This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") presents information related to the consolidated results of the operations of the Company and information concerning the liquidity and capital resources of the Company. The Company's future results may differ materially from those indicated herein, for reasons including those indicated under the forward-looking statements heading below. Consolidated Results of Operations (Dollar amounts in thousands except per share amounts) Three Months Ended March 31, 2021 2020 ChangeNet Sales Americas Tire$ 562,321 $ 457,055 $ 105,266 International Tire 139,369 102,387 36,982 Eliminations (45,863) (27,748) (18,115) Net sales 655,827 531,694 124,133 Operating profit (loss): Americas Tire 59,772 10,416 49,356 International Tire 3,207 (10,279) 13,486 Unallocated corporate charges (23,032) (6,951) (16,081) Eliminations (2,169) 586 (2,755) Operating profit 37,778 (6,228) 44,006 Interest expense (5,130) (5,007) (123) Interest income 699 1,696 (997) Other pension and postretirement benefit expense (2,846) (4,210) 1,364 Other non-operating income 133 1,773 (1,640) Income (Loss) before income taxes 30,634 (11,976) 42,610 Income tax provision (benefit) 8,544 (659) 9,203 Net income (loss) 22,090 (11,317) 33,407 Net income attributable to noncontrolling shareholders' interests 31 274 (243) Net income (loss) attributable to Cooper Tire & Rubber Company $
22,059
Basic earnings (loss) per share$ 0.44 $ (0.23) $ 0.67 Diluted earnings (loss) per share $
0.43
The Merger OnFebruary 22, 2021 , the Company entered into the Merger Agreement, pursuant to which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, Goodyear will acquire the Company by way of the merger of Merger Sub with and into the Company, with the Company surviving such Merger as a wholly owned subsidiary of Goodyear. Under the terms of the Merger Agreement, at the effective time of the Merger, the Company's stockholders will be entitled to receive$41.75 per share in cash and a fixed exchange ratio of 0.907 shares of Goodyear common stock per share of the Company's common stock they own at the effective time. Upon completion of the proposed Merger, it is expected that the Company's stockholders will own approximately 16 percent and Goodyear stockholders will own approximately 84 percent of the combined company on a fully diluted basis. The completion of the Merger is subject to the receipt of antitrust clearance inthe United States . Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), and the rules promulgated thereunder, the Merger may not be completed until the Company and Goodyear have each filed notification and report forms with theUnited States Federal Trade Commission ("FTC"), and theAntitrust Division of theUnited States Department of Justice ("DOJ"), and -24- -------------------------------------------------------------------------------- the applicable waiting period (or any extension thereof) has expired or been terminated. The completion of the Merger is also subject to a number of foreign regulatory filings that will need to be completed. The Company expects to complete the Merger in the second half of 2021. However, the transaction could close earlier, following and subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals. The Company's stockholders approved the Merger onApril 30, 2021 . COVID-19 Update With the global outbreak of COVID-19 and the declaration of a pandemic by theWorld Health Organization onMarch 11, 2020 , the Company temporarily shut down itsChina ,U.S. ,Europe , andMexico manufacturing plants for various periods of time through the first half of 2020. By the end of the second quarter, each of the Company's facilities were reopened. The Company's priorities during the COVID-19 pandemic have been protecting the health and safety of its employees, responsibilities to its broader communities, and commitments to its customers and other key stakeholders. The Company has taken a variety of measures to protect the health and safety of employees, including prohibiting non-essential travel for all employees, modifying workspaces with acrylic dividers and touchless faucets, providing additional personal protective equipment and cleaning supplies, increasing cleaning protocols across all locations, transitioning to remote working arrangements for certain employees, emphasizing the importance of staying home when employees feel sick, implementing protocols to address actual and suspected COVID-19 cases and potential exposure, and enacting policies on face mask usage and appropriate social distancing at the Company's locations The fundamentals of the Company remain strong, and the Company believes it has sufficient liquidity on hand to continue business operations during this volatile period. As disclosed in the Liquidity and Capital Resources section, the Company has total available liquidity of$1,093 million as ofMarch 31, 2021 , consisting of cash on hand and credit facilities. As a reaction to