Goodyear Tire & Rubber : Fourth Quarter 2022 Investor Letter

INVESTOR LETTER

FOURTH QUARTER 2022

FEBRUARY 8, 2023

TABLE OF CONTENTS

03

04

05

08

14

16

18

Letter to Investors Summary Financial Results SBU Results Outlook Enabling Mobility End Notes

18

19

20

Conference Call Details Important Disclosures

Forward-Looking Statements

Non-GAAP Financial Measures

Use of Hyperlinks

Reference Tables

Financial Tables (Unaudited) Other Data Tables

Reconciliation of Non-GAAP Financial Measures

See "Important Disclosures - Non-GAAP Financial Measures" and "Reference Tables" for further explanation and reconciliation tables for Total Segment Operating Income and Margin; Merger-Adjusted Segment Operating Income and Margin; Free Cash Flow; Adjusted Net Income; and Adjusted Diluted Earnings per Share, reflecting the impact of certain significant items on the 2022 and 2021 periods.

Letter to Investors

Summary

Financial Results

SBU Results

Outlook

Enabling Mobility

End Notes

Disclosures

Reference Tables

Q4 2022 - 2

LETTER TO INVESTORS

Fellow Shareholders:

Our business made significant progress in a very challenging operating environment during 2022. Backed by a slate of innovative new products, our advantaged supply chain, and our combination with Cooper Tire, we grew share and strengthened our brand position globally. At the same time, we captured the value of our brand in the face of inflationary conditions not seen in more than four decades, achieving a record level of price/mix. We also continued to demonstrate why we are a leader at the forefront of new mobility, where we are shaping the intelligent tire and achieving an exceptional win rate with new electric vehicle fitments.

Above all, I am most proud of the resilience and determination that our teams demonstrated to achieve these results throughout 2022. It's these traits that define Goodyear and ones that will continue to elevate us, especially through times of adversity. It's these same traits that enabled our above-industry performance amidst softer conditions in the fourth quarter.

During the fourth quarter, our volume outperformed the industry in both replacement and OE. Performance in replacement was driven by share gains in the Americas consumer business, while global OE volumes grew above industry levels, thanks to the ramp-up of new fitments. Our replacement volume was helped by a U.S. consumer who remained resilient through the fourth quarter.

Our net sales in the quarter grew 6% compared with last year (13% excluding foreign currency), primarily due to pricing actions that drove revenue per tire 17% higher (excluding foreign currency) than fourth

quarter 2021 levels. Importantly, our regions delivered the pricing they had set out to achieve at the beginning of the quarter and our value proposition remains intact.

While the strong revenue per tire and market share gains that carried us through most of 2022 continued during the fourth quarter, they were not enough to offset weaker industry conditions and a quarterly high point of inflationary cost increases. As a result, operating results moderated, especially in our EMEA region, where these conditions were felt most acutely.

While we anticipated weaker industry conditions in Europe, the magnitude of the volume softness was greater than expected. Weaker industry volume in the quarter magnified already challenging conditions given the Ukraine conflict and elevated inflation.

We are taking actions throughout our global operations to match the realities of the business environment while also preparing for the future. These ongoing actions in Europe include manufacturing plant optimization efforts and identifying opportunities to reduce structural cost. Consistent with the past, the strong execution by our teams will set us up for success going forward.

While industry volume and the height of inflationary cost conditions combined to create a very challenging setup in the fourth quarter, I am encouraged by recent developments as we look ahead. In particular, raw material and other input costs have moderated recently, which should provide some relief as the year progresses if current trends continue.

Additionally, we also continue to lay the groundwork for future earnings growth. You will find exciting examples of how we are enabling future mobility later in the letter. Among these is our recently unveiled demonstration tire comprised of 90% sustainable materials - a significant step toward our goal of creating the industry's first 100% sustainable-material tire. This tire is another example of the ingenuity and grit our company has demonstrated over its 125-year history. We continue to lead in the face of new challenges and are well-positioned to do so time and again.

On a final note, I would like to recognize Christina Zamarro, who was appointed Chief Financial Officer effective January 1. Christina will be a strong partner for me in advancing Goodyear's priorities, leveraging her deep knowledge of our company and ability to navigate complex environments, gained from more than 15 years of experience at Goodyear. I'd also like to thank Darren Wells, who is moving from the CFO role to a new role as Chief Administrative Officer where he will devote his full focus to leading Goodyear's business strategy and growth agenda. I look forward to partnering with both of them in their new roles.

