered by Goodyear SightLine technology can accurately estimate tire-road friction and provide that information in real time to a vehicle's automated driving system.

![img-3.jpeg](img-3.jpeg)

This new level of data sophistication can enhance both vehicle safety and performance thanks to input from the only part of a vehicle that touches the ground - the tire. This is part of our ongoing focus on evolving the tire to deliver beyond its core, traditional purpose to also become a nexus of valuable data and information. Goodyear SightLine is soon expected to deploy on select original equipment vehicles, bringing immediate value to the mobility market.

![img-4.jpeg](img-4.jpeg)

Through our venture fund, Goodyear Ventures, Goodyear is committed to investing in the entrepreneurs who are solving the most pressing challenges in mobility. In 2022, the total number of startups in our portfolio grew by 50% versus the prior year, including investments in Recurrent, Helium and Helm.

Beyond these, we have unlocked strategic learnings in autonomy and mobile car care through our investments in startups and have a robust number of mobility service investments helping us understand new revenue opportunities for Goodyear. Fleets remain key to our growth in commercial and consumer segments, and our learnings alongside startups like Envoy and Revel allow us to evaluate the right products and solutions for the future of mobility.

## INSPIRING CULTURE

Goodyear strives to have an inspiring culture, where every associate can develop to their full potential. In 2022, we were honored to receive external recognition both as an employer and as an innovator. For the second time, Forbes named Goodyear one of the 'World's Top Female-Friendly Companies.' Goodyear also ranked as a Forbes '2022 World's Best Employer' and one of FORTUNE's 'World's Most Admired Companies.'

4

GOOD YEAR

![img-5.jpeg](img-5.jpeg)

U.S. consumers also rated Goodyear one of the "Top 25" most innovative companies and one of the "Top 25" most socially innovative companies, according to the 2022 American Innovation Index (Aii) and Social Innovation Index (Sii). Recognizing the increasing importance of sustainability to the workforce in general, these accolades also help contribute to Goodyear's goal of being the employer of choice in the tire industry.

## OUR FUTURE

Our people and our culture are the fabric of our company, and I'm tremendously proud of how our team has acted with agility to serve our customers and communities over the last several years. As I think about the path ahead, and despite the continuing macroeconomic uncertainty that surrounds us today, I am confident in Goodyear's future. Building on our strong history of leadership, we will continue to drive innovation in our industry and lay the foundation for the next 125 years.

On behalf of our dedicated Goodyear associates around the world who exemplify our high standards of quality and performance, thank you for your continued support and trust.

Respectfully submitted,

A handwritten signature in black ink, appearing to read 'Richard J. Kramer'.

**RICHARD J. KRAMER**
Chairman, Chief Executive Officer & President

5

# MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

*All per share amounts are diluted and refer to Goodyear net income.*

## OVERVIEW

The Goodyear Tire & Rubber Company is one of the world's leading manufacturers of tires, with one of the most recognizable brand names in the world and operations in most regions of the world. We have a broad global footprint with 57 manufacturing facilities in 23 countries, including the United States. We operate our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa ('EMEA'); and Asia Pacific.

This management's discussion and analysis provides comparisons of material changes in the consolidated financial statements for the years ended December 31, 2022 and 2021. For a comparison of the years ended December 31, 2021 and 2020, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2021.

In January 2023, we approved a rationalization plan and workforce reorganization that will result in an approximately 5% reduction in salaried staff globally, or about 500 positions, in response to a challenging industry environment and cost pressure driven by inflation. In certain foreign countries, relevant portions of the rationalization plan remain subject to consultation with employee representative bodies. We expect to substantially complete the rationalization plan during the first and second quarters of 2023 and estimate total pre-tax charges associated with this action to be approximately $55 million, of which approximately $39 million are expected to be cash charges primarily for associate-related and other exit costs, with the remainder representing non-cash charges primarily for accelerated depreciation and other asset-related charges. We recorded $37 million of pre-tax charges in the fourth quarter of 2022 and expect to record a majority of the remaining charges in the first quarter of 2023. A majority of the cash outflows associated with this plan relate to cash severance payments that are expected to be paid during the first half of 2023. The rationalization and reorganization will result in quarterly run-rate savings of approximately $15 million, beginning in the second quarter of 2023. Savings in the first quarter of 2023 are expected to be $5 million.

In October 2022, we approved a plan to close the Melksham, United Kingdom tire manufacturing facility ('Melksham'), which was acquired in conjunction with the merger between the Company and Cooper Tire. The plan is intended to address long-standing competitiveness issues at Melksham. The plan also (i) consolidates our premium motorcycle tire production in Europe into a single center of excellence based in our Montlucon, France tire manufacturing facility, (ii) discontinues Cooper Tire's European motorsport program and (iii) transfers light truck tire production from the Montlucon facility to other tire manufacturing facilities in Europe. The plan includes approximately 320 job reductions at Melksham. The plan remains subject to consultation with relevant employee representative bodies. We expect to substantially complete this rationalization plan by the end of 2023 and estimate total pre-tax charges associated with this plan to be between $80 million and $90 million, of which $60 million to $70 million are expected to be cash charges primarily for associate-related and other exit costs, with the remainder representing non-cash charges primarily for accelerated depreciation and other asset-related charges. We recorded $34 million of pre-tax charges in 2022 related to this plan. The majority of the remaining charges and cash outflows associated with this plan are expected to occur in 2023.

During the third quarter of 2022, members of the United Steelworkers ratified a new four-year master collective bargaining agreement with us. The new contract, which expires in July 2026, addresses compensation costs while providing operational improvements that increase manufacturing flexibility and productivity for our U.S. plants covered by the agreement.

## Results of Operations

On June 7, 2021, we completed the acquisition of Cooper Tire. Since the Closing Date, Cooper Tire's operating results have been incorporated into our consolidated results of operations. For periods that are not fully comparable, we discuss the impact of Cooper Tire's operating results separately up to the point within those periods when consolidated results became comparable.

During 2022, our operating results reflected a difficult macroeconomic environment, including the strengthening of the U.S. dollar against most foreign currencies. Our results also reflect higher input costs mostly offset by price and product mix and the benefits of our acquisition of Cooper Tire. Challenging market conditions persist, driven by the direct and indirect macroeconomic effects of the ongoing COVID-19 pandemic, the conflict in Ukraine and other global events, that continue to negatively influence our results.

Our global businesses are experiencing varying stages of recovery from the pandemic. National and local efforts during the year in certain countries, such as China, to contain the spread of COVID-19 and its related variants, such as renewed stay-at-home orders and other restrictions on mobility, continued to negatively impact economic conditions and our operations. For instance, some of our facilities, including our facilities in Pulandian and Kunshan, China, had to temporarily shut down or limit production at various times throughout the year because of these restrictions.

6

Increased demand for consumer products, supply chain disruptions and other factors have led to continuing inflationary cost pressures on our results, including higher costs for certain raw materials, higher transportation costs and higher energy costs. Energy cost increases have been more pronounced in Europe driven by the indirect impacts of the conflict in Ukraine. Furthermore, shortages of certain automobile parts, such as semiconductors, continue to affect OE manufacturers' ability to produce consumer and commercial vehicles consistently, although the industry, and our volume, experienced some recovery during the second half of 2022.

We also continue to experience increased labor-related costs and manufacturing inefficiencies associated with the ongoing tight labor supply, particularly in the U.S. To address this issue, we have accelerated hiring as necessary, increased training capacity and started to adjust future investment plans to consider not just the cost, but also the availability of qualified workers.

While most of our global tire manufacturing facilities operated at or near full capacity during 2022, in order to address softening industry demand and prevent the buildup of excess inventory, we reduced production in the fourth quarter of 2022 at most of our tire manufacturing facilities, resulting in a reduction of approximately 3.5 million units compared to production in the fourth quarter of 2021, primarily in Americas and EMEA. Decisions to change production levels in the future will be based on an evaluation of market demand signals and inventory and supply levels, as well as the availability of sufficient qualified labor and our ability to continue to safeguard the health of our associates.

While it remains challenging to operate our business in Ukraine, we were able to resume shipments of tires into the country on a limited basis during the second quarter of 2022 and to expand our shipments during the second half of the year. In addition, we previously suspended all shipments of tires to Russia during the first quarter of 2022 and approved the discontinuation of our Russian operations in January 2023. Goodyear's sales in Ukraine and Russia represented 0.3% and 1.2%, respectively, of our total 2021 net sales of $17.5 billion. We do not have manufacturing operations in either Ukraine or Russia, and we continue to take numerous actions to ensure continuity of supply for raw materials used in manufacturing, some of which are sourced from the impacted area. These actions include increasing our safety stocks when possible, identifying substitutes where appropriate and building alternate supplier relationships where necessary. Nonetheless, the ongoing conflict continues to aggravate the already challenging macroeconomic trends described above, including global supply chain disruptions, higher costs for certain raw materials and higher transportation and energy costs. The situation continues to be very dynamic and we are continually assessing all potential impacts on our associates and business.

Our results for 2022 include a 9.0% increase in tire unit shipments compared to 2021, reflecting the addition of Cooper Tire's operations for the full year, as well as some recovery in OE, including share gains from new OE fitments, despite ongoing supply chain disruptions and shortages. In addition to higher raw material costs, we incurred approximately $890 million of year-over-year incremental costs during 2022 related to inflation and other cost pressures, primarily higher transportation and energy costs, compared to $209 million in 2021.

Net sales were $20,805 million in 2022, compared to $17,478 million in 2021. Net sales increased in 2022 primarily due to global improvements in price and product mix, the addition of incremental net sales from Cooper Tire during the first six months of 2022, higher sales in other tire related businesses, driven by increased third-party chemical sales in Americas, growth in EMEA's Fleet Solutions, higher aviation sales in Americas and EMEA, and increased retail sales in Americas, and higher tire volume in Asia Pacific and EMEA, partially offset by lower tire volume in Americas. These increases were partially offset by unfavorable foreign currency translation, primarily in EMEA and Asia Pacific, driven by the strengthening of the U.S. dollar.

Goodyear net income in 2022 was $202 million, or $0.71 per share, compared to net income of $764 million, or $2.89 per share, in 2021. The decrease in Goodyear net income was primarily due to higher U.S. and Foreign Tax Expense, higher interest expense and higher rationalization charges. Income taxes in 2021 included discrete tax benefits of $340 million related to a reduction in valuation allowances on certain U.S. deferred tax assets primarily for foreign tax credits and $39 million to adjust our deferred tax assets in England for an enacted change in tax rate.

Our total segment operating income for 2022 was $1,276 million, compared to $1,288 million in 2021. The $12 million decrease was primarily due to increased conversion costs of $462 million, higher transportation and import duty costs of $292 million, primarily in Americas and EMEA, and higher Selling, Administrative and General Expense ('SAG') of $96 million, all driven by the inflationary cost trends described above, as well as a favorable indirect tax ruling in Brazil of $69 million in 2021, a favorable settlement of $20 million in 2021 due to a reduction in certain U.S. duty rates on various Cooper Tire commercial tires from China imported into the U.S. during 2019, and unfavorable foreign currency translation of $16 million, primarily in Asia Pacific, driven by the strengthening of the U.S. dollar. These decreases were mostly offset by global improvements in price and product mix of $2,532 million, which more than offset higher raw material costs of $1,885 million, $72 million of amortization expense during the second half of 2021 related to a Cooper Tire fair value step-up in inventory acquired by Goodyear, and higher earnings in other tire-related businesses of $21 million, primarily due to higher aviation sales and retread sales in Americas and EMEA. The remainder of the change was driven by the addition of incremental Cooper Tire operating results during the first six months of 2022. Refer to 'Results of Operations - Segment Information' for additional information.

7

# Liquidity

At December 31, 2022, we had $1,227 million of Cash and Cash Equivalents as well as $4,035 million of unused availability under our various credit agreements, compared to $1,088 million and $4,345 million, respectively, at December 31, 2021. The increase in cash and cash equivalents of $139 million was primarily due to net borrowings of $582 million, cash provided by operating activities of $521 million and cash proceeds of $108 million received from a sale and leaseback transaction in Americas in the second quarter of 2022, partially offset by capital expenditures of $1,061 million. Cash provided by operating activities reflects net income for the period of $209 million, which includes non-cash charges for depreciation and amortization of $964 million, non-cash rationalization charges of $129 million, non-cash net pension curtailment and settlement charges of $124 million, and a non-cash gain of $95 million related to the sale and leaseback transaction in Americas, partially offset by cash used for working capital of $689 million, rationalization payments of $95 million and pension contributions and direct payments of $60 million, as well as the impact of other changes to various assets and liabilities on the Balance Sheet. Refer to 'Liquidity and Capital Resources' for additional information.

# Outlook

The global economy continues to face uncertain macroeconomic conditions, including the ongoing effects of inflation, which have led to higher interest rates and lower consumer confidence. Uncertainties around the availability of energy in Europe have more profoundly affected consumer spending in that region. COVID-19 infections in China are expected to continue to negatively impact consumer spending in that country through the early part of 2023. Although the situation continues to improve, OE manufacturers continue to be affected by shortages of materials and components, limiting vehicle production. The combination of these and other factors have lowered tire industry volumes globally in the fourth quarter of 2022. We expect these soft industry conditions to persist in the first quarter of 2023, especially in Europe, which are expected to reduce our total volume by approximately 5% compared to the first quarter of 2022. Because of this industry softness in Europe, we anticipate segment operating income in EMEA will approach breakeven in the first quarter of 2023 but will return to levels of recent historical performance by the middle of the year.

We expect our raw material costs to increase approximately $200 million in 2023 compared to 2022, including the impact of the stronger U.S. dollar and higher transportation and supplier costs. This net increase includes higher raw material costs of approximately $300 million and $100 million in the first and second quarters of 2023, respectively, and lower raw material costs of approximately $200 million in the second half of the year. We anticipate price and product mix improvements to more than offset raw material cost increases in the first quarter of 2023 by approximately $100 million. Natural and synthetic rubber prices and other commodity prices historically have been volatile, and our raw material costs could change based on future cost fluctuations and changes in foreign exchange rates. We continue to focus on price and product mix, to substitute lower cost materials where possible, to work to identify additional substitution opportunities, to reduce the amount of material required in each tire, and to pursue alternative raw materials to minimize the impact of higher raw material costs.

In addition to higher raw material costs, we expect the impact of other inflationary cost pressures to persist, particularly with respect to transportation, labor and energy costs. We expect the negative impact from non-raw material inflation in the first quarter of 2023 will be approximately $175 million compared with the first quarter of 2022. We continue to focus on actions to offset costs other than raw materials through cost savings initiatives, including rationalization actions, further price actions and improvements in product mix. We also anticipate our first quarter 2023 results will be negatively impacted by our reduced production levels in the fourth quarter of 2022 of approximately 3.5 million tire units. We also plan to reduce our production levels in the first quarter of 2023 by the same number of units as the fourth quarter of 2022, which will impact our second quarter of 2023 results.

For the full year of 2023, we expect working capital to be a source of operating cash flows of approximately $100 million. We anticipate our capital expenditures will be approximately $1.0 billion. Our capital expenditures in 2023 will be focused on projects to modernize certain of our manufacturing facilities and expand others to address anticipated future demand, in addition to capital expenditures to sustain our facilities. We anticipate our cash flows will include rationalization payments of approximately $100 million, as we continue to address our cost structure.

Refer to 'Risk Factors' for a discussion of the factors that may impact our business, results of operations, financial condition or liquidity and 'Forward-Looking Information - Safe Harbor Statement' for a discussion of our use of forward-looking statements.

8

## RESULTS OF OPERATIONS - CONSOLIDATED

Goodyear net income in 2022 was $202 million, or $0.71 per share, compared to net income of $764 million, or $2.89 per share, in 2021. The decrease in Goodyear net income was primarily due to higher U.S. and Foreign Tax Expense, higher interest expense and higher rationalization charges. Income taxes in 2021 included discrete tax benefits of $340 million related to the reduction in valuation allowances on certain U.S. deferred tax assets primarily for foreign tax credits and $39 million to adjust our deferred tax assets in England for an enacted change in the tax rate. Additionally, our 2021 earnings included the impact of a severe winter storm in the U.S., which was estimated to negatively impact earnings by $54 million ($44 million after-tax and minority).