COVID-19, the Company took actions to preserve liquidity beginning late in the first quarter of 2020, including capital expenditure reductions, actions to improve working capital, reductions in discretionary spending and additional temporary cost actions. Based upon the Company's results and the effectiveness of these actions, such actions were gradually reversed throughout the second half of 2020. COVID-19 negatively impacted the Company's business in 2020 and also presented potential new risks to it. The Company began to see the impacts of COVID-19 on its Asian operations early in the first quarter, and in customer demand in late March in theAmericas andEurope , which continued into the second quarter of 2020. The situation surrounding COVID-19 remains fluid and the potential for a continued material impact on the Company increases the longer the virus effects the level of economic activity inthe United States and globally. In the future, the COVID-19 pandemic may cause additional reduced demand for the Company's products, including if it results in a recessionary global economic environment. It could also lead to volatility in consumer demand for or access to Company products, including due to government actions impacting the ability to produce and ship products or impacting consumers' movements and access to the Company's products. The Company believes that over the long term, there will continue to be strong demand for the Company's products. However, the timing and extent of demand recovery in specific markets, the resumption of travel, and product demand trends caused by future economic trends are unclear. Accordingly, there may be heightened volatility in net sales and earnings during and subsequent to the duration of the COVID-19 pandemic. The Company's customers are also being impacted by the pandemic. The success of customers in addressing the issues and maintaining their operations, including their ability to remit timely payment, could impact consumer access to, and as a result, sales of the Company's products. In addition, the COVID-19 pandemic and the Company's and government responses to it have disrupted the Company's operations, and increased its costs, and may continue to do so. The Company's ability to continue to operate and to mitigate the negative impacts of the pandemic will in part depend on the ability to protect its employees and supply chain. The Company has endeavored to follow recommended actions of government and health authorities to protect employees world-wide, with particular measures in place for those working in the Company's plants and distribution facilities. The Company intends to continue to work with government authorities and implement employee safety measures to ensure that it is able to continue manufacturing and distributing products during the COVID-19 pandemic. However, uncertainty resulting from the pandemic could result in an unforeseen disruption that could impact the results of operations. For additional information on risk factors that could impact the Company's results, refer to "Risk Factors" in Part II, Item 1A of this Form 10-Q. 2021 versus 2020 Consolidated net sales for the first quarter of 2021 were$656 million compared with$532 million in the first quarter of 2020, an increase of$124 million . In 2021, the Company experienced higher unit volume of$88 million . The first quarter of 2020 was negatively impacted by the market slowdown caused by COVID-19. The Company also experienced favorable price and mix of$30 million and favorable foreign currency impact of$6 million in the first quarter of 2021 as compared to the first quarter of 2020. -25- -------------------------------------------------------------------------------- The Company recorded an operating profit of$38 million in the first quarter of 2021, compared to an operating loss of$6 million in 2020. The Company's 2021 operating profit benefited from$29 million of higher unit volume,$13 million of favorable price and mix,$3 million of decreased manufacturing costs and$2 million of lower product liability expense compared to the first quarter of 2020. The first quarter of 2020 unit volume was negatively impacted by the market slowdown caused by COVID-19, which also included production days lost due to plant shut downs as a result of the pandemic. The first quarter of 2021 included$7 million of lower raw material costs, with reduction in tariff costs as a result of the Company's sourcing strategy offsetting higher raw material costs. The first quarter of 2021 also included$20 million of higher selling, general and administrative expenses. The first quarter of 2020 included$11 million of restructuring costs within the Americas Tire Operations segment related to the Company's acquisition of the remaining noncontrolling interest in COOCSA. Other costs increased$1 million in the first quarter of 2021 compared to the first quarter of 2020. The principal raw materials for the Company include natural rubber, synthetic