Richard J. Kramer

Chairman, Chief Executive Officer & President

Letter to Investors

Summary

Financial Results

SBU Results

Outlook

Enabling Mobility

End Notes

Disclosures

Reference Tables

Q4 2022 - 3

SUMMARY

Fourth Quarter Overview

• Net sales grew 6% compared with fourth quarter of 2021, 13% excluding foreign currency
• • Unit volume down 3% versus 2021 reflecting weaker replacement industry
  • Revenue per tire (excluding currency impact) up 17% versus fourth quarter of 2021
• Goodyear net loss of $104 million (compared to $553 million of income in prior year); adjusted net income of $20 million (compared to $162 million in prior year)
• Segment operating income of $236 million compared to $391 million in prior year
• Operating tax rate of 63% (versus ~25% typically) based on country mix of earnings

Reflecting on the Fourth Quarter

Positives

• Strong price/mix of $722 million, exceeded raw material costs by $172 million
• • Price / mix outside of EMEA offset raw materials and all other cost increases
• Benefitting from Cooper Tire combination; synergies on track
• Americas volumes remained solid despite weaker industry; significant share improvement
• Improving input cost trends outside of EMEA

Negatives

• Overall European results
• • Industry volume
  • Weak winter mix given warm weather
  • Cost inflation
  • Higher inventory / working capital

Letter to Investors

Summary

Financial Results

SBU Results

Outlook

Enabling Mobility

End Notes

Disclosures

Reference Tables

Q4 2022 - 4

FINANCIAL RESULTS

Fourth quarter results reflect the continuation of many of the same underlying business trends experienced in the third quarter. Among these were overall weaker industry volume and ongoing pressure from cost inflation, partly offset by continued strong price/mix. While Goodyear's global volume results were better than the industry, industry volume was weaker (versus prior year and versus expectations), particularly in Europe.

Global replacement industry volume was down 10.6% in the quarter. Goodyear replacement volume, by comparison, declined 6.2% -- reflecting market share gains. Global OE industry volume grew 4.4%. Goodyear OE volume increased 10.7% -- also better than the industry -- reflecting share gains from recent fitment wins as well as recovery in OE production.

Income Statement

Fourth quarter sales increased 6.3% compared to prior year, driven by strong price/mix. Revenue per tire increased 17% excluding the impact of foreign exchange. Tire unit volume in the quarter totaled

47.2 million units, down 3% from prior-year levels. The stronger U.S. dollar reduced sales by approximately 7%.

Fourth quarter 2022 net loss was $104 million ($0.37 per share loss) compared to net income of $553 million ($1.93 per share) a year ago. The decrease in net income was primarily due to higher U.S. and foreign tax expense, as well as cost of goods sold increases driven by inflation in excess of increases in net sales. The decrease in the quarter also includes higher pension settlement charges of $83 million, reflecting an increase in retirements related to an increase in discount rates. Income taxes in 2021 included a discrete tax benefit of $340 million related to a reduction in valuation allowances on certain U.S. deferred tax assets.

After adjusting for significant items, our fourth quarter net income was $20 million, compared to $162 million in the prior year's quarter. Lower adjusted net income primarily reflects reduced segment operating income ($236 million compared with $391 million a year ago). While our income tax expense was relatively stable in absolute terms, our overall tax rate was higher in 2022, primarily reflecting losses in some European locations where we currently have full valuation allowances.

Adjusted earnings per share on a diluted basis were $0.07 compared to $0.57 a year ago.

NET SALES
			$5,374
+ $320m
	$5,054
YoY
+6.3%	2021		2022

NET INCOME		$553
($657)m	YoY	2021		2022
-118.8%
			($104)
RETURN ON NET SALES	10.9%		-1.9%
	EPS	$1.93		($	0.37)
ADJUSTED EPS	$0.57		$	0.07

TIRE UNITS

48.6

47.2

(1.4)m

YoY

-2.9%

2021

2022

(2.5)m

REPLACEMENT

OE

1.1m

UNITS

-6.2% YoY

UNITS

+10.7% YoY

Letter to Investors

Summary

Financial Results

SBU Results

	SEGMENT OPERATING INCOME
		$391
	( 155)m		YoY
		$						$236
		-39.6%				2021		2022
			SOI MARGIN	7.7%		4.4%
				Terms: Units & $ in millions except per share amounts
				All per share amounts are diluted
Outlook	Enabling Mobility		End Notes	Disclosures	Reference Tables

Q4 2022 - 5