### Net Sales

Net sales in 2022 of $20,805 million increased $3,327 million, or 19.0%, compared to $17,478 million in 2021, primarily due to global improvements in price and product mix of $2,556 million, the addition of an incremental $1,532 million of net sales from Cooper Tire during the first six months of 2022, higher sales in other tire related businesses of $316 million, driven by increased third-party chemical sales in Americas, growth in EMEA's Fleet Solutions, higher aviation sales in Americas and EMEA, and increased retail sales in Americas, and higher tire volume of $41 million in Asia Pacific and EMEA, partially offset by lower tire volume in Americas. These increases were partially offset by unfavorable foreign currency translation of $1,114 million, primarily in EMEA and Asia Pacific, driven by the strengthening of the U.S. dollar. Goodyear worldwide tire unit net sales were $17,886 million and $14,917 million in 2022 and 2021, respectively. Consumer and commercial net sales were $13,163 million and $4,205 million in 2022, respectively. Consumer and commercial net sales were $11,118 million and $3,702 million in 2021, respectively.

The following table presents our tire unit sales for the periods indicated:

| (In millions of tires) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | % Change |
| Replacement Units |  |  |  |
| United States | 62.3 | 55.3 | 12.7% |
| International | 81.6 | 78.8 | 3.6% |
| Total | 143.9 | 134.1 | 7.3% |
| OE Units |  |  |  |
| United States | 10.3 | 9.6 | 7.3% |
| International | 30.3 | 25.6 | 18.4% |
| Total | 40.6 | 35.2 | 15.4% |
| Goodyear worldwide tire units | 184.5 | 169.3 | 9.0% |

The increase in worldwide tire unit sales of 15.2 million units, or 9.0%, compared to 2021, included an increase of 9.8 million replacement tire units, or 7.3%, primarily due to the addition of Cooper Tire's units. OE tire units increased by 5.4 million units, or 15.4%, primarily due to higher vehicle production globally compared to 2021, despite ongoing supply chain disruptions and shortages, and share gains from new OE fitments. Consumer and commercial unit sales in 2022 were 169.0 million and 13.6 million, respectively. Consumer and commercial unit sales in 2021 were 154.2 million and 13.1 million, respectively.

### Cost of Goods Sold

Cost of Goods Sold ('CGS') was $16,953 million in 2022, increasing $3,261 million, or 23.8%, from $13,692 million in 2021. CGS was 81.5% of sales in 2022 compared to 78.3% of sales in 2021. CGS in 2022 increased primarily due to higher raw material costs of $1,885 million, the addition of an incremental $1,194 million of CGS from Cooper Tire during the first six months of 2022, which includes a favorable year-over-year impact of $38 million ($29 million after-tax and minority) of amortization expense in 2021 related to the fair value adjustment to the Closing Date inventory of Cooper Tire that was acquired by Goodyear, higher conversion costs of $462 million driven by inflation and higher energy costs, higher costs in other tire-related businesses of $295 million driven by increased third-party chemical and retail sales in Americas and growth in EMEA's Fleet Solutions, higher transportation and import duty costs of $292 million primarily in Americas and EMEA, a favorable indirect tax ruling in Brazil of $69 million in 2021, of which $66 million ($43 million after-tax and minority) related to prior years, higher tire volume of $47 million, and a favorable adjustment of $20 million ($15 million after-tax and minority) in the second half of 2021 due to a reduction in certain U.S. duty rates on various Cooper Tire commercial tires from China imported into the U.S. during 2019. These increases were partially offset by foreign currency translation of $942 million, primarily in EMEA and Asia Pacific, driven by the strengthening of the U.S. dollar, and $72 million ($53 million after-tax and minority) of amortization expense during the second half of 2021 related to the fair value adjustment to the Closing Date inventory of Cooper Tire that was acquired by Goodyear.

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CGS in 2022 included pension expense of $22 million compared to $21 million in 2021. CGS in 2022 also included a gain of $14 million ($11 million after-tax and minority) in the first half of 2022 due to a reduction in certain U.S. duty rates on various Cooper Tire commercial tires from China imported into the U.S. during 2020 and a gain of $7 million ($6 million after-tax and minority) in Americas related to insurance recoveries. CGS in 2022 included incremental savings from rationalization plans of $2 million compared to $63 million in 2021.

### **Selling, Administrative and General Expense**

SAG was $2,798 million in 2022, increasing $99 million, or 3.7%, from $2,699 million in 2021. SAG was 13.4% of sales in 2022 compared to 15.4% of sales in 2021. SAG increased primarily due to the addition of incremental SAG from Cooper Tire during the first six months of 2022 and $130 million of cost increases reflecting the inflationary cost trends described above. These increases were partially offset by foreign currency translation of $156 million, primarily in EMEA and Asia Pacific, driven by the strengthening of the U.S. dollar, and lower wages and benefits of $36 million, driven by reduced incentive compensation. SAG in 2022 included pension expense of $15 million compared to $18 million in 2021. SAG in 2022 included incremental savings from rationalization plans of $12 million compared to $9 million in 2021.

SAG and CGS in 2022 included $28 million and $9 million, respectively, of accelerated depreciation and asset write-offs, of which $30 million ($27 million after-tax and minority) in total related to rationalization activities. SAG and CGS in 2021 included a total of $6 million ($4 million after-tax and minority) of transaction costs related to the Cooper Tire acquisition.

### **Rationalizations**

We recorded net rationalization charges of $129 million ($120 million after-tax and minority) in 2022. Net rationalization charges include $37 million for the plan primarily to reduce salaried staff globally, $34 million for the plan to close Melksham, $24 million for a plan to reduce duplicative global SAG headcount and close redundant warehouse locations in Americas as part of our ongoing Cooper Tire integration efforts, $16 million related to the permanent closure of our tire manufacturing facility in Gadsden, Alabama, and $14 million related to the exit of our retail operations in South Africa.

We recorded net rationalization charges of $93 million ($82 million after-tax and minority) in 2021. Net rationalization charges include $38 million in Americas, primarily related to the permanent closure of our tire manufacturing facility in Gadsden, Alabama, $29 million related to a plan to reduce SAG headcount in EMEA, and $26 million related to a plan to modernize two of our manufacturing facilities in Germany.

Upon completion of new plans initiated in 2022, we estimate that annual segment operating income (primarily SAG) will improve by approximately $150 million. The savings realized in 2022 from rationalization plans totaled $14 million ($12 million SAG and $2 million CGS).

For further information, refer to Note to the Consolidated Financial Statements No. 4, Costs Associated with Rationalization Programs.

### **Interest Expense**

Interest expense was $451 million in 2022, increasing $64 million from $387 million in 2021. The increase was primarily due to a higher average debt balance of $8,266 million in 2022 compared to $7,267 million in 2021 and a higher average interest rate of 5.46% in 2022 compared to 5.33% in 2021. Interest expense in 2021 included a $6 million ($5 million after-tax and minority) charge related to the redemption of our former $1.0 billion 5.125% senior notes due 2023.

### **Other (Income) Expense**

Other (Income) Expense was $75 million and $94 million of expense in 2022 and 2021, respectively. The $19 million decrease in expense was primarily due to net gains on asset and other sales of $115 million ($87 million after-tax and minority) in 2022 primarily related to the sale and leaseback transaction in Americas, $50 million ($42 million after-tax and minority) of transaction and other costs related to the Cooper Tire acquisition in 2021, net pension curtailment and settlement charges of $43 million ($32 million after-tax and minority) in 2021, and an out of period adjustment of $7 million ($7 million after-tax and minority) of expense related to foreign currency exchange in Americas in 2021. These decreases were partially offset by net pension curtailment and settlement charges of $124 million ($93 million after-tax and minority) in 2022, $48 million ($44 million after-tax and minority) of interest income related to the favorable indirect tax ruling in Brazil in 2021, $15 million of expense ($11 million after-tax and minority) for intellectual property-related legal claims in 2022, net gains on asset and other sales in 2021 of $12 million ($8 million after-tax and minority) primarily related to the sale of land in Hanau, Germany, and a favorable insurance settlement of $10 million ($8 million after-tax and minority) in 2021. The remainder of the difference is mostly attributable to higher interest income in 2022 compared to 2021, driven by higher interest rates.

For further information, refer to Note to the Consolidated Financial Statements No. 6, Other (Income) Expense.

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# Income Taxes

Income tax expense in 2022 was $190 million on income before income taxes of $399 million. In 2022, income tax expense includes net discrete tax expense totaling $23 million ($23 million after minority interest), including a charge of $14 million to write off deferred tax assets related to tax loss carryforwards in the UK and a charge of $11 million to establish a full valuation allowance on our net deferred tax assets in Russia, partially offset by a net benefit of $2 million for various other items.

Income tax benefit in 2021 was $267 million on income before income taxes of $513 million. In 2021, income tax benefit includes net discrete tax benefits totaling $409 million ($409 million after minority interest), including a reduction in our valuation allowances of $340 million for certain U.S. deferred tax assets for foreign tax credits and state tax loss carryforwards, a $39 million benefit to adjust our deferred tax assets in England for a second quarter enacted change in the tax rate, a $21 million benefit to reflect an increase in our estimated state tax rate used in calculating our U.S. net deferred tax assets as a result of a change in the overall mix of our earnings by state after including the impact of the acquisition of Cooper Tire, an $8 million benefit related to a favorable court ruling in Brazil, and a net benefit of $1 million for various other items.

The difference between our effective tax rate and the U.S. statutory rate of 21% for both 2022 and 2021 primarily relates to losses in certain foreign jurisdictions in which no tax benefits are recorded, income in certain foreign jurisdictions taxed at rates higher than the U.S. statutory rate, and the discrete items described above.

On August 16, 2022, the Inflation Reduction Act (the 'Act') was signed into law in the U.S. The Act includes a new 15% corporate alternative minimum tax ('CAMT'). This CAMT applies to tax years beginning after December 31, 2022 for companies with average annual adjusted financial statement income over the previous three years in excess of $1 billion. For 2023, we do not anticipate this CAMT will apply to us due to the significant pandemic-driven losses we incurred in 2020. As allowed, we elected to not consider the estimated impact of potential future CAMT obligations for purposes of assessing valuation allowances on our deferred tax assets.

At December 31, 2022 and December 31, 2021, we had approximately $1.1 billion and $1.2 billion of U.S. federal, state and local net deferred tax assets, respectively, inclusive of valuation allowances totaling $26 million in each year primarily for state tax loss carryforwards with limited lives. Approximately $700 million of these U.S. net deferred tax assets have unlimited lives and approximately $400 million have limited lives and expire between 2023 and 2042. In the U.S., we have a cumulative loss for the three-year period ended December 31, 2022. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only includes the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including continued favorable overall volume trends in the tire industry and our tire volume compared to 2020 levels. In addition, the Cooper Tire acquisition has generated significant incremental domestic earnings since the Closing Date and provides opportunities for cost and other operating synergies to further improve our U.S. profitability.

At December 31, 2022 and December 31, 2021, our U.S. net deferred tax assets described above include approximately $230 million and $340 million, respectively, of foreign tax credits with limited lives. Our earnings and forecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income, provide us sufficient positive evidence that we will be able to utilize these net foreign tax credits which expire through 2032. Our 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) tax planning strategies, including accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, and other financing transactions, all of which would increase our domestic profitability.

We consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets, including our foreign tax credits. These forecasts include the impact of recent trends, including various macroeconomic factors such as the impact of higher raw material, transportation, labor and energy costs, on our profitability, as well as the impact of tax planning strategies. These macroeconomic factors possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future earnings will not be sufficient to fully utilize our U.S. net deferred tax assets, including our 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, objectively verifiable evidence to conclude that it is more likely than not that, at December 31, 2022, our U.S. net deferred tax assets, including our foreign tax credits, will be fully utilized.

At December 31, 2022 and December 31, 2021, we also had approximately $1.2 billion and $1.3 billion of foreign net deferred tax assets, respectively, and related valuation allowances of approximately $1.0 billion in each year. 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 these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of $873 million on all of our net deferred tax assets. Each reporting period, we assess available positive and negative

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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 valuation allowances having a significant impact on our financial position or results of operations will exist within the next twelve months.

For further information regarding income taxes and the realizability of our deferred tax assets, including our foreign tax credits, refer to 'Critical Accounting Policies' and Note to the Consolidated Financial Statements No. 7, Income Taxes.

#### **Minority Shareholders' Net Income**

Minority shareholders' net income was $7 million in 2022, compared to $16 million in 2021. The decrease in 2022 was primarily related to the impact of inflation on earnings of the minority interest in Turkey. Minority shareholders' net income in 2021 includes $3 million ($3 million after-tax) related to a settlement with a minority interest in Turkey.

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## RESULTS OF OPERATIONS - SEGMENT INFORMATION

Segment information reflects our strategic business units ('SBUs'), which are organized to meet customer requirements and global competition and are segmented on a regional basis. Since the Closing Date, Cooper Tire's operating results have been incorporated into each of our SBUs. For periods that are not fully comparable, we discuss the impact of Cooper Tire's operating results separately up to the point within those periods when Cooper Tire's results became comparable.

Results of operations are measured based on net sales to unaffiliated customers and segment operating income. Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions. Segment operating income is computed as follows: Net Sales less CGS (excluding asset write-off and accelerated depreciation charges) and SAG (including certain allocated corporate administrative expenses). Segment operating income also includes certain royalties and equity in earnings of most affiliates. Segment operating income does not include net rationalization charges (credits), asset sales, goodwill and other asset impairment charges and certain other items.

Total segment operating income in 2022 was $1,276 million, a decrease of $12 million, or 0.9%, from $1,288 million in 2021. Total segment operating margin (segment operating income divided by segment sales) in 2022 was 6.1% compared to 7.4% in 2021.

Management believes that total segment operating income is useful because it represents the aggregate value of income created by our SBUs and excludes items not directly related to the SBUs for performance evaluation purposes. Total segment operating income is the sum of the individual SBUs' segment operating income. Refer to Note to the Consolidated Financial Statements No. 9, Business Segments, for further information and for a reconciliation of total segment operating income to Income (Loss) before Income Taxes.

### Americas

| (In millions) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Tire Units | 95.0 | 85.9 | 56.7 |
| Net Sales | $12,766 | $10,051 | $6,556 |
| Operating Income | 1,094 | 914 | 9 |
| Operating Margin | 8.6% | 9.1% | 0.1% |

Americas unit sales in 2022 increased 9.1 million units, or 10.6%, to 95.0 million units. Replacement tire volume increased 7.9 million units, or 10.8%, primarily due to the addition of incremental Cooper Tire units during the first six months of 2022, partially offset by a decrease in our consumer business in the U.S. OE tire volume increased 1.2 million units, or 9.5%, primarily due to continued recovery from the impact on vehicle production of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors, driven by our consumer business in the U.S., Canada and Brazil.

Net sales in 2022 were $12,766 million, increasing $2,715 million, or 27.0%, from $10,051 million in 2021. The increase in net sales was primarily due to improvements in price and product mix of $1,402 million, driven by price increases, the addition of an incremental $1,355 million of net sales from Cooper Tire during the first six months of 2022, and higher sales in other tire-related businesses of $208 million, primarily due to higher third-party chemical, retail, aviation and retread sales. These increases were partially offset by lower tire volume of $258 million. We estimate that the severe winter storm in the U.S. negatively impacted Americas net sales in 2021 by approximately $35 million.

Operating income in 2022 was $1,094 million, increasing $180 million, or 19.7%, from $914 million in 2021. The increase in operating income was due to improvements in price and product mix of $1,452 million, which more than offset higher raw material costs of $881 million, $61 million of amortization expense in the second half of 2021 related to the fair value adjustment to the Closing Date inventory of Cooper Tire that was acquired by Goodyear, higher earnings in other tire-related businesses of $8 million, and the net impact of out of period adjustments in 2021 totaling $6 million ($6 million after-tax and minority) of expense primarily related to inventory and accrued freight charges. These increases were partially offset by higher conversion costs of $242 million and higher transportation and import duty costs of $229 million, both driven by the inflationary cost trends described above, lower tire volume of $81 million, the favorable indirect tax ruling in Brazil of $69 million in 2021, the favorable adjustment of $20 million in the second half of 2021 due to the reduction in certain U.S. duty rates on various Cooper Tire commercial tires from China imported into the U.S. during 2019, and higher SAG of $11 million. The remainder of the change was driven by the addition of Cooper Tire's incremental operating results during the first six months of 2022, which included a favorable year-over-year impact of $35 million for amortization expense in 2021 related to the fair value step-up of inventory acquired by Goodyear. SAG for 2022 includes incremental savings from rationalization plans of $7 million. We estimate that the severe winter storm in the U.S. as well as a national strike in Colombia negatively impacted Americas operating income in 2021 by approximately $42 million and $9 million ($9 million after-tax and minority), respectively.