rubber, carbon black, chemicals and steel reinforcement components. Approximately 70 percent of the Company's raw materials are petroleum-based. Substantially allU.S. inventories have been valued using the LIFO method of inventory costing, which accelerates the impact to cost of goods sold from changes to raw material prices. The Company strives to assure raw material and energy supply and to obtain the most favorable pricing possible. For natural rubber, natural gas and certain principal materials, procurement is managed through a combination of buying forward of production requirements and utilizing the spot market. For other principal materials, procurement arrangements include supply agreements that may contain formula-based pricing based on commodity indices, multi-year agreements or spot purchase contracts. While the Company uses these arrangements to satisfy normal manufacturing demands, the pricing volatility in these commodities contributes to the difficulty in managing the costs of raw materials. Product liability expense related to normal claim activity decreased$2 million in the first quarter of 2021 compared to the first quarter of 2020. Insurance premium costs and legal costs related to product liability claims in the first quarter of 2021 were comparable to the first quarter of 2020. Additional information related to the Company's accounting for product liability costs appears in the Notes to the Condensed Consolidated Financial Statements. Selling, general, and administrative expenses were$71 million in the first quarter of 2021 (10.9 percent of net sales) and$51 million in the first quarter of 2020 (9.6 percent of net sales). During the first quarter of 2021, the Company incurred approximately$10,655 of expenses associated with the Merger. These expenses are recorded in Selling, general & administrative expenses on the Condensed Consolidated Statements of Operations. These expenses include$4,923 of advisory, legal and other professional fees, as well as an increase in mark to market costs of stock-based liabilities subsequent to the Merger announcement of$5,732 . The mark to market cost represents the impact of the movement in the Company's closing stock price from the day prior to the Merger Agreement announcement as compared to the closing price of Company's stock on the day of the Merger Agreement announcement. In the first quarter of 2020, the Company recorded$11 million of restructuring expense in the Americas Tire Operations segment related to the Company's acquisition of the remaining noncontrolling ownership interest in COOCSA. Interest expense was$5 million for the first quarter of each 2021 and 2020. Interest income was$1 million in the first quarter of 2021, which was a decrease from$2 million in the first quarter of 2020. For the period endedMarch 31, 2021 , other pension and postretirement benefit expense was$3 million as compared to$4 million for the period endedMarch 31, 2020 . This decrease is primarily the result of the Company's improved funded status atDecember 31, 2020 , as a result of favorable returns on plan assets in 2020, which improved the Company's funding position and lowered the actuarially determined expense for 2021 as compared to 2020. Other non-operating income decreased$2 million in the first quarter of 2021 as compared to the first quarter of 2020. This decrease was primarily due to the impact of foreign currency forward contracts. For the quarter endedMarch 31, 2021 , the Company recorded income tax expense of$9 million (effective tax rate of 27.9 percent) compared to an income tax benefit of$1 million (effective tax rate of 5.5 percent) for the quarter endedMarch 31, 2020 . The first quarter 2021 effective tax rate was influenced by$5 million of Merger-related costs which are not tax deductible, the projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded. The effective tax rate for the first quarter of 2020 was impacted by$4 million of unrecognized tax benefit related to the tax deductibility of certain business expenses incurred during the quarter, the projected mix of earnings in international jurisdictions with differing tax rates and jurisdictions where valuation allowances are recorded. -26- -------------------------------------------------------------------------------- Segment Operating Results The Company has four segments under ASC 280: •North America, composed of the Company's operations in theU.S. andCanada ; •Latin America, composed of the Company's operations inMexico ,Central America andSouth America ; •Europe; and •Asia.North America andLatin America meet the criteria for aggregation in accordance with ASC 280, as they are similar in their production and distribution processes and exhibit similar economic characteristics. The aggregatedNorth America andLatin America segments are presented as "Americas Tire Operations" in the segment disclosure. Both theEurope andAsia segments have been determined to be individually immaterial, as they do not meet the quantitative requirements for segment disclosure under ASC 280. In accordance with ASC 280, information about operating segments that are not reportable shall be combined and disclosed in an all other category separate from other reconciling items. As a result, these two segments have been combined in the segment operating results discussion. The results of the combinedEurope andAsia segments are presented as "International Tire Operations" in the segment disclosure. Americas Tire Operations Segment (Dollar amounts in thousands) Three Months Ended March 31, 2021 Change 2020 Sales$ 562,321 23.0%$ 457,055 Operating profit$ 59,772 473.8%$ 10,416 Operating margin 10.6% 8.3 points 2.3% Total unit sales change 13.6%United States replacement market unit shipment changes: Passenger tires Segment 15.2% USTMA members 12.0% Total Industry 8.8% Light truck tires Segment 29.5% USTMA members 24.6% Total Industry 25.0% Total light vehicle tires Segment 18.4% USTMA members 13.7% Total Industry 10.9% The source of this information is theUnited States Tire Manufactures Association ("USTMA") and internal sources. Overview The Americas Tire Operations segment manufactures and markets passenger car and light truck tires, primarily for sale in theU.S. replacement market. The segment also has a manufacturing operation inMexico , COOCSA, which supplies passenger car and light truck tires to the Mexican, North American, Central American and South American markets. OnJanuary 24, 2020 , the Company acquired the remaining noncontrolling ownership interest in COOCSA, making COOCSA a wholly-owned subsidiary. The segment also markets and distributes wheels and racing, TBR and motorcycle tires. The racing and motorcycle tires are manufactured by the Company's European segment and by others. TBR tires are sourced from GRT and ACTR. TBR tires had also been sourced through off-take agreements with PCT and Sailun Vietnam throughDecember 31, 2020 . Major distribution channels and customers include independent tire dealers, wholesale distributors, regional and national retail tire chains, large retail chains that sell tires as well as other automotive products, mass merchandisers and digital channels. The -27- -------------------------------------------------------------------------------- segment does not currently sell its products directly to end users, except through three Company-owned retail stores. The segment sells a limited number of tires to OEMs. Sales Net sales of the Americas Tire Operations segment increased from$457 million in the first quarter of 2020 to$562 million in the first quarter of 2021. In 2021, the segment experienced higher unit volume of$62 million , as well as favorable price and mix of$43 million . Unit shipments for the segment increased 13.6 percent in the first quarter of 2021 compared with the first quarter of 2020. In theU.S. , the segment's unit shipments of total light vehicle tires increased 18.4 percent in 2021 compared with the same period in 2020. This increase compares with a 13.7 percent increase in total light vehicle tire shipments experienced by USTMA members, and a 10.9 percent increase in total light vehicle tire shipments experienced for the total industry (including an estimate for non-USTMA members). In the first quarter of 2020, Americas Tire Operations volume, as well as that of the USTMA and total industry, were negatively impacted by reduced demand as a result of the COVID-19 pandemic. Operating Profit Operating profit for the segment increased from$10 million for the three months endedMarch 31, 2020 to$60 million for the three months endedMarch 31, 2021 . Operating profit in the first quarter of 2021 included$22 million of higher unit volume,$15 million of favorable price and mix,$2 million of lower product liability expense and$1 million of favorable manufacturing costs compared to the first quarter of 2020. The first quarter of 2020 unit volume was negatively impacted by the market slowdown caused by COVID-19, which also included production days lost due to plant shut downs as a result of the pandemic. The first quarter of 2021 included$4 million of lower raw material costs, with reduction in tariff costs as a result of the Company's sourcing strategy offsetting higher raw material costs. The first quarter of 2021 also included$3 million of higher selling, general and administrative expenses and$2 million of higher other costs compared to the first quarter of 2020. Operating profit in the first quarter of 2020 also included$11 million of restructuring costs related to the Company's acquisition of the remaining noncontrolling ownership interest in COOCSA. The segment utilizes an internal raw material index which is calculated based upon the underlying costs of the segment's key raw materials for the period and is utilized in comparing the cost of raw materials from period to period. The segment's internally calculated raw material index of 153.6 for the quarter endedMarch 31, 2021 was an increase