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Operating income in 2022 excluded net rationalization charges of $32 million and net gains on asset sales of $122 million, primarily related to the sale and leaseback transaction in the second quarter of 2022 and the sale and exit of certain retail locations in the fourth quarter of 2022. Operating income in 2021 excluded rationalization charges of $38 million and a net gain on asset sales of $1 million.

Americas' results are highly dependent upon the United States, which accounted for 84% of Americas' net sales in both 2022 and 2021. Results of operations in the United States are expected to continue to have a significant impact on Americas' future performance.

## Europe, Middle East and Africa

| (In millions) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Tire Units | 55.1 | 52.7 | 44.5 |
| Net Sales | $5,645 | $5,243 | $4,020 |
| Operating Income (Loss) | 61 | 239 | (72) |
| Operating Margin | 1.1% | 4.6% | (1.8)% |

Europe, Middle East and Africa unit sales in 2022 increased 2.4 million units, or 4.5%, to 55.1 million units. Replacement tire volume increased 1.3 million units, or 3.1%, primarily in our consumer business, reflecting continued recovery from the COVID-19 pandemic during the first half of the year and the impacts of our ongoing initiative to align distribution in Europe, as well as the addition of incremental Cooper Tire units during the first six months of 2022. These increases were partially offset by industry declines in the second half of the year. OE tire volume increased 1.1 million units, or 10.1%, reflecting share gains driven by new consumer fitments and increased demand from improved vehicle production.

Net sales in 2022 were $5,645 million, increasing $402 million, or 7.7%, from $5,243 million in 2021. Net sales increased primarily due to improvements in price and product mix of $999 million, driven by price increases, higher tire volume of $141 million, higher sales in other tire-related businesses of $115 million, primarily due to growth in Fleet Solutions and an increase in aviation, motorcycle and retread sales, and the addition of an incremental $105 million of net sales from Cooper Tire during the first six months of 2022. These increases were partially offset by unfavorable foreign currency translation of $954 million, driven by a weaker euro, Turkish lira, Polish zloty and British pound.

Operating income in 2022 was $61 million, decreasing $178 million, or 74.5%, from $239 million in 2021. The decrease in operating income was primarily due to higher conversion costs of $217 million and higher transportation and import duty costs of $61 million, both driven by the inflationary cost trends described above, and higher SAG of $85 million primarily due to inflation, higher advertising costs and higher costs for wages and benefits. These decreases were partially offset by improvements in price and product mix of $894 million, which more than offset higher raw material costs of $767 million, higher tire volume of $36 million, and higher earnings in other tire-related businesses of $13 million. The remainder of the change was driven by the addition of Cooper Tire's incremental operating results during the first six months of 2022. SAG and conversion costs for 2022 include incremental savings from rationalization plans of $5 million and $2 million, respectively.

Operating income in 2022 excluded net rationalization charges of $92 million and accelerated depreciation and asset write-offs of $20 million. Operating income in 2021 excluded net rationalization charges of $49 million, a net gain on asset sales of $13 million and accelerated depreciation and asset write-offs of $1 million.

EMEA's results are highly dependent upon Germany, which accounted for 15% of EMEA's net sales in both 2022 and 2021. Results of operations in Germany are expected to continue to have a significant impact on EMEA's future performance.

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# Asia Pacific

| (In millions) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Tire Units | 34.4 | 30.7 | 24.8 |
| Net Sales | $2,394 | $2,184 | $1,745 |
| Operating Income | 121 | 135 | 49 |
| Operating Margin | 5.1% | 6.2% | 2.8% |

Asia Pacific unit sales in 2022 increased 3.7 million units, or 12.1%, to 34.4 million units. OE tire volume increased 3.1 million units, or 28.1%, primarily due to continued recovery from the impact on vehicle production of global supply chain disruptions, including shortages of key manufacturing components, such as semiconductors, the addition of incremental Cooper Tire units during the first six months of 2022, and share gains driven by new OE fitments. Replacement tire volume increased 0.6 million units, or 3.3%, primarily due to the addition of incremental Cooper Tire units during the first six months of 2022 and expansion of our distribution networks.

Net sales in 2022 were $2,394 million, increasing $210 million, or 9.6%, from $2,184 million in 2021. Net sales increased due to higher tire volume of $158 million, improvements in price and product mix of $155 million, driven by price increases, and the addition of an incremental $72 million of net sales from Cooper Tire during the first six months of 2022. These increases were partially offset by unfavorable foreign currency translation of $168 million, primarily related to the strengthening of the U.S. dollar against the Japanese yen, Indian rupee, Chinese yuan and Australian dollar.

Operating income in 2022 was $121 million, decreasing $14 million, or 10.4%, from $135 million in 2021. The decrease in operating income was primarily due to higher raw material costs of $237 million and unfavorable foreign currency translation of $21 million, primarily related to the strengthening of the U.S. dollar against the Japanese yen and Indian rupee. These decreases were partially offset by improvements in price and product mix of $186 million and higher tire volume of $39 million. The remainder of the change was driven by the addition of Cooper Tire's incremental operating results during the first six months of 2022.

Asia Pacific's results are highly dependent upon China and Australia. China accounted for 29% of Asia Pacific's net sales in both 2022 and 2021. Australia accounted for 24% of Asia Pacific's net sales in both 2022 and 2021. Results of operations in China and Australia are expected to continue to have a significant impact on Asia Pacific's future performance.

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## LIQUIDITY AND CAPITAL RESOURCES

### Overview

Our primary sources of liquidity are cash generated from our operating and financing activities. Our cash flows from operating activities are driven primarily by our operating results and changes in our working capital requirements and our cash flows from financing activities are dependent upon our ability to access credit or other capital.

On September 15, 2022, we amended our $2.75 billion first lien revolving credit facility to change the base interest rate from LIBOR to SOFR.

On October 12, 2022, we amended and restated our European revolving credit facility. Significant changes to the European revolving credit facility include extending the maturity to January 14, 2028 and changing the base interest rate for loans denominated in U.S. dollars from LIBOR to SOFR.

At December 31, 2022, we had $1,227 million of Cash and Cash Equivalents, compared to $1,088 million at December 31, 2021. The increase in cash and cash equivalents of $139 million was primarily due to net borrowings of $582 million, cash provided by operating activities of $521 million and cash proceeds of $108 million received from the sale and leaseback transaction in Americas in the second quarter of 2022, partially offset by capital expenditures of $1,061 million. Cash provided by operating activities reflects net income for the period of $209 million, which includes non-cash charges for depreciation and amortization of $964 million, non-cash rationalization charges of $129 million, non-cash net pension curtailment and settlement charges of $124 million, and a non-cash gain of $95 million related to the sale and leaseback transaction in Americas, partially offset by cash used for working capital of $689 million, rationalization payments of $95 million and pension contributions and direct payments of $60 million, as well as the impact of other changes to various assets and liabilities on the Balance Sheet.

At December 31, 2022 and 2021, we had $4,035 million and $4,345 million, respectively, of unused availability under our various credit agreements. The table below provides unused availability by our significant credit facilities as of December 31:

| (In millions) | 2022 | 2021 |
| --- | --- | --- |
| First lien revolving credit facility | $2,747 | $2,314 |
| European revolving credit facility | 480 | 908 |
| Chinese credit facilities | 516 | 622 |
| Mexican credit facility | - | 42 |
| Other foreign and domestic debt | 292 | 459 |
|  | $4,035 | $4,345 |

We expect our 2023 cash flow needs to include capital expenditures of approximately $1.0 billion. We also expect interest expense to be approximately $500 million; rationalization payments to be approximately $100 million; income tax payments to be approximately $200 million, excluding one-time items; and contributions to our funded pension plans to be $25 million to $50 million. We expect working capital to be a source of operating cash flows of approximately $100 million for the full year of 2023.

We actively monitor our liquidity and intend to operate our business in a way that allows us to address our cash flow needs with our existing cash and available credit if they cannot be funded by cash generated from operating or other financing activities. We believe that our liquidity position is adequate to fund our operating and investing needs and debt maturities for the next twelve months and to provide us with the ability to respond to further changes in the business environment.

Our ability to service debt and operational requirements is also dependent, in part, on the ability of our subsidiaries to make distributions of cash to various other entities in our consolidated group, whether in the form of dividends, loans or otherwise. In certain countries where we operate, such as China, South Africa, Serbia and Argentina, transfers of funds into or out of such countries by way of dividends, loans, advances or payments to third-party or affiliated suppliers are generally or periodically subject to certain requirements, such as obtaining approval from the foreign government and/or currency exchange board before net assets can be transferred out of the country. In addition, certain of our credit agreements and other debt instruments limit the ability of foreign subsidiaries to make distributions of cash. Thus, we would have to repay and/or amend these credit agreements and other debt instruments in order to use this cash to service our consolidated debt. Because of the inherent uncertainty of satisfactorily meeting these requirements or limitations, we do not consider the net assets of our subsidiaries, including our Chinese, South African, Serbian and Argentinian subsidiaries, which are subject to such requirements or limitations to be integral to our liquidity or our ability to service our debt and operational requirements. At December 31, 2022, approximately $1.0 billion of net assets, including approximately $225 million of cash and cash equivalents, were subject to such requirements. The requirements we must comply with to transfer funds out of China, South Africa, Serbia and Argentina have not adversely impacted our ability to make transfers out of those countries.

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## **Cash Position**

At December 31, 2022, significant concentrations of cash and cash equivalents held by our international subsidiaries included the following amounts:

- $361 million or 29% in EMEA, primarily France, Belgium and England ($161 million or 15% at December 31, 2021),
- $316 million or 26% in Americas, primarily Chile, Brazil and Mexico ($320 million or 29% at December 31, 2021), and
- $301 million or 25% in Asia Pacific, primarily China, India and Australia ($317 million or 29% at December 31, 2021).

We have deposited our cash and cash equivalents and entered into various credit agreements and derivative contracts with financial institutions that we considered to be substantial and creditworthy at the time of such transactions. We seek to control our exposure to these financial institutions by diversifying our deposits, credit agreements and derivative contracts across multiple financial institutions, by setting deposit and counterparty credit limits based on long term credit ratings and other indicators of credit risk such as credit default swap spreads, and by monitoring the financial strength of these financial institutions on a regular basis. We also enter into master netting agreements with counterparties when possible. By controlling and monitoring exposure to financial institutions in this manner, we believe that we effectively manage the risk of loss due to nonperformance by a financial institution. However, we cannot provide assurance that we will not experience losses or delays in accessing our deposits or lines of credit due to the nonperformance of a financial institution. Our inability to access our cash deposits or make draws on our lines of credit, or the inability of a counterparty to fulfill its contractual obligations to us, could have a material adverse effect on our liquidity, financial condition or results of operations in the period in which it occurs.

## **Operating Activities**

Net cash provided by operating activities was $521 million in 2022, decreasing $541 million compared to net cash provided by operating activities of $1,062 million in 2021.

The decrease in net cash provided by operating activities reflects a net increase in cash used for working capital of $330 million and a $12 million decrease in operating income from our SBUs, which includes a non-cash year-over-year benefit of $110 million related to the amortization of the Cooper Tire inventory fair value step-up in 2021. These decreases were partially offset by lower rationalization payments of $102 million, lower cash payments for transaction and other costs related to the Cooper Tire acquisition of $40 million, lower pension contributions and direct payments of $31 million, and lower cash payments for income taxes of $27 million. The remainder of the decrease in net cash provided by operating activities was primarily due to a net unfavorable change of $250 million in Balance Sheet accounts for Compensation and Benefits, Other Assets and Liabilities and Other Current Liabilities.

The net increase in cash used for working capital reflects a decrease in cash provided by Accounts Payable - Trade of $237 million and an increase in cash used for Inventory of $60 million and Accounts Receivable of $33 million. These changes were driven by the impact of the current year inflationary cost trends described above on our manufacturing operations and pricing.

## **Investing Activities**

Net cash used for investing activities was $914 million in 2022, compared to $2,793 million in 2021. The $1,879 million decrease in cash used for investing activities primarily relates to the $1,856 million cash component of the purchase price, net of cash and restricted cash acquired, for the acquisition of Cooper Tire in 2021 and cash proceeds of $108 million in 2022 related to the sale and leaseback transaction in Americas. Capital expenditures were $1,061 million in 2022, increasing $80 million, compared to $981 million in 2021, primarily due to the addition of Cooper Tire's capital expenditures for the full year. Beyond expenditures required to sustain our facilities, capital expenditures in 2022 and 2021 primarily related to the modernization and expansion of tire manufacturing facilities around the world.

## **Financing Activities**

Net cash provided by financing activities was $575 million in 2022, compared to net cash provided by financing activities of $1,309 million in 2021. The $734 million decrease reflects lower net borrowings of $824 million, primarily due to borrowings in 2021 used to fund a portion of the Cooper Tire acquisition, partially offset by an increase in net cash provided by other financing transactions, primarily due to an increase in our liability to remit cash from factored account receivables to the purchaser of those receivables. No cash dividends were paid in 2022 or 2021.

## **Credit Sources**

In aggregate, we had total credit arrangements of $11,806 million available at December 31, 2022, of which $4,035 million were unused, compared to $11,628 million available at December 31, 2021, of which $4,345 million were unused. At December

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31, 2022, we had long term credit arrangements totaling $10,925 million, of which $3,566 million were unused, compared to $10,624 million and $3,785 million, respectively, at December 31, 2021. At December 31, 2022, we had short term committed and uncommitted credit arrangements totaling $881 million, of which $469 million were unused, compared to $1,004 million and $560 million, respectively, at December 31, 2021. The continued availability of the short term uncommitted arrangements is at the discretion of the relevant lender and may be terminated at any time.

#### Outstanding Notes

At December 31, 2022, we had $5,560 million of outstanding notes, compared to $5,591 million at December 31, 2021.

#### $2.75 Billion Amended and Restated First Lien Revolving Credit Facility due 2026

On September 15, 2022, we amended our $2.75 billion first lien revolving credit facility to change the base interest rate from LIBOR to SOFR. Our first lien revolving credit facility is available in the form of loans or letters of credit. Up to $800 million in letters of credit and $50 million of swingline loans are available for issuance under the facility. 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. The facility matures on June 8, 2026. Based on our current liquidity, amounts drawn under this facility bear interest at SOFR plus 125 basis points.

Availability under the facility is subject to a borrowing base, which is based 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 in an amount not to exceed $400 million, (iii) the value of eligible machinery and equipment, and (iv) certain cash in an amount not to exceed $275 million. To the extent that our eligible accounts receivable, 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 $2.75 billion. In addition, if the amount of outstanding borrowings and letters of credit under the facility exceeds the borrowing base, we would be required to prepay borrowings and/or cash collateralize letters of credit sufficient to eliminate the excess. As of December 31, 2022, our borrowing base was above the facility's stated amount of $2.75 billion.

At December 31, 2022, we had no borrowings and $3 million of letters of credit issued under the revolving credit facility. At December 31, 2021, we had no borrowings and $19 million of letters of credit issued under the revolving credit facility.

#### €800 Million Amended and Restated Senior Secured European Revolving Credit Facility due 2028

On October 12, 2022, we amended and restated our European revolving credit facility. Significant changes to the European revolving credit facility include extending the maturity to January 14, 2028 and changing the base interest rate for loans denominated in U.S. dollars from LIBOR to SOFR.

The European revolving credit facility consists of (i) a €180 million German tranche that is available only to Goodyear Germany GmbH and (ii) a €620 million all-borrower tranche that is available to Goodyear Europe B.V. ('GEBV'), Goodyear Germany and Goodyear 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. Amounts drawn under this facility will bear interest at SOFR plus 150 basis points for loans denominated in U.S. dollars, EURIBOR plus 150 basis points for loans denominated in euros, and SONIA plus 150 basis points for loans denominated in pounds sterling. Undrawn amounts under the facility are subject to an annual commitment fee of 25 basis points.

At December 31, 2022, there were no borrowings outstanding under the German tranche, $374 million (€350 million) of borrowings outstanding under the all-borrower tranche and no letters of credit outstanding under the European revolving credit facility. At December 31, 2021, we had no borrowings and no letters of credit outstanding under the European revolving credit facility.

Each of our first lien revolving credit facility and our European revolving credit facility have 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, 2020 under the first lien facility and December 31, 2021 under the European 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 2027. 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 19, 2021 through October 19, 2022, the designated maximum amount of the facility was €300 million. For the period from October 20, 2022 through October 18, 2023, the designated maximum amount of the facility remains at €300 million.

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The facility involves an 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) October 19, 2027, (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 similar to the events of default under our first lien revolving credit facility; 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 18, 2023.

At December 31, 2022, the amounts available and utilized under this program totaled $267 million (€250 million). At December 31, 2021, the amounts available and utilized under this program totaled $279 million (€246 million). The program does not qualify for sale accounting, and accordingly, these amounts are included in Long Term Debt and Finance Leases.

#### 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 December 31, 2022, the gross amount of receivables sold was $744 million, compared to $605 million at December 31, 2021. The increase from December 31, 2021 is primarily due to an increase in our accounts receivable as a result of higher sales prices.

#### Letters of Credit

At December 31, 2022, we had $229 million in letters of credit issued under bilateral letter of credit agreements and other foreign credit facilities.

#### Supplier Financing

We have entered into payment processing agreements with several financial institutions. Under these agreements, the financial institutions act as our paying agents with respect to accounts payable due to our suppliers. These agreements also allow our suppliers to sell their receivables to the financial institutions at the sole discretion of both the supplier and the financial institution on terms that are negotiated between them. We are not always notified when our suppliers sell receivables under these programs. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our suppliers’ decisions to sell their receivables under these programs. Agreements for such supplier financing programs totaled up to $920 million and $630 million at December 31, 2022 and 2021, respectively. The increase from December 31, 2021 is primarily due to the overall increase in our cost base as a result of the Cooper Tire acquisition.

#### Further Information

The ICE Benchmark Administration, the administrator of LIBOR, ceased publication of U.S. dollar LIBOR (“USD LIBOR”) for the one week and two month USD LIBOR tenors on December 31, 2021 and intends to cease publication for all other USD LIBOR tenors on June 30, 2023. We previously identified and evaluated our debt obligations and other contracts that refer to LIBOR and have amended our first lien revolving credit facility and our European revolving credit facility, which constituted the most significant of our LIBOR-based debt obligations and contracts, to replace LIBOR with SOFR. We do not believe that the discontinuation of LIBOR, or its replacement with an alternative reference rate or rates, will have a material impact on our results of operations, financial position or liquidity.

For a further description of the terms of our outstanding notes, first lien revolving credit facility, European revolving credit facility and pan-European accounts receivable securitization facility, refer to Note to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments.

#### Covenant Compliance

Our first lien revolving credit facility and some of the indentures governing our notes contain certain covenants that, among other things, limit our ability to incur additional debt or issue redeemable preferred stock, pay dividends, repurchase shares or make certain other restricted payments or investments, incur liens, sell assets, incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us, enter into affiliate transactions, engage in sale and leaseback transactions, and consolidate, merge, sell or otherwise dispose of all or substantially all of our assets. These covenants are subject to significant exceptions and qualifications. Our first lien revolving credit facility and the indentures governing our notes also have customary defaults, including cross-defaults to material indebtedness of Goodyear and its subsidiaries.

We have an additional financial covenant in our first lien revolving credit facility that is currently not applicable. We become subject to that financial covenant when the aggregate amount of our Parent Company (The Goodyear Tire & Rubber Company) and guarantor subsidiaries cash and cash equivalents (“Available Cash”) plus our availability under our first lien revolving credit facility is less than $275 million. If this were to occur, our ratio of EBITDA to Consolidated Interest Expense may not

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be less than 2.0 to 1.0 for the most recent period of four consecutive fiscal quarters. As of December 31, 2022, our unused availability under this facility of $2,747 million plus our Available Cash of $174 million totaled $2,921 million, which is in excess of $275 million.

In addition, our European revolving credit facility contains non-financial covenants similar to the non-financial covenants in our first lien revolving credit facility that are described above and a financial covenant applicable only to GEBV and its subsidiaries. This financial covenant provides that we are not permitted to allow GEBV’s ratio of Consolidated Net GEBV Indebtedness to Consolidated GEBV EBITDA for a period of four consecutive fiscal quarters to be greater than 3.0 to 1.0 at the end of any fiscal quarter. Consolidated Net GEBV Indebtedness is determined net of the sum of cash and cash equivalents in excess of $100 million held by GEBV and its subsidiaries, cash and cash equivalents in excess of $150 million held by the Parent Company and its U.S. subsidiaries, and availability under our first lien revolving credit facility if the ratio of EBITDA to Consolidated Interest Expense described above is not applicable and the conditions to borrowing under the first lien revolving credit facility are met. Consolidated Net GEBV Indebtedness also excludes loans from other consolidated Goodyear entities. This financial covenant is also included in our pan-European accounts receivable securitization facility. At December 31, 2022, we were in compliance with this financial covenant.

Our credit facilities also state that we may only incur additional debt or make restricted payments that are not otherwise expressly permitted if, after giving effect to the debt incurrence or the restricted payment, our ratio of EBITDA to Consolidated Interest Expense for the prior four fiscal quarters would exceed 2.0 to 1.0. Certain of our senior note indentures have substantially similar limitations on incurring debt and making restricted payments. Our credit facilities and indentures also permit the incurrence of additional debt through other provisions in those agreements without regard to our ability to satisfy the ratio-based incurrence test described above. We believe that these other provisions provide us with sufficient flexibility to incur additional debt necessary to meet our operating, investing and financing needs without regard to our ability to satisfy the ratio-based incurrence test.

Covenants could change based upon a refinancing or amendment of an existing facility, or additional covenants may be added in connection with the incurrence of new debt.

As of December 31, 2022, we were in compliance with the currently applicable material covenants imposed by our principal credit facilities and indentures.

The terms “Available Cash,” “EBITDA,” “Consolidated Interest Expense,” “Consolidated Net GEBV Indebtedness” and “Consolidated GEBV EBITDA” have the meanings given them in the respective credit facilities.

#### Potential Future Financings

In addition to the financing activities described above, we may seek to undertake additional financing actions which could include restructuring bank debt or capital markets transactions, possibly including the issuance of additional debt or equity. Given the inherent uncertainty of market conditions, access to the capital markets cannot be assured.

Our future liquidity requirements may make it necessary for us to incur additional debt. However, a substantial portion of our assets are already subject to liens securing our indebtedness. As a result, we are limited in our ability to pledge our remaining assets as security for additional secured indebtedness. In addition, no assurance can be given as to our ability to raise additional unsecured debt.

#### Dividends and Common Stock Repurchase Program

Under our primary credit facilities and some of our note indentures, we are permitted to pay dividends on and repurchase our capital stock (which constitute restricted payments) as long as no default will have occurred and be continuing, additional indebtedness can be incurred under the credit facilities or indentures following the payment, and certain financial tests are satisfied.

During 2020, we paid cash dividends of $37 million on our common stock. This excludes dividends earned on stock based compensation plans of $1 million. On April 16, 2020, we announced that we suspended the quarterly dividend on our common stock. No cash dividends were paid in 2022 or 2021.

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 2022, 2021, and 2020, we did not repurchase any shares from our employees.

The restrictions imposed by our credit facilities and indentures are not expected to affect our ability to pay dividends or repurchase our capital stock in the future.

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# Asset Dispositions

The restrictions on asset sales imposed by our material indebtedness have not affected our ability to divest non-core businesses, and those divestitures have not affected our ability to comply with those restrictions.

# Supplemental Guarantor Financial Information

Certain of our subsidiaries, which are listed on Exhibit 22.1 to the Annual Report on Form 10-K for the year ended December 31, 2022 and are generally holding or operating companies, have guaranteed our obligations under the $800 million outstanding principal amount of 9.5% senior notes due 2025, the $900 million outstanding principal amount of 5% senior notes due 2026, the $700 million outstanding principal amount of 4.875% senior notes due 2027, the $850 million outstanding principal amount of 5% senior notes due 2029, the $550 million outstanding principal amount of 5.25% senior notes due April 2031, the $600 million outstanding principal amount of 5.25% senior notes due July 2031 and the $450 million outstanding principal amount of 5.625% senior notes due 2033 (collectively, the “Notes”).

The Notes have been issued by The Goodyear Tire & Rubber Company (the “Parent Company”) and are its senior unsecured obligations. The Notes rank equally in right of payment with all of our existing and future senior unsecured obligations and senior to any of our future subordinated indebtedness. The Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the assets securing that indebtedness. The Notes are fully and unconditionally guaranteed on a joint and several basis by each of our wholly-owned U.S. and Canadian subsidiaries that also guarantee our obligations under our first lien revolving credit facility (such guarantees, the “Guarantees”; and, such guaranteeing subsidiaries, the “Subsidiary Guarantors”). The Guarantees are senior unsecured obligations of the Subsidiary Guarantors and rank equally in right of payment with all existing and future senior unsecured obligations of our Subsidiary Guarantors. The Guarantees are effectively subordinated to existing and future secured indebtedness of the Subsidiary Guarantors to the extent of the assets securing that indebtedness.

The Notes are structurally subordinated to all of the existing and future debt and other liabilities, including trade payables, of our subsidiaries that do not guarantee the Notes (the “Non-Guarantor Subsidiaries”). The Non-Guarantor Subsidiaries will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make funds available to pay those amounts. Certain Non-Guarantor Subsidiaries are limited in their ability to remit funds to us 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.

The Subsidiary Guarantors, as primary obligors and not merely as sureties, jointly and severally irrevocably and unconditionally guarantee on a senior unsecured basis the performance and full and punctual payment when due of all obligations of the Parent Company under the Notes and the related indentures, whether for payment of principal of or interest on the Notes, expenses, indemnification or otherwise. The Guarantees of the Subsidiary Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

Although the Guarantees provide the holders of Notes with a direct unsecured claim against the assets of the Subsidiary Guarantors, under U.S. federal bankruptcy law and comparable provisions of U.S. state fraudulent transfer laws, in certain circumstances a court could cancel a Guarantee and order the return of any payments made thereunder to the Subsidiary Guarantor or to a fund for the benefit of its creditors.

A court might take these actions if it found, among other things, that when the Subsidiary Guarantors incurred the debt evidenced by their Guarantee (i) they received less than reasonably equivalent value or fair consideration for the incurrence of the debt and (ii) any one of the following conditions was satisfied:

- the Subsidiary Guarantor was insolvent or rendered insolvent by reason of the incurrence;
- the Subsidiary Guarantor was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or
- the Subsidiary Guarantor intended to incur, or believed (or reasonably should have believed) that it would incur, debts beyond its ability to pay as those debts matured.

In applying the above factors, a court would likely find that a Subsidiary Guarantor did not receive fair consideration or reasonably equivalent value for its Guarantee, except to the extent that it benefited directly or indirectly from the issuance of the Notes. The determination of whether a guarantor was or was not rendered “insolvent” when it entered into its guarantee will vary depending on the law of the jurisdiction being applied. Generally, an entity would be considered insolvent if the sum of its debts (including contingent or unliquidated debts) is greater than all of its assets at a fair valuation or if the present fair salable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts, including contingent or unliquidated debts, as they mature.

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Under Canadian federal bankruptcy and insolvency laws and comparable provincial laws on preferences, fraudulent conveyances or other challengeable or voidable transactions, the Guarantees could be challenged as a preference, fraudulent conveyance, transfer at undervalue or other challengeable or voidable transaction. The test to be applied varies among the different pieces of legislation, but as a general matter these types of challenges may arise in circumstances where:

- • such action was intended to defeat, hinder, delay, defraud or prejudice creditors or others;
- • such action was taken within a specified period of time prior to the commencement of proceedings under Canadian bankruptcy, insolvency or restructuring legislation in respect of a Subsidiary Guarantor, the consideration received by the Subsidiary Guarantor was conspicuously less than the fair market value of the consideration given, and the Subsidiary Guarantor was insolvent or rendered insolvent by such action and (in some circumstances, or) such action was intended to defraud, defeat or delay a creditor;
- • such action was taken within a specified period of time prior to the commencement of proceedings under Canadian bankruptcy, insolvency or restructuring legislation in respect of a Subsidiary Guarantor and such action was taken, or is deemed to have been taken, with a view to giving a creditor a preference over other creditors or, in some circumstances, had the effect of giving a creditor a preference over other creditors; or
- • a Subsidiary Guarantor is found to have acted in a manner that was oppressive, unfairly prejudicial to or unfairly disregarded the interests of any shareholder, creditor, director, officer or other interested party.

In addition, in certain insolvency proceedings a Canadian court may subordinate claims in respect of the Guarantees to other claims against a Subsidiary Guarantor under the principle of equitable subordination if the court determines that (1) the holder of Notes engaged in some type of inequitable or improper conduct, (2) the inequitable or improper conduct resulted in injury to other creditors or conferred an unfair advantage upon the holder of Notes and (3) equitable subordination is not inconsistent with the provisions of the relevant solvency statute.

If a court canceled a Guarantee, the holders of Notes would no longer have a claim against that Subsidiary Guarantor or its assets.

Each Guarantee is limited, by its terms, to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Guarantee, as it relates to that Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

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Each Subsidiary Guarantor is a consolidated subsidiary of the Parent Company at the date of the balance sheet presented. The following tables present summarized financial information for the Parent Company and the Subsidiary Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the Subsidiary Guarantors and (ii) equity in earnings from and investments in any Non-Guarantor Subsidiary.

|  | Summarized Balance Sheet |  |
| --- | --- | --- |
|  | December 31, 2022 |  |
| (In millions) |  |  |
| Total Current Assets (1) | $ | 5,657 |
| Total Non-Current Assets |  | 8,463 |
| Total Current Liabilities | $ | 3,124 |
| Total Non-Current Liabilities |  | 8,594 |

(1) Includes receivables due from Non-Guarantor Subsidiaries of $1,499 million as of December 31, 2022.

|  | Summarized Statement of Operations |  |
| --- | --- | --- |
|  | Year Ended December 31, 2022 |  |
| (In millions) |  |  |
| Net Sales | $ | 11,909 |
| Cost of Goods Sold |  | 9,769 |
| Selling, Administrative and General Expense |  | 1,511 |
| Rationalizations |  | 35 |
| Interest Expense |  | 358 |
| Other (Income) Expense |  | (118) |
| Income before Income Taxes (2) | $ | 354 |
| Net Income | $ | 300 |
| Goodyear Net Income | $ | 300 |

(2) Includes income from intercompany transactions with Non-Guarantor Subsidiaries of $577 million for the year ended December 31, 2022, primarily from royalties, dividends, interest and intercompany product sales.