of 1.9 percent from the quarter endedMarch 31, 2020 . The raw material index increased 6.1 percent from the quarter endedDecember 31, 2020 . International Tire Operations Segment (Dollar amounts in thousands) Three Months Ended March 31, 2021 Change 2020 Sales$ 139,369 36.1%$ 102,387 Operating profit (loss)$ 3,207 n/m$ (10,279) Operating margin 2.3% 12.3 points (10.0)% Total unit sales change 47.2% n/m - not meaningful Overview The International Tire Operations segment is the combination of theEurope andAsia operating segments. The European operations include manufacturing operations in theU.K. andSerbia . TheU.K. entity primarily manufactures and markets motorcycle and racing tires and tire retread material for domestic and global markets. The Serbian entity manufactures passenger car and light truck tires primarily for the European markets and for export to the North American segment. The Asian operations are located in the PRC andVietnam .Cooper Kunshan Tire , in the PRC, manufactures passenger car and light truck tires both for the Chinese domestic market and for export to markets outside of the PRC. GRT, a joint venture manufacturing facility located in the PRC, and ACTR, a joint venture manufacturing facility located inVietnam , serve as global sources of TBR tire production for the Company. The segment also procured certain TBR tires under off-take agreements with PCT and Sailun Vietnam throughDecember 31, 2020 . The segment sells a majority of its tires in the replacement market, with a portion also sold to OEMs. Sales Net sales of the International Tire Operations segment were$139 million for the quarter endedMarch 31, 2021 , compared to$102 million for the quarter endedMarch 31, 2020 . The segment experienced$48 million of higher unit volume and$6 million of favorable foreign currency impact, partially offset by$17 million of unfavorable price and mix. Segment unit volume was up 47.2 percent compared to the first quarter of 2020. Demand in the first quarter of 2020 was negatively impacted by the COVID-19 pandemic. -28- -------------------------------------------------------------------------------- Operating Profit (Loss) In the first quarter of 2021, the segment's operating profit of$3 million compared to an operating loss of$10 million in the first quarter of 2020. The segment experienced$7 million of higher unit volume,$3 million of lower raw material costs, as the segment utilizes the FIFO method of inventory valuation,$2 million of favorable manufacturing efficiencies and$2 million of favorable price and mix. The first quarter of 2020 unit volume was negatively impacted by the market slowdown caused by COVID-19, and also included production days lost due to plant shut downs as a result of the pandemic. Selling, general and administrative costs increased$1 million in the first quarter of 2021 compared to the first quarter of 2020. Liquidity and Capital Resources Sources and uses of cash in operating activities Net cash used by operating activities was$40 million in the first quarter of 2021 compared to$114 million of net cash used by operating activities in the first quarter of 2020. The improvement in operating cash flows was partially driven by the Company's increased net income in 2021 of$22 million , as compared to a net loss of$11 million in 2020. Changes in operating assets and liabilities in 2021 used$145 million of net cash, as compared to the usage of$141 million in 2020. Lower sales volume and decreased production activity in the first quarter of 2020 as a result of the COVID-19 pandemic resulted in favorable movement in accounts and notes receivable and inventory in 2020. In the first quarter of 2021, movement in accounts and notes receivable was unfavorable due to increased sales volume, while the Company is building inventory to meet forecasted demand and replenishing its inventory on hand from depleted levels atDecember 31, 2020 . The Company also experienced favorable movement in accounts payable in the first quarter of 2021 due to increased purchasing related to inventory, coupled with continuing capital spending. Non-cash items contributed$83 million of favorable cash flow movement in the first quarter of 2021, compared to$38 million contributed in the first quarter of 2020, with the Company experiencing growth in its LIFO reserve in the first quarter of 2021 as a result of the Company's growth in inventory fromDecember 31, 2020 . Sources and uses of cash in investing activities Net cash used in investing activities reflects capital expenditures of$57 million and$55 million in 2021 and 2020, respectively. Sources and uses of cash in financing activities In the first quarter of 2020, the Company had$269 million of net short term borrowings, as the Company utilized its revolving credit facility and accounts receivable securitization facility to increase cash on hand for working capital and general corporate purposes as it managed the impacts of the COVID-19 pandemic prior to repaying the