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## COMMITMENTS AND CONTINGENT LIABILITIES

### Contractual Obligations

The following table presents our contractual obligations and commitments to make future payments as of December 31, 2022:

| (In millions) | Total | 2023 | 2024 | 2025 | 2026 | 2027 | Beyond 2027 |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Debt Obligations (1) | $7,665 | $615 | $578 | $969 | $908 | $1,092 | $3,503 |
| Finance Lease Obligations (2) | 255 | 6 | 5 | 5 | 4 | 4 | 231 |
| Interest Payments (3) | 2,398 | 404 | 385 | 319 | 245 | 195 | 850 |
| Operating Lease Obligations (4) | 1,328 | 255 | 212 | 176 | 141 | 108 | 436 |
| Pension Benefits (5) | 340 | 60 | 60 | 60 | 70 | 90 | NA |
| Other Postretirement Benefits (6) | 234 | 24 | 24 | 24 | 24 | 23 | 115 |
| Workers' Compensation (7) | 239 | 42 | 21 | 16 | 13 | 10 | 137 |
| Binding Commitments (8) | 2,706 | 1,790 | 436 | 254 | 163 | 29 | 34 |
| Uncertain Income Tax Positions (9) | 15 | 2 | 11 | 2 | - | - | - |
|  | $15,180 | $3,198 | $1,732 | $1,825 | $1,568 | $1,551 | $5,306 |

(1) Debt obligations include Notes Payable and Overdrafts, and excludes the impact of deferred financing fees, unamortized discounts, and a fair value step-up related to the Cooper Tire acquisition.
(2) The minimum lease payments for finance lease obligations are $759 million.
(3) These amounts represent future interest payments related to our existing debt obligations and finance leases based on fixed and variable interest rates specified in the associated debt and lease agreements. The amounts provided relate only to existing debt obligations and do not assume the refinancing or replacement of such debt or future changes in variable interest rates.
(4) Operating lease obligations have not been reduced by minimum sublease rentals of $11 million, $9 million, $7 million, $4 million, $2 million and $3 million in each of the periods above, respectively, for a total of $36 million. Payments, net of minimum sublease rentals, total $1,292 million. The present value of the net operating lease payments, including sublease rentals, is $991 million. The operating leases relate to, among other things, real estate, vehicles, data processing equipment and miscellaneous other assets. No asset is leased from any related party.
(5) The obligation related to pension benefits is actuarially determined and is reflective of obligations as of December 31, 2022. Although subject to change, the amounts set forth in the table represent the mid-point of the range of our expected contributions for funded U.S. and non-U.S. pension plans, plus expected cash funding of direct participant payments to our U.S. and non-U.S. pension plans.

We made significant contributions to fully fund our U.S. pension plans in 2013 and 2014. We have no minimum funding requirements for our funded U.S. pension plans under current ERISA law or the provisions of our USW collective bargaining agreement, including a provision which requires us to maintain an annual ERISA funded status for the Goodyear hourly U.S. pension plan of at least 97%.

Future U.S. pension contributions will be affected by our ability to offset changes in future interest rates with returns from our asset portfolios and any changes to ERISA law. For further information on the U.S. pension investment strategy, refer to Note to the Consolidated Financial Statements No. 18, Pension, Other Postretirement Benefits and Savings Plans.

Future non-U.S. contributions are affected by factors such as:

- future interest rate levels,
- the amount and timing of asset returns, and
- how contributions in excess of the minimum requirements could impact the amount and timing of future contributions.
(6) The payments presented above are expected payments for the next 10 years. The payments for other postretirement benefits reflect the estimated benefit payments of the plans using the provisions currently in effect. Under the relevant summary plan descriptions or plan documents, we have the right to modify or terminate the plans. The obligation related to other postretirement benefits is actuarially determined on an annual basis.
(7) The payments for workers' compensation obligations are based upon recent historical payment patterns on claims. The present value of anticipated claims payments for workers' compensation is $187 million.

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(8) Binding commitments are for raw materials, capital expenditures, utilities, and various other types of contracts. The obligations to purchase raw materials include supply contracts at both fixed and variable prices. Those with variable prices are based on index rates for those commodities at December 31, 2022.
(9) These amounts primarily represent expected payments with interest for uncertain income tax positions as of December 31, 2022. We have reflected them in the period in which we believe they will be ultimately settled based upon our experience with these matters.

Additional other long term liabilities include items such as general and product liabilities, environmental liabilities and miscellaneous other long term liabilities. These other liabilities are not contractual obligations by nature. We cannot, with any degree of reliability, determine the years in which these liabilities might ultimately be settled. Accordingly, these other long term liabilities are not included in the above table.

In addition, pursuant to certain long term agreements, we will purchase varying amounts of certain raw materials and finished goods at agreed upon base prices that may be subject to periodic adjustments for changes in raw material costs and market price adjustments, or in quantities that may be subject to periodic adjustments for changes in our or our suppliers' production levels. These contingent contractual obligations, the amounts of which cannot be estimated, are not included in the table above.

We do not engage in the trading of commodity contracts or any related derivative contracts. We generally purchase raw materials and energy through short term, intermediate and long term supply contracts at fixed prices or at formula prices related to market prices or negotiated prices. We may, however, from time to time, enter into contracts to hedge our energy costs.

We have an agreement to provide a revolving loan commitment to TireHub, LLC of up to $100 million. At December 31, 2022, $17 million was drawn on this commitment.

### Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has:

- made guarantees,
- retained or held a contingent interest in transferred assets,
- undertaken an obligation under certain derivative instruments, or
- undertaken any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company.

We have entered into certain arrangements under which we have provided guarantees that are off-balance sheet arrangements. Those guarantees totaled $32 million at December 31, 2022. For further information about our guarantees, refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities.

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## CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the financial statements. On an ongoing basis, management reviews its estimates, based on currently available information. Changes in facts and circumstances may alter such estimates and affect our results of operations and financial position in future periods. Our critical accounting policies relate to:

- acquisitions,
- general and product liability and other litigation,
- workers' compensation,
- goodwill and intangible assets,
- deferred tax asset valuation allowances and uncertain income tax positions, and
- pensions and other postretirement benefits.

Acquisitions. We allocate the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess value of the purchase price for an acquired business over the estimated fair value of the assets acquired and liabilities assumed is recognized as goodwill. The valuation of the acquired assets and liabilities will impact the determination of future operating results. We use a variety of information sources to determine the fair value of acquired assets and liabilities including: third-party appraisers for the values and lives of property, identifiable intangibles and inventories; and actuaries and other third-party specialists for defined benefit pension plans, workers' compensation and general and product liabilities. Goodwill is assigned to reporting units as of the date of the related acquisition. If goodwill is assigned to more than one reporting unit, we utilize a method that is consistent with the manner in which the amount of goodwill in a business combination is determined. Transaction costs related to the acquisition of a business are expensed as incurred.

We estimate the fair value of acquired customer relationships using the multi-period excess earnings method. Fair value is estimated as the present value of the benefits anticipated from ownership of the asset, in excess of the returns required on the investment in contributory assets which are necessary to realize those benefits. The intangible asset's operating margins are determined as the residual earnings after quantifying operating margins from contributory assets. Assumptions used in these calculations are considered from a market participant perspective and include revenue growth rates, operating margins, contributory asset charges, customer attrition rates and discount rates.

We estimate the fair value of trade names (definite and indefinite) using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the assets. Assumed royalty rates are applied to projected revenue for the remaining useful lives of the assets to estimate the royalty savings. Assumptions used in the determination of the fair value of a trade name include revenue growth rates, including a terminal growth rate, the royalty rate and the discount rate.

While we use our best estimates and assumptions, fair value estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments required after the measurement period are recorded in the consolidated statement of operations.

Future changes in the judgments, assumptions and estimates that are used in our acquisition valuations and intangible asset and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.

General and Product Liability and Other Litigation. We have recorded liabilities for both asserted and unasserted claims totaling $412 million, including related legal fees expected to be incurred, for potential product liability and other tort claims, including asbestos claims, at December 31, 2022. General and product liability and other litigation liabilities are recorded based on management's assessment that a loss arising from these matters is probable. If the loss can be reasonably estimated, we record the amount of the estimated loss. If the loss is estimated within a range and no point within the range is more probable than another, we record the minimum amount in the range. As additional information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary. Loss ranges are based upon the specific facts of each claim or class of claims and are determined after review by counsel. Court rulings on our cases or similar cases may impact our assessment of the probability and our estimate of the loss, which may have an impact on our reported results of operations, financial position and liquidity. We record receivables for insurance recoveries related to our litigation claims when it is probable that we will receive reimbursement from the insurer. Specifically, we are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to asbestos in certain products previously manufactured by us or present in certain of our facilities. Typically, these lawsuits have been brought against multiple defendants in federal and state courts.

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We periodically, and at least annually, update, using actuarial analyses, 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. 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 changed circumstances arising in the future may result in an increase in the recorded obligation, and that increase may be significant. We had recorded gross liabilities for both asserted and unasserted asbestos claims, inclusive of defense costs, totaling $125 million at December 31, 2022.

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. 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. This determination is based on consultation with our outside legal counsel and takes into consideration agreements with certain of our insurance carriers, the financial viability and legal obligations of our insurance carriers, and other relevant factors.

As of December 31, 2022, we recorded a receivable related to asbestos claims of $70 million, and we expect that approximately 55% of asbestos claim related losses would be recoverable through insurance through the period covered by the estimated liability. Of this amount, $11 million was included in Current Assets as part of Accounts Receivable at December 31, 2022. 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. Although we believe these amounts are collectible under primary and certain excess policies today, future disputes with insurers could result in significant charges to operations.

*Workers' Compensation.* We have recorded liabilities, on a discounted basis, of $187 million for anticipated costs related to U.S. workers' compensation claims at December 31, 2022. 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. The liability is discounted using the risk-free rate of return.

For further information on general and product liability and other litigation, and workers' compensation, refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities.

*Goodwill and Intangible Assets.* Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if an indicator of impairment is present. Intangible assets subject to amortization are tested only if a triggering event would require evaluation. Goodwill and Intangible Assets totaled $1,014 million and $1,004 million, respectively, at December 31, 2022.

We test goodwill and indefinite-lived intangible assets for impairment on at least an annual basis, with the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit or intangible asset to its carrying amount. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit or intangible asset unless the entity determines that it is more likely than not (defined as a likelihood of more than 50%) that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit or intangible asset is less than its carrying amount, then an impairment loss will be recorded for the difference between the carrying value and the fair value.

At October 31, 2022, after considering the results of our most recent quantitative annual testing for each reporting unit and indefinite-lived intangible asset, results of valuations related to the acquisition of Cooper Tire, the capital markets environment, macroeconomic conditions, tire industry competition and trends, our results of operations, and other factors, we concluded that it was not more likely than not that the fair values of our reporting units or indefinite-lived intangible assets were less than their respective carrying values and, therefore, did not perform a quantitative analysis.

*Deferred Tax Asset Valuation Allowances and Uncertain Income Tax Positions.* On August 16, 2022, the Inflation Reduction Act (the 'Act') was signed into law in the U.S. The Act includes a new 15% corporate alternative minimum tax ('CAMT'). This CAMT applies to tax years beginning after December 31, 2022 for companies with average annual adjusted financial statement income over the previous three years in excess of $1 billion. For 2023, we do not anticipate this CAMT will apply to us due to the significant pandemic-driven losses we incurred in 2020. As allowed, we elected to not consider the estimated impact of potential future CAMT obligations for purposes of assessing valuation allowances on our deferred tax assets.

At both December 31, 2022 and December 31, 2021, our valuation allowances on certain of our U.S. federal, state and local net deferred tax assets totaled $26 million and our valuation allowances on our foreign net deferred tax assets totaled $1.0 billion.

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We record a reduction to the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. The valuation of deferred tax assets requires judgment in assessing future profitability by year, including the impact of tax planning strategies, relative to the expiration dates, if any, of the assets.

We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable evidence. We give operating results during the most recent three-year period a significant weight in our analysis. We typically only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. We also consider prudent tax planning strategies (including an assessment of their feasibility) to accelerate taxable income if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized.

At December 31, 2022 and December 31, 2021, we had approximately $1.1 billion and $1.2 billion of U.S. federal, state and local net deferred tax assets, respectively, inclusive of valuation allowances totaling $26 million in each year primarily for state tax loss carryforwards with limited lives. Approximately $700 million of these U.S. net deferred tax assets have unlimited lives and approximately $400 million have limited lives and expire between 2023 and 2042. In the U.S., we have a cumulative loss for the three-year period ended December 31, 2022. However, as the three-year cumulative loss in the U.S. is driven by business disruptions created by the COVID-19 pandemic, primarily in 2020, and only includes the favorable impact of the Cooper Tire acquisition since the Closing Date, we also considered other objectively verifiable information in assessing our ability to utilize our net deferred tax assets, including continued favorable overall volume trends in the tire industry and our tire volume compared to 2020 levels. In addition, the Cooper Tire acquisition has generated significant incremental domestic earnings since the Closing Date and provides opportunities for cost and other operating synergies to further improve our U.S. profitability.

At December 31, 2022 and December 31, 2021, our U.S. net deferred tax assets described above include approximately $230 million and $340 million, respectively, of foreign tax credits with limited lives. Our earnings and forecasts of future profitability, taking into consideration recent trends, along with three significant sources of foreign income, provide us sufficient positive evidence that we will be able to utilize these net foreign tax credits which expire through 2032. Our 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) tax planning strategies, including accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, and other financing transactions, all of which would increase our domestic profitability.

We consider our current forecasts of future profitability in assessing our ability to realize our deferred tax assets, including our foreign tax credits. These forecasts include the impact of recent trends, including various macroeconomic factors such as the impact of higher raw material, transportation, labor and energy costs, on our profitability, as well as the impact of tax planning strategies. These macroeconomic factors possess a high degree of volatility and can significantly impact our profitability. As such, there is a risk that future earnings will not be sufficient to fully utilize our U.S. net deferred tax assets, including our 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, objectively verifiable evidence to conclude that it is more likely than not that, at December 31, 2022, our U.S. net deferred tax assets, including our foreign tax credits, will be fully utilized.

At December 31, 2022 and December 31, 2021, we also had approximately $1.2 billion and $1.3 billion of foreign net deferred tax assets, respectively, and related valuation allowances of approximately $1.0 billion in each year. 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 these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of $873 million on all 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 valuation allowances having a significant impact on our financial position or results of operations will exist within the next twelve months.

We recognize the effects of changes in tax rates and laws on deferred tax balances in the period in which legislation is enacted. We remeasure existing deferred tax assets and liabilities considering the tax rates at which they will be realized. We also consider the effects of enacted tax laws in our analysis of the need for valuation allowances.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including those for transfer pricing. We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the

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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, resulting in an increase in our effective tax rate in the period of resolution. To reduce our risk of an unfavorable transfer price settlement, the Company applies consistent transfer pricing policies and practices globally, supports pricing with economic studies and seeks advance pricing agreements and joint audits to the extent possible. 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. We report interest and penalties related to uncertain income tax positions as income tax expense.

For additional information regarding uncertain income tax positions and tax valuation allowances, refer to Note to the Consolidated Financial Statements No. 7, Income Taxes.

Pensions and Other Postretirement Benefits. We have recorded liabilities for pension and other postretirement benefits of $94 million and $292 million, respectively, at December 31, 2022. Our recorded liabilities and net periodic costs for pensions and other postretirement benefits are based on a number of assumptions, including:

- life expectancies,
- retirement rates,
- discount rates,
- long term rates of return on plan assets,
- inflation rates,
- future health care costs, and
- maximum company-covered benefit costs.

Certain of these assumptions are determined with the assistance of independent actuaries. Assumptions about life expectancies, retirement rates, future compensation levels and future health care costs are based on past experience and anticipated future trends. The discount rate for our U.S. plans is based on a yield curve derived from a portfolio of corporate bonds from issuers rated AA or higher by established rating agencies as of December 31 and is reviewed annually. Our expected benefit payment cash flows are discounted based on spot rates developed from the yield curve. The mortality assumption for our U.S. plans is based on actual historical experience or published actuarial tables, an assumed long term rate of future improvement based on published actuarial tables, and current government regulations related to lump sum payment factors. The long term rate of return on U.S. plan assets is based on estimates of future long term rates of return similar to the target allocation of substantially all fixed income securities. Actual U.S. pension fund asset allocations are reviewed on a monthly basis and the pension fund is rebalanced to target ranges on an as-needed basis. These assumptions are reviewed regularly and revised when appropriate. Changes in one or more of them may affect the amount of our recorded liabilities and net periodic costs for these benefits. Other assumptions involving demographic factors such as retirement age and turnover are evaluated periodically and are updated to reflect our experience and expectations for the future. If actual experience differs from expectations, our financial position, results of operations and liquidity in future periods may be affected.