borrowings in the third quarter of 2020. In the first quarter of 2021, the Company did not repay any of its net short-term debt at its Asian operations as compared to$4 million of such payments in the first quarter of 2020. In the first quarter of 2021, the Company repaid$10 million of long-term debt and finance lease obligations as compared to$3 million in the first quarter of 2020. In the first quarter of 2020, the Company paid$62 million for the acquisition of the remaining noncontrolling ownership interest in COOCSA, as well as for services rendered by members of the joint venture workforce that were also shareholders of the non-controlling interest. Dividends paid on the Company's common shares were$5 million in the first quarter of both 2021 and 2020. Available cash, credit facilities and contractual commitments AtMarch 31, 2021 , the Company had cash and cash equivalents of$460 million . This does not include restricted cash of$71 million , which includes amounts in a trust to provide funding for benefits payable and other potential payments to directors, executive officers and certain other employees under various plans and agreements of the Company as a result of the Merger. Domestically, the Company's Credit Facility with a consortium of several banks provides up to$700 million and expires inJune 2024 . Of this borrowing capacity,$200 million is allocated to the Term Loan A, while the remaining$500 million is allocated to a revolving credit facility. The Term Loan A was drawn inDecember 2019 primarily to pay for maturing unsecured notes. The Credit Facility also includes a$110 million letter of credit sub-facility. The Company also has an accounts receivable securitization facility with a borrowing limit of up to$100 million , based on eligible receivables, which expires inDecember 2022 . AtMarch 31, 2021 , the Company has no borrowing drawn on its revolving credit facility or accounts receivable securitization facility. These credit facilities have been used to secure letters of credit of$18 million atMarch 31, 2021 . The Company's additional borrowing capacity under these facilities, net of amounts used to back letters of credit and based on available collateral atMarch 31, 2021 , was$570 million . The Company's revolving credit facilities contain restrictive covenants which limit or preclude certain actions based upon the measurement of certain financial covenant metrics. However, the covenants are structured such that the Company expects to have sufficient flexibility to conduct its operations. The Company was in compliance with all of its debt covenants as ofMarch 31, 2021 . -29- -------------------------------------------------------------------------------- The Company's operations inAsia have annual renewable unsecured credit lines that provide up to$68 million of borrowings and do not contain significant financial covenants. The additional borrowing capacity on the Asian credit lines totaled$63 million atMarch 31, 2021 . The Company believes that its cash and cash equivalent balances, along with available cash from operating cash flows and credit facilities, will be adequate to fund its typical needs, including working capital requirements, projected capital expenditures, and dividend goals as it navigates the COVID-19 pandemic. The Company also believes it has access to additional funds from capital markets to fund potential strategic initiatives. Short-term borrowings atMarch 31, 2021 include$5 million of short-term notes of consolidated subsidiaries. The Company expects to refinance or pay the short-term notes within the next twelve months.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by words such as "anticipate," "believe," "could," "design," "estimate," "expect," "forecast," "goal," "guidance," "imply," "intend," "may," "objective," "opportunity," "outlook," "plan," "position," "potential," "predict," "project," "prospective," "pursue," "seek," "should," "strategy," "target," "will," "would" or other similar expressions that convey the uncertainty of future events or outcomes. In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. Forward-looking statements include, but are not limited to, statements that relate to, or statements that are subject to risks, contingencies or uncertainties that relate to: •the ability to complete the proposed Merger of the Company and Goodyear on anticipated terms and timetable; •the effect of restructuring or reorganization of business components; •uncertainty and weaknesses in global economic conditions, including the impact of the ongoing coronavirus (COVID-19) pandemic, or similar public health crises, on the Company's and Goodyear's financial condition, operations, distribution channels, customers and suppliers, as well as potentially exacerbating other factors discussed herein? •continued volatility in raw material and energy prices, including those of rubber, steel, petroleum-based products and natural gas or the unavailability of such raw materials or energy sources, which may impact the price-adjustment calculations under sales contracts? •delays or disruptions in the supply chain resulting in increased costs or disruptions in operations; •the ability to cost-effectively achieve planned production rates or levels? •the ability to successfully identify and consummate any strategic investments or development projects? •the outcome of any contractual disputes with customers, joint venture partners or any other litigation or arbitration? •impacts of existing and increasing governmental regulation and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorization of, or from, any governmental or regulatory entity and costs related to implementing improvements to ensure compliance with regulatory changes; •the ability to maintain adequate liquidity, level of indebtedness and the availability of capital could limit cash flow available to fund working capital, planned capital expenditures, acquisitions and other general corporate purposes or ongoing needs of the business? •the ability to continue to pay cash dividends, and the amount and timing of any cash dividends; •availability of capital and ability to maintain adequate liquidity? •the impact of labor problems, including labor disruptions at the Company, its joint ventures, or at one or more of its large customers or suppliers? •the ability of our customers, joint venture partners and third party service providers to meet their obligations on a timely basis or at all? •adverse changes in interest rates and tax laws? and •the potential existence of significant deficiencies or material weakness in our internal control over financial reporting. We have based our forward-looking statements on our current expectations, estimates and projections about our industry and our partnership. We caution that these statements are not guarantees of future performance and you should not rely unduly on them, as they involve risks, uncertainties, and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements. Differences between actual results and any future performance suggested in our forward-looking statements could result from a variety of factors, including the following: -30- -------------------------------------------------------------------------------- •the failure to satisfy various other conditions to the closing of the transaction contemplated by the Merger Agreement; •the failure to obtain governmental approvals of the transaction on the proposed terms and schedule, and any conditions imposed on the combined company in connection with consummation of the transaction; •the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; •disruption from the proposed transaction making it more difficult to maintain relationships with customers, partners, employees or suppliers; •the risk that the proposed transaction may be less accretive than expected, or may be dilutive, and that the combined company may fail to realize the benefits expected from the Merger; •risks relating to any unforeseen liabilities of Goodyear or the Company; •the volatility in raw material and energy prices, including those of rubber, steel, petroleum-based products and natural gas or the unavailability of such raw materials or energy sources; •governmental regulation; •changes to tariffs or trade agreements, or the imposition of new or increased tariffs or trade restrictions, imposed on tires, raw materials or manufacturing equipment which the Company uses, including changes related to tariffs on tires, raw materials and tire manufacturing equipment imported into theU.S. fromChina or other countries, as well as changes to trade agreements resulting from theUnited Kingdom's withdrawal from theEuropean Union ; •future laws and regulations or the manner in which they are interpreted and enforced; •the inability to obtain and/or renew permits necessary for the operations; •existing and future indebtedness may limit cash flow available; •operating expenses could increase significantly if the price of electrical power, fuel or other energy sources increases; •changes in credit ratings issued by nationally recognized statistical rating organizations; •risks involving the acts or omissions of our joint venture partners; •natural disasters, weather conditions, disruption of energy, unanticipated geological conditions, equipment failures, and other unexpected events; •a disruption in, or failure of our information technology systems, including those related to cybersecurity; failure of outside contractors and/or suppliers to perform; •the cost and time to implement a strategic capital project may be greater than originally anticipated; •reliance on estimates of recoverable reserves; and •the risks that are described from time to time in Goodyear's and the Company's respective reports filed with theSEC .
We undertake no obligation to update any forward-looking statements except to the extent required by applicable law.
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