The weighted average discount rate used in estimating the total liability for our U.S. pension and other postretirement benefit plans was 5.45% and 5.51%, respectively, at December 31, 2022, compared to 2.82% and 2.87%, respectively, at December 31, 2021. The increase in the discount rate at December 31, 2022 was due primarily to higher yields on highly rated corporate bonds. Interest cost included in our U.S. net periodic pension cost was $133 million in 2022, compared to $94 million in 2021 and $126 million in 2020. Interest cost included in our worldwide net periodic other postretirement benefits cost was $12 million in 2022, compared to $9 million in 2021 and $8 million in 2020.

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The following table presents the sensitivity of our U.S. projected pension benefit obligation and accumulated other postretirement benefits obligation to the indicated increase/decrease in the discount rate:

| (Dollars in millions) Assumption: | Change | + / - Change at December 31, 2022 |  |
| --- | --- | --- | --- |
|  |  | PBO/ABO | Annual Expense |
| Pensions ... | +/- 0.5% | $155 | $ - |
| Other Postretirement Benefits ... | +/- 0.5% | 9 | 1 |

Changes in general interest rates and corporate (AA or better) credit spreads impact our discount rate and thereby our U.S. pension benefit obligation. Our U.S. pension plans are invested in a portfolio of substantially all fixed income securities designed to offset the impact of future discount rate movements on liabilities for these plans. If corporate (AA or better) interest rates increase or decrease in parallel (i.e., across all maturities), the investment portfolio described above is designed to mitigate a substantial portion of the expected change in our U.S. pension benefit obligation. For example, if corporate (AA or better) interest rates increased or decreased by 0.5%, the investment portfolio described above would be expected to mitigate approximately 85% of the expected change in our U.S. pension benefit obligation.

At December 31, 2022, our net actuarial loss included in Accumulated Other Comprehensive Loss ('AOCL') related to global pension plans was $2,271 million, $1,836 million of which related to our U.S. pension plans. The net actuarial loss included in AOCL related to our U.S. pension plans continues to decrease and is primarily due to declines in U.S. discount rates and plan asset losses that occurred prior to the funding and investment de-risking actions we undertook in 2013 and 2014, which were designed to mitigate further actuarial losses of a similar nature. For purposes of determining our 2022 U.S. pension total benefits cost, we recognized $225 million of the net actuarial losses in 2022. We will recognize approximately $100 million of net actuarial losses in 2023 U.S. net periodic pension cost. If our future experience is consistent with our assumptions as of December 31, 2022, actuarial loss recognition over the next few years will remain at an amount near that to be recognized in 2023 before it begins to gradually decline. In addition, if annual lump sum payments from a pension plan exceed annual service and interest cost for that plan, accelerated recognition of net actuarial losses will be required through a settlement in total benefits cost.

The actual rate of return on our U.S. pension fund was (17.00%), 1.80% and 13.20% in 2022, 2021 and 2020, respectively, as compared to the expected rate of 4.23%, 3.74% and 4.22% in 2022, 2021 and 2020, respectively. We use the fair value of our pension assets in the calculation of pension expense for all of our U.S. pension plans.

The weighted average amortization period for our U.S. pension plans is approximately 16 years.

Service cost of pension plans was recorded in CGS, as part of the cost of inventory sold during the period, or SAG in our Consolidated Statements of Operations, based on the specific roles (i.e., manufacturing vs. non-manufacturing) of employee groups covered by each of our pension plans. In 2022, 2021 and 2020, the amount of service cost included in CGS and SAG is approximately equal. Non-service related net periodic pension costs were recorded in Other (Income) Expense.

Globally, we expect our 2023 net periodic pension cost to be $120 million to $140 million, including approximately $30 million of service cost, compared to $73 million in 2022, which included $37 million of service cost. The increase in expected net periodic pension cost is primarily due to higher interest cost from increases in interest rates.

The net actuarial gain of $96 million included in AOCL for our worldwide other postretirement benefit plans as of December 31, 2022 is a result of recent increases in discount rates. For purposes of determining 2022 worldwide net periodic other postretirement benefits cost, we recognized $2 million of net actuarial losses in 2022. We will recognize approximately $10 million of net actuarial gains in 2023. If our future experience is consistent with our assumptions as of December 31, 2022, actuarial gain recognition over the next few years will remain at an amount near that to be recognized in 2023.

For further information on pensions and other postretirement benefits, refer to Note to the Consolidated Financial Statements No. 18, Pension, Other Postretirement Benefits and Savings Plans.

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# FORWARD-LOOKING INFORMATION - SAFE HARBOR STATEMENT

Certain information in this Annual Report (other than historical data and information) may constitute forward-looking statements regarding events and trends that may affect our future operating results and financial position. The words “estimate,” “expect,” “intend” and “project,” as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report. Such statements are based on current expectations and assumptions, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including:

- • a prolonged economic downturn or economic uncertainty could adversely impact our business and results of operations;
- • there are risks and uncertainties regarding our acquisition of Cooper Tire and our ability to achieve the remaining expected benefits of that acquisition;
- • our future results of operations, financial condition and liquidity may continue to be adversely impacted by the COVID-19 pandemic, and that impact may be material;
- • raw material cost increases may materially adversely affect our operating results and financial condition;
- • we are experiencing inflationary cost pressures, including with respect to wages, benefits, transportation and energy costs, that may materially adversely affect our operating results and financial condition;
- • delays or disruptions in our supply chain or in the provision of services, including utilities, to us could result in increased costs or disruptions in our operations;
- • changes to tariffs, trade agreements or trade restrictions may materially adversely affect our operating results;
- • if we do not successfully implement our strategic initiatives, our operating results, financial condition and liquidity may be materially adversely affected;
- • we face significant global competition and our market share could decline;
- • deteriorating economic conditions in any of our major markets, or an inability to access capital markets or third-party financing when necessary, may materially adversely affect our operating results, financial condition and liquidity;
- • if we experience a labor strike, work stoppage, labor shortage or other similar event at the Company or its joint ventures, our business, results of operations, financial condition and liquidity could be materially adversely affected;
- • financial difficulties, work stoppages, labor shortages, supply disruptions or economic conditions affecting our major OE customers, dealers or suppliers could harm our business;
- • our capital expenditures may not be adequate to maintain our competitive position and may not be implemented in a timely or cost-effective manner;
- • our international operations have certain risks that may materially adversely affect our operating results, financial condition and liquidity;
- • we have foreign currency translation and transaction risks that may materially adversely affect our operating results, financial condition and liquidity;
- • our long-term ability to meet our obligations, to repay maturing indebtedness or to implement strategic initiatives may be dependent on our ability to access capital markets in the future and to improve our operating results;
- • we have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise materially adversely affect our financial health;
- • any failure to be in compliance with any material provision or covenant of our debt instruments, or a material reduction in the borrowing base under our first lien revolving credit facility, could have a material adverse effect on our liquidity and operations;
- • our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly;
- • we have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net sales;

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- • we may incur significant costs in connection with our contingent liabilities and tax matters;
- • our reserves for contingent liabilities and our recorded insurance assets are subject to various uncertainties, the outcome of which may result in our actual costs being significantly higher than the amounts recorded;
- • environmental issues, including climate change, or legal, regulatory or market measures to address environmental issues, may negatively affect our business and operations and cause us to incur significant costs;
- • we are subject to extensive government regulations that may materially adversely affect our operating results;
- • we may be adversely affected by any disruption in, or failure of, our information technology systems due to computer viruses, unauthorized access, cyber-attack, natural disasters or other similar disruptions;
- • we may not be able to protect our intellectual property rights adequately;
- • if we are unable to attract and retain key personnel, our business could be materially adversely affected; and
- • we may be impacted by economic and supply disruptions associated with events beyond our control, such as war, including the current conflict between Russia and Ukraine, acts of terror, political unrest, public health concerns, labor disputes or natural disasters.

It is not possible to foresee or identify all such factors. We will not revise or update any forward-looking statement or disclose any facts, events or circumstances that occur after the date hereof that may affect the accuracy of any forward-looking statement.

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## QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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.

### Commodity Price Risk

The raw materials costs to which our operations are principally exposed include the cost of natural rubber, synthetic rubber, carbon black, fabrics, steel cord and other petrochemical-based commodities. Approximately two-thirds of our raw materials are petroleum-based, the cost of which may be affected by fluctuations in the price of oil. We currently do not hedge commodity prices. We do, however, use various strategies to partially offset cost increases for raw materials, including centralizing purchases of raw materials through our global procurement organization in an effort to leverage our purchasing power, expanding our capabilities to substitute lower cost raw materials, and reducing the amount of material required in each tire.

### Interest Rate Risk

We continuously monitor our fixed and floating rate debt mix. Within defined limitations, we manage the mix using refinancing. At December 31, 2022, 21% of our debt was at variable interest rates averaging 5.94% compared to 15% at an average rate of 4.01% at December 31, 2021.

The following table presents information about long term fixed rate debt, excluding finance leases, at December 31:

| (In millions) | 2022 | 2021 |
| --- | --- | --- |
| Carrying amount - liability | $5,766 | $5,781 |
| Fair value - liability | 5,198 | 6,149 |
| Pro forma fair value - liability | 5,413 | 6,409 |

The pro forma information assumes an 100 basis point decrease in market interest rates at December 31 of each year, and reflects the estimated fair value of fixed rate debt outstanding at that date under that assumption. The sensitivity of our fixed rate debt to changes in interest rates was determined using current market pricing models.

### Foreign Currency Exchange Risk

We enter into foreign currency contracts in order to reduce the impact of changes in foreign exchange rates on our consolidated results of operations and future foreign currency-denominated cash flows. These contracts 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.

The following table presents foreign currency derivative information at December 31:

| (In millions) | 2022 | 2021 |
| --- | --- | --- |
| Fair value - asset (liability) | $(8) | $5 |
| Pro forma decrease in fair value | (108) | (98) |
| Contract maturities | 1/23-12/23 | 1/22-12/22 |

The pro forma decrease in fair value assumes a 10% adverse change in underlying foreign exchange rates at December 31 of each year, and reflects the estimated change in the fair value of contracts outstanding at that date under that assumption. The sensitivity of our foreign currency positions to changes in exchange rates was determined using current market pricing models.

Fair values are recognized on the Consolidated Balance Sheets at December 31 as follows:

| (In millions) | 2022 | 2021 |
| --- | --- | --- |
| Current asset (liability): |  |  |
| Accounts receivable | $5 | $10 |
| Other current liabilities | (13) | (5) |

For further information on foreign currency contracts, refer to Note to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments.

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for a discussion of our management of counterparty risk.

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# **THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES**  
 **CONSOLIDATED STATEMENTS OF OPERATIONS**

| (In millions, except per share amounts) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net Sales (Note 3) | $20,805 | $17,478 | $12,321 |
| Cost of Goods Sold | 16,953 | 13,692 | 10,337 |
| Selling, Administrative and General Expense | 2,798 | 2,699 | 2,192 |
| Goodwill and Other Asset Impairments (Notes 12 and 13) | - | - | 330 |
| Rationalizations (Note 4) | 129 | 93 | 159 |
| Interest Expense (Note 5) | 451 | 387 | 324 |
| Other (Income) Expense (Note 6) | 75 | 94 | 119 |
| Income (Loss) before Income Taxes | 399 | 513 | (1,140) |
| United States and Foreign Tax Expense (Benefit) (Note 7) | 190 | (267) | 110 |
| Net Income (Loss) | 209 | 780 | (1,250) |
| Less: Minority Shareholders’ Net Income | 7 | 16 | 4 |
| Goodyear Net Income (Loss) | $202 | $764 | $(1,254) |
| Goodyear Net Income (Loss) - Per Share of Common Stock |  |  |  |
| Basic | $0.71 | $2.92 | $(5.35) |
| Weighted Average Shares Outstanding (Note 8) | 284 | 261 | 234 |
| Diluted | $0.71 | $2.89 | $(5.35) |
| Weighted Average Shares Outstanding (Note 8) | 286 | 264 | 234 |

*The accompanying notes are an integral part of these consolidated financial statements.*

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# **THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES**  
 **CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**

| (In millions) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net Income (Loss) | $209 | $780 | $(1,250) |
| Other Comprehensive Income (Loss): |  |  |  |
| Foreign currency translation, net of tax of ($9) in 2022 (($4) in 2021, $4 in 2020) | (275) | (139) | (134) |
| Unrealized gains (losses) from securities, net of tax of $0 in 2022 ($0 in 2021, $0 in 2020) | 1 | - | - |
| Defined benefit plans: |  |  |  |
| Amortization of prior service cost and unrecognized gains and losses included in total benefit cost, net of tax of $31 in 2022 ($34 in 2021, $35 in 2020) | 94 | 105 | 109 |
| Decrease/(increase) in net actuarial losses, net of tax of $48 in 2022 ($48 in 2021, ($10) in 2020) | 162 | 153 | (3) |
| Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements, and divestitures, net of tax of $30 in 2022 ($10 in 2021, $7 in 2020) | 94 | 33 | 22 |
| Prior service credit (cost) from plan amendments, net of tax of ($2) in 2022 ($0 in 2021, ($1) in 2020) | (3) | 1 | (2) |
| Deferred derivative gains (losses), net of tax of $0 in 2022 ($0 in 2021, $0 in 2020) | - | 1 | 15 |
| Reclassification adjustment for amounts recognized in income, net of tax of $0 in 2022 ($0 in 2021, $0 in 2020) | (2) | (2) | (13) |
| Other Comprehensive Income (Loss) | 71 | 152 | (6) |
| Comprehensive Income (Loss) | 280 | 932 | (1,256) |
| Less: Comprehensive Income (Loss) Attributable to Minority Shareholders | (10) | (4) | (3) |
| Goodyear Comprehensive Income (Loss) | $290 | $936 | $(1,253) |

*The accompanying notes are an integral part of these consolidated financial statements.*

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# **THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES**  
 **CONSOLIDATED BALANCE SHEETS**

*(In millions, except share data)*

|  | December 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Assets: |  |  |
| Current Assets: |  |  |
| Cash and Cash Equivalents (Note 1) | $1,227 | $1,088 |
| Accounts Receivable (Note 10) | 2,610 | 2,387 |
| Inventories (Note 11) | 4,571 | 3,594 |
| Prepaid Expenses and Other Current Assets | 257 | 262 |
| Total Current Assets | 8,665 | 7,331 |
| Goodwill (Note 12) | 1,014 | 1,004 |
| Intangible Assets (Note 12) | 1,004 | 1,039 |
| Deferred Income Taxes (Note 7) | 1,443 | 1,596 |
| Other Assets (Note 13) | 1,035 | 1,106 |
| Operating Lease Right-of-Use Assets (Note 15) | 976 | 981 |
| Property, Plant and Equipment (Note 14) | 8,294 | 8,345 |
| Total Assets | $22,431 | $21,402 |
| Liabilities: |  |  |
| Current Liabilities: |  |  |
| Accounts Payable - Trade | $4,803 | $4,148 |
| Compensation and Benefits (Notes 18 and 19) | 643 | 689 |
| Other Current Liabilities | 872 | 822 |
| Notes Payable and Overdrafts (Note 16) | 395 | 406 |
| Operating Lease Liabilities due Within One Year (Note 15) | 199 | 204 |
| Long Term Debt and Finance Leases due Within One Year (Notes 15 and 16) | 228 | 343 |
| Total Current Liabilities | 7,140 | 6,612 |
| Operating Lease Liabilities (Note 15) | 821 | 819 |
| Long Term Debt and Finance Leases (Notes 15 and 16) | 7,267 | 6,648 |
| Compensation and Benefits (Notes 18 and 19) | 998 | 1,445 |
| Deferred Income Taxes (Note 7) | 134 | 135 |
| Other Long Term Liabilities | 605 | 559 |
| Total Liabilities | 16,965 | 16,218 |
| Commitments and Contingent Liabilities (Note 20) |  |  |
| Shareholders’ Equity: |  |  |
| Goodyear Shareholders’ Equity: |  |  |
| Common Stock, no par value: |  |  |
| Authorized, 450 million shares, Outstanding shares - 283 million (282 million in 2021) | 283 | 282 |
| Capital Surplus | 3,117 | 3,107 |
| Retained Earnings | 5,775 | 5,573 |
| Accumulated Other Comprehensive Loss (Note 22) | (3,875) | (3,963) |
| Goodyear Shareholders’ Equity | 5,300 | 4,999 |
| Minority Shareholders’ Equity - Nonredeemable | 166 | 185 |
| Total Shareholders’ Equity | 5,466 | 5,184 |
| Total Liabilities and Shareholders’ Equity | $22,431 | $21,402 |

*The accompanying notes are an integral part of these consolidated financial statements.*

36

# **THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES**
**CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**

| (Dollars in millions, except per share amounts) | Common Stock |  | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Loss | Goodyear Shareholders' Equity | Minority Shareholders' Equity - Non- Redeemable | Total Shareholders' Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Shares | Amount |  |  |  |  |  |  |
| Balance at December 31, 2019 |  |  |  |  |  |  |  |  |
| (after deducting 45,813,109 common treasury shares) ... | 232,650,318 | $233 | $2,141 | $6,113 | $(4,136) | $4,351 | $194 | $4,545 |
| Net income (loss) ... |  |  |  | (1,254) |  | (1,254) | 4 | (1,250) |
| Other comprehensive income (loss) ... |  |  |  |  | 1 | 1 | (7) | (6) |
| Total comprehensive income (loss) ... |  |  |  |  |  | (1,253) | (3) | (1,256) |
| Adoption of new accounting standard... |  |  |  | (12) |  | (12) |  | (12) |
| Stock-based compensation plans ... |  |  | 32 |  |  | 32 |  | 32 |
| Dividends declared ... |  |  |  | (38) |  | (38) | (10) | (48) |
| Common stock issued from treasury ... | 569,780 |  | (2) |  |  | (2) |  | (2) |
| Balance at December 31, 2020 |  |  |  |  |  |  |  |  |
| (after deducting 45,243,329 common treasury shares) ... | 233,220,098 | $233 | $2,171 | $4,809 | $(4,135) | $3,078 | $181 | $3,259 |

We declared and paid cash dividends of $0.16 per common share for the year ended December 31, 2020.

*The accompanying notes are an integral part of these consolidated financial statements.*

37

# **THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES**
**CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - (Continued)**

| (Dollars in millions, except per share amounts) | Common Stock |  | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Loss | Goodyear Shareholders' Equity | Minority Shareholders' Equity - Non-Redeemable | Total Shareholders' Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Shares | Amount |  |  |  |  |  |  |
| Balance at December 31, 2020 |  |  |  |  |  |  |  |  |
| (after deducting 45,243,329 common treasury shares)... | 233,220,098 | $233 | $2,171 | $4,809 | $(4,135) | $3,078 | $181 | $3,259 |
| Net income ... |  |  |  | 764 |  | 764 | 16 | 780 |
| Other comprehensive income (loss)... |  |  |  |  | 172 | 172 | (20) | 152 |
| Total comprehensive income (loss) ... |  |  |  |  |  | 936 | (4) | 932 |
| Common stock issued... | 45,824,480 | 46 | 892 |  |  | 938 |  | 938 |
| Stock-based compensation plans ... |  |  | 26 |  |  | 26 |  | 26 |
| Dividends declared ... |  |  |  |  |  |  | (13) | (13) |
| Common stock issued from treasury... | 2,748,645 | 3 | 18 |  |  | 21 |  | 21 |
| Acquisition of Cooper Tire's minority interests ... |  |  |  |  |  |  | 21 | 21 |
| Balance at December 31, 2021 |  |  |  |  |  |  |  |  |
| (after deducting 42,494,684 common treasury shares)... | 281,793,223 | $282 | $3,107 | $5,573 | $(3,963) | $4,999 | $185 | $5,184 |

There were no dividends declared or paid for the year ended December 31, 2021.

*The accompanying notes are an integral part of these consolidated financial statements.*

38

# **THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES**  
 **CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - (Continued)**

|  | Common Stock |  | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Loss | Goodyear Shareholders' Equity | Minority Shareholders' Equity - Non- Redeemable | Total Shareholders' Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Shares | Amount |  |  |  |  |  |  |
| (Dollars in millions, except per share amounts) |  |  |  |  |  |  |  |  |
| Balance at December 31, 2021 |  |  |  |  |  |  |  |  |
| (after deducting 42,494,684 common treasury shares)... | 281,793,223 | $282 | $3,107 | $5,573 | $(3,963) | $4,999 | $185 | $5,184 |
| Net income ... |  |  |  | 202 |  | 202 | 7 | 209 |
| Other comprehensive income (loss) ... |  |  |  |  | 88 | 88 | (17) | 71 |
| Total comprehensive income (loss) ... |  |  |  |  |  | 290 | (10) | 280 |
| Stock-based compensation plans ... |  |  | 17 |  |  | 17 |  | 17 |
| Dividends declared ... |  |  |  |  |  |  | (9) | (9) |
| Common stock issued from treasury ... | 1,103,129 | 1 | (7) |  |  | (6) |  | (6) |
| Balance at December 31, 2022 |  |  |  |  |  |  |  |  |
| (after deducting 41,391,555 common treasury shares)... | 282,896,352 | $283 | $3,117 | $5,775 | $(3,875) | $5,300 | $166 | $5,466 |

There were no dividends declared or paid for the year ended December 31, 2022.

*The accompanying notes are an integral part of these consolidated financial statements.*

39

# **THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES**  
 **CONSOLIDATED STATEMENTS OF CASH FLOWS**

| (In millions) | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Cash Flows from Operating Activities: |  |  |  |
| Net Income (Loss) | $209 | $780 | $(1,250) |
| Adjustments to Reconcile Net Income (Loss) to Cash Flows from Operating Activities: |  |  |  |
| Depreciation and Amortization | 964 | 883 | 859 |
| Amortization and Write-Off of Debt Issuance Costs | 15 | 14 | 11 |
| Amortization of Inventory Fair Value Adjustment Related to the Cooper Tire Acquisition (Note 2) | - | 110 | - |
| Transaction and Other Costs Related to the Cooper Tire Acquisition (Note 2) | - | 56 | - |
| Cash Payments for Transaction and Other Costs Related to the Cooper Tire Acquisition | (2) | (42) | - |
| Goodwill and Other Asset Impairments (Notes 12 and 13) | - | - | 330 |
| Provision for Deferred Income Taxes (Note 7) | 28 | (471) | 23 |
| Net Pension Curtailments and Settlements (Note 18) | 124 | 43 | 18 |
| Net Rationalization Charges (Note 4) | 129 | 93 | 159 |
| Rationalization Payments | (95) | (197) | (186) |
| Net (Gains) Losses on Asset Sales (Note 6) | (122) | (20) | 2 |
| Operating Lease Expense (Note 15) | 300 | 295 | 286 |
| Operating Lease Payments (Note 15) | (276) | (278) | (268) |
| Pension Contributions and Direct Payments | (60) | (91) | (56) |
| Changes in Operating Assets and Liabilities, Net of Asset Acquisitions and Dispositions: |  |  |  |
| Accounts Receivable | (333) | (300) | 132 |
| Inventories | (1,042) | (982) | 713 |
| Accounts Payable - Trade | 686 | 923 | 26 |
| Compensation and Benefits | (107) | 64 | 95 |
| Other Current Liabilities | (1) | (11) | 26 |
| Other Assets and Liabilities | 104 | 193 | 195 |
| Total Cash Flows from Operating Activities | 521 | 1,062 | 1,115 |
| Cash Flows from Investing Activities: |  |  |  |
| Acquisition of Cooper Tire, net of cash and restricted cash acquired (Note 2) | - | (1,856) | - |
| Capital Expenditures | (1,061) | (981) | (647) |
| Cash Proceeds from Sale and Leaseback Transaction (Note 6) | 108 | - | - |
| Asset Dispositions | 52 | 14 | - |
| Short Term Securities Acquired | (75) | (118) | (96) |
| Short Term Securities Redeemed | 107 | 125 | 96 |
| Notes Receivable | (16) | 16 | (13) |
| Other Transactions | (29) | 7 | (7) |
| Total Cash Flows from Investing Activities | (914) | (2,793) | (667) |
| Cash Flows from Financing Activities: |  |  |  |
| Short Term Debt and Overdrafts Incurred | 1,321 | 1,095 | 1,651 |
| Short Term Debt and Overdrafts Paid | (1,295) | (1,047) | (1,593) |
| Long Term Debt Incurred | 10,503 | 9,862 | 6,251 |
| Long Term Debt Paid | (9,947) | (8,504) | (6,059) |
| Common Stock Issued | (6) | 9 | - |
| Common Stock Dividends Paid (Note 21) | - | - | (37) |
| Transactions with Minority Interests in Subsidiaries | (9) | (13) | (10) |
| Debt Related Costs and Other Transactions | 8 | (93) | - |
| Total Cash Flows from Financing Activities | 575 | 1,309 | 203 |
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | (35) | (38) | (1) |
| Net Change in Cash, Cash Equivalents and Restricted Cash | 147 | (460) | 650 |
| Cash, Cash Equivalents and Restricted Cash at Beginning of the Period | 1,164 | 1,624 | 974 |
| Cash, Cash Equivalents and Restricted Cash at End of the Period | $1,311 | $1,164 | $1,624 |

*The accompanying notes are an integral part of these consolidated financial statements.*

40

# THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Accounting Policies

A summary of the significant accounting policies used in the preparation of the accompanying consolidated financial statements follows:

Basis of Presentation

On June 7, 2021 (the “Closing Date”), we completed the acquisition of Cooper Tire & Rubber Company (“Cooper Tire”). As a result of the acquisition, Cooper Tire, along with its subsidiaries, became subsidiaries of Goodyear. For further information about the acquisition, refer to Note to the Consolidated Financial Statements No. 2, Cooper Tire Acquisition.

Recently Adopted Accounting Standards

Effective January 1, 2022, we adopted an accounting standards update which requires the disclosure of certain types of government assistance that are accounted for by analogizing to a grant model. We do not have material grants to disclose under this new accounting standards update.

Recently Issued Accounting Standards

In September 2022, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update on the disclosure of supplier finance programs. Entities are required to disclose the key terms of each program, including a description of the payment terms and assets pledged as security or other forms of guarantees, if any, provided for the committed payment to the finance provider or intermediary. In addition, on a quarterly basis, entities are required to disclose the related obligations outstanding at each interim reporting period and where those obligations are presented on the balance sheet and, on an annual basis, entities are also required to disclose a roll-forward of the amount of the obligations outstanding at the end of the reporting period. The standards update is effective retrospectively for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the roll-forward information, which is effective prospectively for fiscal years beginning after December 15, 2023, with early adoption permitted. We are currently assessing the impact of this standards update on our disclosures in the notes to the consolidated financial statements.

Acquisitions

We include the results of operations of the businesses in which we acquire a controlling financial interest in our consolidated financial statements beginning as of the acquisition date. On the acquisition date, we recognize, separate from goodwill, the assets acquired, including separately identifiable intangible assets, and the liabilities assumed at their fair values. The excess of the consideration transferred over the fair values assigned to the net identifiable assets and liabilities of the acquired business is recognized as goodwill. Transaction costs are recognized separately from the acquisition and are expensed as incurred.

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.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes to the consolidated financial statements. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to:

- acquisitions,
- general and product liabilities and other litigation,
- workers’ compensation,
- goodwill, intangibles and other long-lived assets,
- deferred tax asset valuation allowances and uncertain income tax positions,

41

# THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

- various other operating allowances and accruals, based on currently available information.

Changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.

## *Revenue Recognition and Accounts Receivable Valuation*

Sales are recognized when obligations under the terms of a contract are satisfied and control is transferred. This generally occurs with shipment or delivery, depending on the terms of the underlying contract, or when services have been rendered. Sales are measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The amount of consideration we receive and sales we recognize can vary due to changes in sales incentives, rebates, rights of return or other items we offer our customers, for which we estimate the expected amounts based on an analysis of historical experience, or as the most likely amount in a range of possible outcomes. Payment terms with customers vary by region and customer, but are generally 30-90 days or at the point of sale for our consumer retail locations. Net sales exclude sales, value added and other taxes. Costs to obtain contracts are generally expensed as incurred due to the short term nature of individual contracts. Incidental items that are immaterial in the context of the contract are recognized as expense as incurred. We have elected to recognize the costs incurred for transportation of products to customers as a component of Cost of Goods Sold ('CGS').

Appropriate provisions are made for uncollectible accounts based on historical loss experience, portfolio duration, economic conditions and credit risk, considering both expected future losses as well as current incurred losses. The adequacy of the allowances are assessed quarterly. Effective January 1, 2020, we adopted, using the modified retrospective adoption approach, an accounting standards update with new guidance related to the accounting for credit losses on financial instruments. Our adoption of this standards update resulted in adjustments in 2020 that decreased Retained Earnings by $12 million, with Accounts Receivable decreasing by $15 million and Deferred Income Taxes increasing by $3 million.

## *Research and Development Costs*

Research and development costs include, among other things, materials, equipment, compensation and contract services. These costs are expensed as incurred and included as a component of CGS. Research and development expenditures were $501 million, $473 million and $390 million in 2022, 2021 and 2020, respectively.

## *Warranty*

Warranties are provided on the sale of certain of our products and services and an accrual for estimated future claims is recorded at the time revenue is recognized. Tire replacement under most of the warranties we offer is on a prorated basis. Warranty reserves are based on past claims experience, sales history and other considerations. Refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities.

## *Environmental Cleanup Matters*

We expense environmental costs related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. We determine our liability on a site by site basis and record a liability at the time when it is probable and can be reasonably estimated. Our estimated liability is reduced to reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective share of the relevant costs. Our estimated liability is not discounted or reduced for possible recoveries from insurance carriers. Refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities.

## *Legal Costs*

We record a liability for estimated legal and defense costs related to pending general and product liability claims, environmental matters and workers' compensation claims. Refer to Note to the Consolidated Financial Statements No. 20, Commitments and Contingent Liabilities.

## *Advertising Costs*

Costs incurred for producing and communicating advertising are generally expensed when incurred as a component of Selling, Administrative and General Expense ('SAG'). Costs incurred under our cooperative advertising programs with dealers and franchisees are generally recorded as reductions of sales as related revenues are recognized. Advertising costs, including costs for our cooperative advertising programs with dealers and franchisees, were $375 million, $382 million and $304 million in 2022, 2021 and 2020, respectively.

42

# THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

### *Rationalizations*

We record costs for rationalization actions implemented to reduce excess and high-cost manufacturing capacity and operating and administrative costs. Associate-related costs include severance, supplemental unemployment compensation and benefits, medical benefits, pension curtailments, postretirement benefits, and other termination benefits. For ongoing benefit arrangements, a liability is recognized when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated. For one-time benefit arrangements, a liability is incurred and must be accrued at the date the plan is communicated to employees, unless they will be retained beyond a minimum retention period. In this case, the liability is calculated at the date the plan is communicated to employees and is accrued ratably over the future service period. For voluntary benefit arrangements, a liability is not estimable and is not recognized until eligible associates apply for the benefit and we accept the applications. Other costs generally include non-cancelable lease, contract termination and relocation costs. A liability for these costs is recognized in the period in which the liability is incurred. Rationalization charges related to accelerated depreciation and asset impairments are recorded in CGS or SAG. Refer to Note to the Consolidated Financial Statements No. 4, Costs Associated with Rationalization Programs.

### *Income Taxes*

Income taxes are recognized during the year in which transactions enter into the determination of financial statement income, with deferred taxes being provided for temporary differences between carrying values of assets and liabilities for financial reporting purposes and such carrying values as measured under applicable tax laws. The effect on deferred tax assets or liabilities of a change in the tax law or tax rate is recognized in the period the change is enacted. Valuation allowances are recorded to reduce net deferred tax assets to the amount that is more likely than not to be realized. The calculation of our tax liabilities also involves considering uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain income tax positions based on our estimate of whether it is more likely than not that additional taxes will be required and we report related interest and penalties as income taxes. To the extent that we incur expense under global intangible low-taxed income provisions, we will treat it as a component of income tax expense in the period incurred. Our policy is to utilize an item-by-item approach to release stranded income tax effects from Accumulated Other Comprehensive Loss ('AOCL'). Refer to Note to the Consolidated Financial Statements No. 7, Income Taxes.

### *Cash and Cash Equivalents / Consolidated Statements of Cash Flows / Restricted Cash*

Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less. Substantially all of our cash and short-term investment securities are held with investment grade rated counterparties. At December 31, 2022, our cash investments with any single counterparty did not exceed approximately $270 million.

Cash flows associated with derivative financial instruments designated as hedges of identifiable transactions or events are classified in the same category as the cash flows from the related hedged items. Cash flows associated with derivative financial instruments not designated as hedges are classified as operating activities. Bank overdrafts, if any, are recorded within Notes Payable and Overdrafts. Cash flows associated with bank overdrafts are classified as financing activities.

Customer prepayments for products and government grants received that predominately relate to operations are reported as operating activities. Government grants received that are predominately related to capital expenditures are reported as investing activities. The Consolidated Statements of Cash Flows are presented net of finance leases of $25 million, $39 million and $3 million originating in the years ended December 31, 2022, 2021 and 2020, respectively, and accrued capital expenditures financed with extended terms of $15 million in 2020 which were paid in 2021. Cash flows from investing activities in 2022 exclude $324 million of accrued capital expenditures remaining unpaid at December 31, 2022, and include payment for $257 million of capital expenditures that were accrued and unpaid at December 31, 2021. Cash flows from investing activities in 2021 exclude $257 million of accrued capital expenditures remaining unpaid at December 31, 2021, and include payment for $224 million of capital expenditures that were accrued and unpaid at December 31, 2020. Cash flows from investing activities in 2020 exclude $224 million of accrued capital expenditures remaining unpaid at December 31, 2020, and include payment for $243 million of capital expenditures that were accrued and unpaid at December 31, 2019.

43

# THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

The following table provides a reconciliation of Cash, Cash Equivalents and Restricted Cash as reported within the Consolidated Statements of Cash Flows:

| (In millions) | December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Cash and Cash Equivalents | $1,227 | $1,088 | $1,539 |
| Restricted Cash (1) | 84 | 76 | 85 |
| Total Cash, Cash Equivalents and Restricted Cash | $1,311 | $1,164 | $1,624 |

(1) Includes remaining acquired restricted cash of Cooper Tire of $16 million and $25 million at December 31, 2022 and 2021, respectively.

Restricted Cash primarily represents amounts required to be set aside in relation to (i) accounts receivable factoring programs and (ii) change-in-control provisions of certain Cooper Tire compensation plans. The restrictions lapse when cash from factored accounts receivable is remitted to the purchaser of those receivables or as the compensation payments are made, respectively. At December 31, 2022, $74 million and $10 million were recorded in Prepaid Expenses and Other Current Assets and Other Assets in the Consolidated Balance Sheets, respectively. At December 31, 2021, $62 million and $14 million were recorded in Prepaid Expenses and Other Current Assets and Other Assets in the Consolidated Balance Sheets, respectively.

## *Restricted Net Assets*

In certain countries where we operate, transfers of funds into or out of such countries by way of dividends, loans or advances are generally or periodically subject to various governmental regulations. In addition, certain of our credit agreements and other debt instruments limit the ability of foreign subsidiaries to make cash distributions. At December 31, 2022, approximately $1.0 billion of net assets were subject to such regulations or limitations.

## *Inventories*

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out or the average cost method. Costs include direct material, direct labor and applicable manufacturing and engineering overhead. We allocate fixed manufacturing overheads based on normal production capacity and recognize abnormal manufacturing costs as period costs. We determine a provision for excess and obsolete inventory based on management's review of inventories on hand compared to estimated future usage and sales. Refer to Note to the Consolidated Financial Statements No. 11, Inventories.

## *Goodwill and Intangible Assets*

Goodwill is recorded when the cost of acquired businesses exceeds the fair value of the identifiable net assets acquired. Goodwill and intangible assets with indefinite useful lives are not amortized but are assessed for impairment annually with the option to perform a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of the reporting unit or indefinite-lived intangible to its carrying amount. Under the qualitative assessment, an entity is not required to calculate the fair value unless the entity determines that it is more likely than not that the fair value is less than the carrying amount. If under the quantitative assessment the fair value is less than the carrying amount, then an impairment loss will be recorded for the difference between the carrying value and the fair value.

In addition to annual testing, impairment testing is conducted when events occur or circumstances change, including the macroeconomic environment, our business performance or our market capitalization, that would more likely than not reduce the fair value of the asset below its carrying amount. Goodwill and intangible assets with indefinite useful lives would be written down to fair value if considered impaired. Intangible assets with finite useful lives are amortized to their estimated residual values over such finite lives, and reviewed for impairment whenever events or circumstances warrant such a review. Refer to Note to the Consolidated Financial Statements No. 12, Goodwill and Intangible Assets.

## *Investments*

Investments in marketable securities are stated at fair value. Fair value is determined using quoted market prices at the end of the reporting period and, when appropriate, exchange rates at that date. Unrealized gains and losses on marketable equity securities are recorded in earnings. Unrealized gains and losses on marketable debt securities classified as available-for-sale are recorded in AOCL, net of tax. Our investments in TireHub, LLC ('TireHub'), a distribution joint venture in the U.S., and ACTR Company Limited ('ACTR'), a tire manufacturing joint venture in Vietnam, are accounted for under the equity method.

We regularly review our investments to determine whether a decline in fair value below their recorded amount is other than temporary. If the decline in fair value is judged to be other than temporary, the investment is written down to fair value and the amount of the write-down is included in the Consolidated Statements of Operations. Refer to Notes to the Consolidated

44

# THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

Financial Statements No. 13, Other Assets and Investments, No. 17, Fair Value Measurements, and No. 22, Reclassifications out of Accumulated Other Comprehensive Loss.

## *Property, Plant and Equipment*

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method. Additions and improvements that substantially extend the useful life of property, plant and equipment, and interest costs incurred during the construction period of major projects are capitalized. Government grants to us that are predominately related to capital expenditures are recorded as reductions of the cost of the associated assets. Repair and maintenance costs are expensed as incurred. Property, plant and equipment are depreciated to their estimated residual values over their estimated useful lives, and reviewed for impairment whenever events or circumstances warrant such a review. Depreciation expense for property, plant and equipment was $928 million, $862 million and $857 million in 2022, 2021 and 2020, respectively. Refer to Notes to the Consolidated Financial Statements No. 5, Interest Expense, and No. 14, Property, Plant and Equipment.

## *Leases*

We determine if an arrangement is or contains a lease at inception. We enter into leases primarily for our 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. 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 stated in the lease agreement. Operating lease expense is recognized on a straight-line basis over the lease term. Refer to Note to the Consolidated Financial Statements No. 15, Leases.

## *Foreign Currency Translation*

The functional currency for most subsidiaries outside the United States is the local currency. Financial statements of these subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses. The U.S. dollar is used as the functional currency in countries with a history of high inflation and in countries that predominantly sell into the U.S. dollar export market. For all operations, gains or losses from remeasuring foreign currency transactions into the functional currency are included in Other (Income) Expense. Translation adjustments are recorded in AOCL. Income taxes are generally not provided for foreign currency translation adjustments.

## *Derivative Financial Instruments and Hedging Activities*

To qualify for hedge accounting, hedging instruments must be designated as hedges and meet defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or changes in fair value of the hedging instrument substantially offset those of the position being hedged.

Derivative contracts are reported at fair value on the Consolidated Balance Sheets as Accounts Receivable, Other Assets, Other Current Liabilities or Other Long Term Liabilities. Deferred gains and losses on contracts designated as cash flow hedges are recorded net of tax in AOCL.

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## THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

*Interest Rate Contracts* - Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in AOCL. Amounts are transferred from AOCL and recognized in income as Interest Expense in the same period that the hedged item is recognized in income. Gains and losses on contracts designated as fair value hedges are recognized in income in the current period as Interest Expense. Gains and losses on contracts with no hedging designation are recorded in the current period in Other (Income) Expense.

*Foreign Currency Contracts* - Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in AOCL. Amounts are transferred from AOCL and recognized in income in the same period and on the same line that the hedged item is recognized in income. Gains and losses on contracts designated as fair value hedges, excluding premiums and discounts, are recorded in Other (Income) Expense in the current period. Gains and losses on contracts with no hedging designation are also recorded in Other (Income) Expense in the current period. We do not include premiums or discounts on forward currency contracts in our assessment of hedge effectiveness. Premiums and discounts on contracts designated as hedges are recorded in AOCL. The amounts are recognized in the Statement of Operations on a straight-line basis over the life of the contract on the same line that the hedged item is recognized in the Statement of Operations.

*Net Investment Hedging* - Nonderivative instruments denominated in foreign currencies are used from time to time to hedge net investments in foreign subsidiaries. Gains and losses on these instruments are deferred and recorded in AOCL as Foreign Currency Translation Adjustments. These gains and losses are only recognized in income upon the complete or partial sale of the related investment or the complete liquidation of the investment.

*Termination of Contracts* - Gains and losses (including deferred gains and losses in AOCL) are recognized in Other (Income) Expense when contracts are terminated concurrently with the termination of the hedged position. To the extent that such position remains outstanding, gains and losses are amortized to Interest Expense or to Other (Income) Expense over the remaining life of that position. Gains and losses on contracts that we temporarily continue to hold after the early termination of a hedged position, or that otherwise no longer qualify for hedge accounting, are recognized in Other (Income) Expense. Refer to Note to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments.

### *Stock-Based Compensation*

We measure compensation cost arising from the grant of stock-based awards to employees at fair value and recognize such cost in income over the period during which the service is provided, usually the vesting period. We recognize compensation expense using the straight-line approach.

Stock-based awards to employees include grants of performance share units, restricted stock units and stock options. We measure the fair value of grants of performance share units and restricted stock 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.

We estimate the fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate compensation expense are determined as follows:

- Expected term represents the period of time that options granted are expected to be outstanding based on our historical experience of option exercises;
- Expected volatility is measured using the weighted average of historical daily changes in the market price of our common stock over the expected term of the award and implied volatility calculated for our exchange traded options with an expiration date greater than one year;
- Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and
- Forfeitures are based substantially on the history of cancellations of similar awards granted in prior years.

Refer to Note to the Consolidated Financial Statements No. 19, Stock Compensation Plans.

### *Earnings Per Share of Common Stock*

Basic earnings per share are computed based on the weighted average number of common shares outstanding. Diluted earnings per share primarily reflects the dilutive impact of outstanding stock options and other stock based awards. All earnings per share amounts in these notes to the consolidated financial statements are diluted, unless otherwise noted. Refer to Note to the Consolidated Financial Statements No. 8, Earnings Per Share.

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# THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

# *Fair Value Measurements*

# *Valuation Hierarchy*

Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.

- Level 1 - Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.
- Level 2 - Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
- Level 3 - Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. Valuation methodologies used for assets and liabilities measured at fair value are as follows:

# *Investments*

Where quoted prices are available in an active market, investments are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, certain mortgage products and exchange-traded equities. If quoted market prices are not available, fair values are estimated using quoted prices of securities with similar characteristics or inputs other than quoted prices that are observable for the security, and would be classified within Level 2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities would be classified within Level 3 of the valuation hierarchy.

# *Derivative Financial Instruments*

Exchange-traded derivative financial instruments that are valued using quoted prices would be classified within Level 1 of the valuation hierarchy. Derivative financial instruments valued using internally-developed models that use as their basis readily observable market parameters are classified within Level 2 of the valuation hierarchy. Derivative financial instruments that are valued based upon models with significant unobservable market parameters, and that are normally traded less actively, would be classified within Level 3 of the valuation hierarchy. Refer to Notes to the Consolidated Financial Statements No. 16, Financing Arrangements and Derivative Financial Instruments, and No. 17, Fair Value Measurements.

# *Reclassifications and Adjustments*

Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation. In the second quarter of 2021, we recorded an out of period adjustment of $8 million of income related to accrued freight charges in Americas. Additionally, in the first quarter of 2021, we recorded out of period adjustments totaling $20 million of expense, primarily related to the valuation of inventory in Americas. The adjustments relate to prior years and did not have a material effect on any of the periods impacted.

# **Note 2. Cooper Tire Acquisition**

On June 7, 2021, we completed our acquisition of Cooper Tire for cash and stock consideration of $2,155 million and $942 million, respectively, or approximately $3.1 billion in total (the "Merger Consideration"). The cash component of the Merger Consideration less cash and restricted cash of Cooper Tire that was acquired amounted to $1,856 million.

Under the acquisition method of accounting, the Merger Consideration is allocated, as of the Closing Date, to the identifiable assets acquired and liabilities assumed of Cooper Tire, which are recognized and measured at fair value based on management's estimates, available information and supportable assumptions that management considers reasonable.

During the second quarter of 2022, we finalized our valuation of the identified assets acquired and liabilities assumed. No significant measurement period changes were recorded during the six months ended June 30, 2022. Principal changes since our initial measurement in the second quarter of 2021 included (i) decreasing the value attributed to customer relationships primarily to reflect updated assumptions related to customer attrition rates, (ii) updating the value attributed to trade names to reflect our long-term view of how each acquired brand fits into the overall product portfolio of the combined company and the appropriate royalty rate to value each acquired brand based on expected profitability, (iii) decreasing the value attributed to Property, Plant and Equipment primarily to reflect updated assumptions related to the estimated economic value of certain underlying assets, (iv) decreasing the value attributed to pension and other postretirement benefit liabilities primarily to reflect updated plan population data, (v) increasing the value attributed to a liability for environmental matters primarily to reflect updated estimated lifecycle remediation cost data and recording other liabilities identified during the measurement period, and (vi) a reclassification between Accounts Receivable and Accounts Payable to conform to Goodyear's classification of customer

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## THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES

rebate and discount program liabilities. These adjustments were recorded net of adjustments to Deferred Tax Liabilities with the corresponding offset recorded to Goodwill, as applicable.

The following table sets forth cumulative measurement period changes from the Closing Date to the second quarter of 2022 when our purchase accounting was finalized, as well as the final and initial allocation of the Merger Consideration to the estimated fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of Cooper Tire, with the excess recorded to Goodwill as of the Closing Date:

| (In millions) | Final Purchase Price Allocation | Cumulative Measurement Period Changes | Initial Purchase Price Allocation |
| --- | --- | --- | --- |
| Cash and Cash Equivalents | $231 | $ - | $231 |
| Accounts Receivable | 538 | (83) | 621 |
| Inventories | 708 | 15 | 693 |
| Property, Plant and Equipment | 1,346 | (26) | 1,372 |
| Goodwill | 633 | 158 | 475 |
| Intangible Assets | 926 | (160) | 1,086 |
| Other Assets | 360 | (2) | 362 |
|  | 4,742 | (98) | 4,840 |
| Accounts Payable - Trade | 384 | (80) | 464 |
| Compensation and Benefits | 356 | (30) | 386 |
| Debt, Finance Leases and Notes Payable and Overdrafts | 151 | - | 151 |
| Deferred Tax Liabilities, net | 292 | (55) | 347 |
| Other Liabilities | 441 | 67 | 374 |
| Minority Equity | 21 | - | 21 |
|  | 1,645 | (98) | 1,743 |
| Merger Consideration | $3,097 | $ - | $3,097 |

The estimated value of Inventory includes adjustments totaling $245 million, comprised of $135 million, primarily to adjust inventory valued on a last-in, first-out ('LIFO') basis to a current cost basis, and $110 million to step-up inventory to estimated fair value. The fair value step-up was fully amortized to CGS in 2021 as the related inventory was sold, which negatively impacted our 2021 results. We eliminated the LIFO reserve on Cooper Tire's U.S. inventories as we predominately determine the value of our inventory using the first-in, first-out ('FIFO') method. To estimate the fair value of inventory, we considered the components of Cooper Tire's inventory, as well as estimates of selling prices and selling and distribution costs that were based on Cooper Tire's historical experience.

The estimated value of Property, Plant and Equipment includes adjustments totaling $138 million to increase the net book value of $1,208 million to the final fair value estimate of $1,346 million. This estimate is based on a combination of cost and market approaches, including appraisals, and expectations as to the duration of time we expect to realize benefits from those assets.

The estimated fair values of identifiable intangible assets acquired were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. The estimated useful lives are based on our historical experience and expectations as to the duration of time we expect to realize benefits from those assets.

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